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FHA Back to Work program

The FHA back to work program is available now in 2013. These guidelines have changed the waiting periods required after the discharge of a bankruptcy, foreclosure or short sale. Under normal guidelines it is 2 years after a bankruptcy. 3 years after a foreclosure and a short sale unless it can be shown that there were extenuating circumstances for the short sale. The guideline changes below effectively cut the waiting down to 12 months for each of these events.

The Special Credit Requirements / HUD Mortgagee Letter 2013-26 “Back to Work”:

This guidance applies to purchase transactions only.

The provisions of this mortgagee letter apply when a borrower experienced an Economic Event, as defined in the ML, which resulted in a foreclosure, short sale, bankruptcy or other negative impact on their credit, AND whose application has been issued a “Refer” recommendation by TOTAL Scorecard, or received an “Accept/Approve” but must be manually downgraded. All other FHA eligibility and policy requirements apply in addition to these requirements.

Borrowers that may be otherwise ineligible for an FHA mortgage due to the waiting period for bankruptcy, foreclosure, deed in lieu, and short sales, as well as delinquencies and/or indications of derogatory credit, including collections and judgments, may be eligible for an FHA mortgage if the borrower can document that the delinquencies and/or indications of derogatory credit are the result of an Economic Event as described below has completed satisfactory Housing Counseling as described below, AND meets all other HUD requirements

Definitions: An Economic Event is any occurrence beyond the borrower’s control that results in a Loss of Employment, Loss of Income, or a combination of both, which causes a reduction to the borrower’s Household Income of 20% or more for a period of at least 6 months. The Onset of an Economic Event is the month of the Loss of Employment/Income. Recovery from an Economic Event is the re-establishment of Satisfactory Credit (as defined below) for a minimum of 12 months.

To find out if you may qualify for the Back to Work program, please complete our online mortgage quote form and tell us in the comments when your bankruptcy, foreclosure or short sale was discharged, whether you reestablished your credit since the discharge and the reasons for your economic event. Was it due to a loss in income as described above?

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