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What is foreclosure and bankruptcy seasoning?

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Wiki User
2015-07-17 17:57:27

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.

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