When Is Foreclosure Removed from Your Credit Report?

Foreclosures, deeds in lieu, short sales, bankruptcies — they can damage your credit for a long time.

But by following guidelines from the FHA, Fannie Mae, or Freddie Mac, you can become a homeowner again if you work to rebuild your credit and have a little patience.

Government Entities Set Guidelines for Credit Events

The chart below outlines the criteria that government entities FHA, Fannie Mae, and Freddie Mac follow for major credit-busting events, including foreclosure. Although FHA, Fannie Mae, and Freddie Mac aren’t direct lenders, they wield a lot of behind-the-scenes influence by working with banks to guarantee loans and help lenders free up capital to provide more mortgages.

One of these entities may have made your loan possible without you even knowing it. Although for the most part banks make loans to whomever they want, they’ll likely find themselves following FHA, Fannie Mae, or Freddie Mac guidelines at a minimum in order to keep working with these useful partners.

Some lenders may have more stringent policies and others, willing to take greater risks, may work outside these entities and offer more liberal lending policies.

This chart offers summaries of what can be complex rules and regulations. So:

  1. Look to professionals, such as a bankruptcy lawyer and a CPA specializing in bankruptcy provisions, before making major financial decisions.
  2. For HUD-approved counselors, go to HUD.gov. You can also call 1-888-995-HOPE for help from the Homeownership Preservation Foundation.
  3. Understand what “extenuating circumstances” means in each case:

FHA: An event that was out of the borrower’s control that made a significant impact on the borrower’s finances and led to bankruptcy or foreclosure.

Fannie Mae: A nonrecurring event that’s beyond the borrower’s control that results in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

Freddie Mac: A nonrecurring or isolated circumstance, or set of circumstances, that was beyond the borrower’s control and that significantly reduced income and/or increased expenses and rendered the borrower unable to repay obligations as agreed, resulting in significant adverse or derogatory credit information.