Great News for Boomerang Buyers!
According to new Mortgagee Letter 2013-26, HUD announced:
As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.
The “Back to Work – Extenuating Circumstances” program is designed to help Boomerang buyers who have experienced short sale, foreclosure, bankruptcy, loan modification, or other derogatory credit event, can now qualify in 12 months. This provision waives the three year waiting period FHA had in place prior to this announcement. Again this is great news for Boomerang Buyers as the program is here through September 2016!
FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:
• Certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control.
• The borrower has demonstrated full recovery from the event.
• The borrower has completed housing counseling.
Qualifications for a Back to Work – Economic Event
A Back to Work – Economic Event is an occurrence beyond the borrowers control that results in Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrowers Household Income of 20% or more for a period of at least 6 months.
The Approval Process Back to Work – Economic Event
Receiving loan approval using the Economic Event circumstance is not automatic. Borrowers must obtain a Manual underwrite under stricter FHA guidelines including lower debt to income ratios
How Do You Demonstrate Stability According to Guidelines?
- Stable Employment
- Completed housing counseling.
- No late payments on any credit accounts including auto loans, credit cards, mortgages, and student loans in the last 12 months
- Fully document derogatory credit was the result of the Economic Event
- Meet all other FHA requirements under the Manual Underwrite approval guidelines
To qualify or for more information contact firstname.lastname@example.org or direct 510-282-5456.