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Published On: Thu, Oct 22nd, 2015

A Comeback? Why Many Who Filed Bankruptcy Or Foreclosure Are Getting New Home Loans

There is life after bankruptcy. Many people who have found themselves struggling with financial woes are realizing that there is a possibility of owning their own assets again. For example, take the story of Rick LeBlanc The St. Augustine, Florida man fell behind on his mortgage payments back in 2007 after a pay cut. The 46-year-old residential-construction manager attempted to sell his house in order to move and pursue a new job. After that failed, he decided to turn the home into a rental property. Unfortunately, by then LeBlanc already owed $225,000 and him and his wife lost their Michigan home to foreclosure.

As LeBlanc learned to live his life with ruined credit, he turned down credit card and loan offers. Instead, he learned how to pay for expenses with cash only. Fast forward to seven years later, the dust from the foreclosure settled and LeBlanc was finally given a semi-clean slate of credit. That’s when the impossible happened. He was able to purchase a house for his family.

Millions of Americans find themselves in the same situation. Watching their houses being foreclosed and the credit score become negative. These negative marks would stain their credit scores for seven years before finally allowing a fresh start. For those that made it through the financial bust of 2007, the light at the end of the tunnel is finally here.

The dark shadow of the foreclosure crisis is finally beginning to fade,” says Mark Zandi, chief economist at Moody’s Analytics, a unit of Moody’s Corp. “That should be a positive for single-family housing and, by extension, for the broader economy.”

In fact, mortgage companies are already reporting seeing a boost in borrowers. Surprisingly, LoanDepot LLC, one of the biggest FHA lenders says one out of every four borrowers have had a foreclosure or bankruptcy in the last seven years.

In the past, mortgage requirements, such as extremely high credit scores had made it hard for borrowers with a past foreclosure or bankruptcy,” explains Simon Resnik, one of the leading Los Angeles Chapter 13 bankruptcy lawyers. “Fortunately, times are changing and now they are getting approved.

It is important to note that some of these borrowers do not have lenders knocking down their door. In fact, many have reported having trouble finding a lender that will agree to give them a mortgage. While this is the case, the Wall Street Journal is reporting that several companies are reaching for those with a troubled financial past.

Financial experts are warning about this kind of practice, citing that these ‘boomerang borrowers’ could cause another wave of bad loans by ultimately going through another foreclosure ordeal.

photo TaxRebate.org.uk

photo TaxRebate.org.uk

There are even some borrowers that didn’t even have to wait the seven years to have their credit restored, like Catherine and Kerry Foley. The married couple found themselves facing foreclosure after defaulting on their $238,000 home in 2010. Then, Kerry lost his job. The couple found themselves living in a cheap apartment and decided this was the chance to scrimp and save. By avoiding any new debt, they were able to boost their credit score to 700. This allowed them to become eligible for a mortgage. In fact, they purchased a new home just three years later. Catherine Foley says she learned a valuable lesson.

I don’t know that anybody is going to be financially secure in this present economy, but I feel as secure as I can be. I’ve learned to have a backup plan,” she says.

Experts explain that this success of getting a mortgage is due to a number of new nonbank lenders who are seeking out risky borrowers to take on mortgages. They are targeting those that are coming out of the seven year waiting period after going through a bankruptcy or foreclosure.

Lenders are trying to carve out niches that play upon the fact that underwriting remains, by historic standards, very tight,” said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. “That’s always the way it starts out and then you keep loosening and loosening—we’re right at the beginning of that.”

Whether this will cause another financial bust or not, couples like the Foleys and LeBlancs are thankful for these second chances.

Guest Author: Lolita Di

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  1. Sam G says:

    This is great news, don’t like to hear anybody being out of opportunity to get a home

  2. Tub Door St. Augustine Fl says:

    […] A Comeback? Why Many Who Filed Bankruptcy Or Foreclosure Are Getting New Home Loans – For example, take the story of Rick LeBlanc The St. Augustine, Florida man fell behind on his mortgage payments … some of these borrowers do not have lenders knocking down their door. In fact, many have reported … […]

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