From the WSJ:
Jumbo borrowers who went into foreclosure a few years ago are learning the hard way: You can’t go home again.
Affluent home buyers attempting to get back into real estate after defaulting on their home loan are finding that few lenders are willing to work with them. Those that do often impose long waiting periods, higher down payments and higher interest rates.
Since spring, lenders say they have increasingly been hearing from would-be buyers who went through foreclosure. “We get the calls routinely,” says Al Engel, executive vice president at Valley National Bank, based in Wayne, N.J.
Callers include self-employed borrowers whose income dropped during the recession, causing them to fall behind on their mortgages, but who have since financially recovered. Also affected are borrowers who walked away from their homes after their values plummeted and owed more on their mortgage than the house was worth. Now that home values have stopped falling in most housing markets, they want back in.
Borrowers who intentionally default—the ones who walked away from their homes—are less likely to be approved for another mortgage soon after. Lenders that originate private jumbos often follow guidelines set by Fannie Mae and Freddie Mac, which require strategic defaulters to have re-established their credit profile for at least seven years after foreclosure in order to get a mortgage.
But experts say more flexibility among lenders could emerge in the next year. A recent change allows certain borrowers to become eligible for mortgages backed by the Federal Housing Administration in as little as one year after their foreclosure. Previously the waiting period was at least three years. “This may be an influence on the private lenders to loosen a little bit on their waiting period,” says Daren Blomquist vice president at RealtyTrac.
Borrowers who overcame a financial hardship that was out of their control and improved their credit profile and are shopping for a mortgage should consider smaller lenders. Valley National Bank and Fremont Bank, which is based in the San Francisco Bay area, say they are open to working with some private jumbo applicants in as little as 2½ to three years, respectively, after the date of foreclosure.