Foreclosure ‘Boomerang’ Home Buyers Return
October 15, 2012
Families who had once lost their home to foreclosure following the housing crash are now re-emerging and looking to buy again, The Wall Street Journal reports.
As Stuart Miller, chief executive of national homebuilder Lennar Corp., puts it: More people are “coming out of the penalty box.”
Some builders have a growing interest in reaching out to these “boomerang” foreclosure buyers. For example, builders like K. Hovnanian are providing sales staff with fliers that detail mortgage eligibility rules for families who have undergone a foreclosure or bankruptcy.
"The industry is saying, 'Pay your dues and then get back into the market,' " says Dan Klinger, president of K. Hovnanian American Mortgage.
In order to qualify for a mortgage backed by the Federal Housing Administration, families must wait three years or more to apply again following a foreclosure or short sale. Using that benchmark, about 729,000 households that were foreclosed on during the housing crash are now eligible to apply for an FHA mortgage–up from 285,000 a year ago, The Wall Street Journal reports.
Fannie Mae and Freddie Mac require a much longer wait than FHA to qualify for a loan after a foreclosure or short sale, up to seven years.
But just because “boomerang” families are allowed to apply again for financing for a home purchase doesn’t mean they’ll qualify for a loan, housing experts say. These families will still have to show a strong credit score and meet stringent underwriting standards.
Source: “Buyers Back After Foreclosure,” The Wall Street Journal (Oct. 14, 2012)
Updated: May 18, 2019