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The Long Term Impact of Foreclosure

By Peter Olson, Esq.

Here's the full piece from Ken Harney (He's syndicated but usually appears in the Sunday Trib...the best real estate finance writer going). But he brings up some facts that are new to me about the length of time that foreclosure or "walkaway" will impact you.

On March 31, Fannie Mae sent out new guidelines to lenders aimed at walkaways and other foreclosure situations. Fannie will prohibit foreclosed borrowers from getting another mortgage through it for five years, unless there are "documented extenuating circumstances." In those cases, the prohibition is three years.

Even after five years, borrowers with foreclosures in their files will have to put at least 10 percent down and need minimum FICO credit scores of 680.

Freddie Mac, Fannie's rival, counts foreclosures as major blots for seven years, and a senior official said the company is aggressively pursuing walkaways "to preserve our deficiency rights" where permitted by state law.

Full post as published by Closing Real Estate in Chicago on April 23, 2008 (boomark / email).