Foreclosure in 02465>Question Details

Di, Other/Just Looking in West Newton, MA

How does reciept of a foreclosure notice affect ones credit?

Asked by Di, West Newton, MA Fri Dec 2, 2011

A friend has received a foreclosure notice. If he does not correct the situation, the property will be auctioned. Now that he has received the notice, is his credit affected? How?

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Answers

8
Di,

Your friends credit was affected with the first missing mortgage payment and continued to go down with each missed payment. The foreclosure itself won’t affect the score it’s the missed payments that affect the score. Having a foreclosure will make impossible to obtain another mortgage for 3 years with a FHA loan and 4 years for a conventional loan.
Correcting the situation since the damage is done will only allow you to buy again sooner not change the score since the 30,60 & 120 day late mortgage payments are already reflected on the credit report.
2 votes Thank Flag Link Fri Dec 2, 2011
Your friend's credit is already affected because of late payments. However, if he works out a modification - which will also modify how much patience he/she has with phone systems and banks - then the lates will be removed from the credit reports in many cases, and the credit will be improved.
0 votes Thank Flag Link Mon Dec 5, 2011
His credit has been affected due to missed payment the notice itself is not reported but anyone reviewing his credit knows there is a problem and will make decisions based on that.

He should be in contact with his lender attempt a modification, short sale or deed-in-lieu-of if not he will loss the house. Modifications are best because all other avenues will cause major credit issues keeping him out of the housing market for quite some time.

Ramifications of Foreclosure, Short Sale or Deed-in-lieu-of Foreclosure

Here are some of the ramifications of foreclosure, short sale or deed-in-lieu-of-foreclosure, there are many more like; insurance rates, your job (yes employers are checking credit records these days).

Your credit score will be reduced by 200-400 points, short sale and deed-in-lieu-of a little less 100-200 points.

All forms of foreclosure stay on your credit report for 10 years.

After you have gone through foreclosure, short sale or deed-in-lieu-of-foreclosure there will be what is known as the "waiting period", this period of time varies for each and can be reduced if you had some type of extenuating circumstances that caused the foreclosure:
Waiting Periods to Buy After Foreclosure – “YES” Short Sale and Deed-in-lieu-of are forms of foreclosure
• Buying after a Walk Away Foreclosure
The waiting period is 7 years
• Buying after a Foreclosure
The waiting period is 5 years with 20% deposit up to 7 years.
• Buying after a Foreclosure with Extenuating Circumstances
The waiting period is 3 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.
• Buying after a Short Sale
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Short Sale with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.

In addition to the waiting period and minimum down payment, you will be required to have a minimum FICO score and the home purchase must also be the principal place of residence, not a rental nor a vacation home.

Lastly, most loan applications will ask the dreaded question "Have you ever been foreclosed on?" this stays with you for life, many think that because it will not show up on the credit report after 10 years they can answer "no", well lying on a loan application is a felony that carries a major jail term, so be aware.

Bob Patrick
Buy a home after foreclosure, short sale, deed-in-lieu-of, or bankruptcy expert
Movin-On LLC
Helping families/people that have lost their home get back into another in as little as 6 months
0 votes Thank Flag Link Sat Dec 3, 2011
The foreclosure notice itself will not create any problems with the credit as that is not reported to the credit agencies.

The issue more likely to affect their credit is the missed payments that have gotten them to the point of receiving the foreclosure notice. For an auction to be scheduled they had to go to through, usually a notice of foreclosure (banks typically send within 30-90 days of missed payment) their notice to cure (150 days), the service member relief act (30 days) and now the scheduling of the auction (under 30 days). Your probably talking a minimum of 6 months of payments missed and potentially much more.

It is not clear if they have received a notice that they will start the foreclosure proceedings or if they have actually received their notice of an auction date.

1- Catching up the mortgage
2- Short Sale- http://merrimackvalleymarealestate.com/massachusetts-short-sales/
3- Bankruptcy- http://merrimackvalleymarealestate.com/2011/10/bankruptcy-an…
4- Loan Modification- http://merrimackvalleymarealestate.com/2011/03/massachusetts…

At this point the affect to the credit score should be the least of their worries and they should be focusing on the next steps.
0 votes Thank Flag Link Fri Dec 2, 2011
Your friend's credit most likely is not affected by the foreclosure notice. Your friend's credit is affected, however, by the circumstances that led to the foreclosure notice which is the non-payment of the monthly mortgage obligation.

If your friend is not in a position to satisfy the delinquency in his mortgage payments, then he should seek other remedies to avoid foreclosure. If none of the foreclosure avoidance remedies are possible, that he should give every consideration to listing his property for sale - even if he owes more on the property than what he can sell it for - before the bank or lender forcloses on his home.

The primary reason is a foreclosure will have a more damaging affect on his credit than a short sale will, and can cause other unforseen problems later on.
Web Reference: http://HomeRescuePlans.com
0 votes Thank Flag Link Fri Dec 2, 2011
Probably not much more than the problems that have caused him to receive the notice. Here is a link to Fannie’s risk assessment,

https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/…

Notice the last column in the first box on page 2, just having enough late payments to get a foreclosure notice puts him in the highest risk level,
0 votes Thank Flag Link Fri Dec 2, 2011
Di,

Its not the foreclosure notice that will be damaging to your friend's credit, its the missed payments that are already affecting his/her credit.

A foreclosure will be very damaging for years to them, not only on their credit but also for job opportunities, rentals etc. Has your friend attempted a short sale? There is still time is we act quickly.

Feel free to contact me, I am CDPE certified.

Amy
617-899-2146
0 votes Thank Flag Link Fri Dec 2, 2011
If he has a loan on the house, the reason that he would be getting the foreclosure notice is because he has late payments, which affects his credit score. Getting the letter doesn't change that, or change the scores. However, if the house is being foreclosed on because the property taxes aren't paid, then it will only affect the credit once a judgement is obtain, which will get reported.
0 votes Thank Flag Link Fri Dec 2, 2011
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