Tuesday, October 21, 2014

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People running into obstacles buying a home following bankruptcy

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Rochester: People running into obstacles buying a home following bankruptcy
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After the real estate market crashed in 2008, many people lost their homes and filed for bankruptcy. Now, many of them have re-established their credit and are looking to buy a home again. But, some are running into an issue.

"They're ready, they're financially capable again of homeownership but we need three years from the time of the foreclosure to be able to lend to them again and the problem is that the bank has never foreclosed on the property that they let go. They're relieved financially, because the bankruptcy incorporated the mortgage, but they're still on title to the property," said Jim Cardinal, Syracuse Securities Mortgage Specialist.

Worse, there is little that the homeowners can do about it. It's up to the banks.

"They're not mandated to foreclose. It's an option they have inside the clause of the mortgage. A lot of these banks have so many foreclosures; they're walking away as well. So it puts these properties in limbo, and these clients in limbo as well," said Cardinal.

What can be most difficult about this is that prospective homeowners may not even know that it's an obstacle.

"There's nothing on the credit report to indicate that the property was taken over at this date and it's difficult to find. So going through the county records is a way to find out if the property is actually transferred or staying in contact with the bank that is supposed to be foreclosing on it," said Cardinal.

If you're currently in a financial hardship situation and you think you may file for bankruptcy, there is another option that you may want to consider to avoid having this happen in the future.

Cardinal said, "I know it's tough to think about when you're in a tough spot financially, but maybe doing a short sale may be a better way because at least when you do a short sale, you're expediting the process of getting rid of the property."

Be proactive in your situation and seek out advice of realtors, mortgage lenders and lawyers.

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