Posted on Friday, August 7, 2009
The current guidelines from Fannie Mae & Freddie Mac state that the waiting period for a Deed in Lieu of Foreclosure is 4 years from the date the proceeding is completed. If there are extenuating circumstances that caused the borrower to have to enter into a Deed In Lieu of Foreclosure proceeding, the waiting period is 2 years from the date the proceeding is completed.
There isn't a set 100-point or 150-point drop for a deed-in-lieu of foreclosure. These negatives are cumulative, meaning that the point drops get steeper every time. Also, how the negative information is actually coded by the lender when the information is updated to your credit history is crucial. Here are the standard options:
• Paid As Agreed-Credit scores will have already dropped over 100 points due to default in payments; however, if reported as Paid As Agreed, the borrower will be able to purchase another home in a shorter time period.
• Paid Settlement-Credit scores could drop 75-100 points in addition to the points already lost for delinquent payments.
• Foreclosure-Credit scores could drop 100-150 points in addition to the points already lost for delinquent payments.
So in addition to making sure you negotiate for a release from the deficiency, judgement also negotiate how it will be reported to the credit agencies.
Generally speaking, remember, 35 percent of your score is based on your payment history; 30 percent is based on the amounts that you owe on your various types of loans; 15 percent of your score is the length of your credit history; 10 percent is new credit that you've opened; and the final 10 percent is based on the various types of credit used.