After a financial crisis, the last thing a borrower wants to think about is applying for another mortgage loan. The situation can be frightening, wondering if life will take another unexpected, financial twist. This past August, the Federal Housing Administration (FHA) created a program that may help lessen the worries of those with previous economic events.
The “Back to Work – Extenuating Circumstances” program gives families a second chance at a successful mortgage without long waiting periods. Whether a borrower is recovering from bankruptcy, prior short sale, prior foreclosure, forbearance agreement or loan modification, the program’s easy home mortgage loans may be able to help.
If a borrower has suffered what Mortgagee Letter 2013-26 calls an “economic event,” he or she is eligible to apply: “An economic event is any occurrence beyond the borrower’s control that results in loss of employment, loss of income, or a combination of both.” The household income must have been reduced by 20 percent or more for at least six months.
Another requirement by Mortgagee Letter 2013-26 is satisfactory credit. The letter states, “The lender may deem a borrower to have satisfactory credit if the borrower’s credit history is clear of late housing or installment debt payments.” In other words, the borrower must have supplied sufficient housing payments on time for at least twelve months.
This also means that a household must be making a full recovery from their job loss, foreclosure or other economic event. Many banks refuse to work with borrowers who have had financial crises in fear that in will happen again. However, many are beginning to lend home mortgage loans through the Back to Work program, since borrowers must prove they’re fully recovering.
Another reason why lenders are hopping on board with the FHA is because the program requires borrowers to have one hour of one-on-one housing counseling in order to participate – another way families can prove they will know how to boost their credit. Although recovering from significant credit reduction can be a long process, the “Back to Work” program is making home mortgage loans more quick and easy for those working to get back on track.