What is foreclosure and bankruptcy seasoning?
Foreclosure is basically the act of foreclosing, especially a
legal proceeding by which a mortgage is foreclosed. Here in
California, for example, a lender can foreclose on the deed of
trust if you don't pay your mortgage. The bank or note holder goes
through an extensive process to sell the property at public auction
to the highest bidder. Some foreclosures require court action,
others do not.
Your reference to bankruptcy seasoning is a little unclear.
Creditor attorneys will sometimes refer to a lien as "seasoned" if
the lienw as created outside of the preferential transfer period in
federal bankruptcy law. Federal bankruptcy law allows a debtor to
recover certain payments or "preferential transfers", that were
made to a creditor a short time before the filing of the debtor's
bankruptcy. A judgment lien can be a transfer and can be a
preferential transfer if the lien arose within the 90-day time
period prior to the filing of the bankruptcy.
Foreclosure and bankruptcy seasoning is commonly used in the
mortgage industry referring to the time period that must elapse
before a borrower is eligible for a loan. ie. To purchase a home
using an FHA loan the foreclosure seasoning requirement is 3 years,
therefore 3 years must have elapsed since the previous home was
foreclsosed. Unless the foreclosure was due to extenuating
circumstances such as the loss of the primary wage earner or a
situation beyond the borrowers control. It must be a really good
reason before a lender will reduce the 3 year restriction. The
bankruptcy seasoning requirments are 2 years from the discharge
date for a chapter 7 and 12 months for a chapter 13 bankruptcy with
court approval on an excellent payment history on the trustee
payments. The seasoning requirments for conventional loans are much
longer in the midst of these volatile lending conditions. Please
consult your mortgage advisor for details.