Waiting Periods on Distressed Borrowers Reduced

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In a recent report by Fannie Mae, mandatory waiting periods for borrowers with a derogatory credit event to receive a new loan have been shortened. Potential borrowers with a foreclosure, bankruptcy, short sale or deed-in-lieu of foreclosure on their credit history must now wait a minimum of four years to become eligible for a new loan.

Some may be allowed to borrow in two years if there were extenuated circumstances defined in the report as "nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations."

The previous policy required a two-year waiting period with maximum 80% LTV for borrowers with extenuating circumstances, and a four-year waiting period with maximum 90% LTV, two-year waiting period with maximum 90% LTV or a seven-year waiting period for standard borrowers.