FNMA Waiting Periods for Major Derogatory Events

The following Table summarizes the Waiting period requirements mandated by Fannie Mae for all significant derogatory credit events.

Note:  The terms “short sale” and “pre-foreclosure sale” have the same meaning – the sale of a property in lieu of a foreclosure, resulting in a payoff of less than the total amount owed, which was pre-approved by the  servicer.

 Exceptions for Extenuating Circumstances
(From the Fannie Mae Selling Guide, Lenders may have stricter definitions.)

Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.).

The lender must obtain a letter from the borrower explaining the relevance of the documentation.  The letter must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no reasonable options other than to default on their financial obligations. 

Read Fannie Mae’s official release on borrowers with short sale and foreclosure history.

Read Fannie Mae’s official release on the waiting periods.