“Homeowners who defaulted on their mortgages during the housing market collapse are back in the market buying again.
They’re called boomerang buyers. And mortgage lenders appear to be welcoming them with open arms.
Since the real estate bubble burst, 4.8 million homeowners lost homes in foreclosure and 2.2 million sold their homes in short sales, according to RealtyTrac data cited by CNNMoney.
Mike Edgar, an Idaho broker, worked with 15 boomerang buyers last year and expects that number to double this year, according to CNNMoney.
After a foreclosure or short sale, former homeowners typically see their credit scores fall 85 to 160 points, Jon Maddux, CEO of YouWalkAway.com, a foreclosure agency advising homeowners, told CNNMoney. Restoring credit may take three to seven years.
Fannie Mae and Freddie Mac, which purchase or guarantee most home loans, require boomerang buyers to wait five years, to have credit score of at least 680 and put 10 percent down, according to CNNMoney. The wait can be cut to three years, if potential buyers show that an extenuating circumstance, like a layoff or illness, prompted their default.
Quantifying the number of boomerang buyers can be difficult.
“It’s more than incremental business, that’s for sure,” Dan Klinger, president of K. Hovnanian American Mortgage, told The Wall Street Journal. “The industry is saying, ‘Pay your dues and then get back into the market.’”
Many of the boomerang buyers purchased homes at or near the peak of the housing bubble using adjustable-rate mortgages that reset to higher monthly payments. When the bubble popped, their home equity vanished, and their mortgage payments exploded….”
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