They are calling it “Back to Work – Extenuating Circumstances”
If you or someone you know lost their home do to a job loss, or other extenuating Circumstance, but have gotten back on your feet and can afford a home again, FHA wants to help you.
Here’s how from a bulletin they put out.
“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 preforeclosure
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.
To that end, 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; and,
- the borrower has completed housing counseling.
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, which causes a reduction in the borrower’s Household Income of twenty (20) percent or more for a period of at least six (6) months.
The Onset of an Economic Event is the month of Loss of Employment/Income.
Recovery from an Economic Event is the re-establishment of Satisfactory Credit (as defined on page 5 of this ML) for a minimum of twelve (12) months.
- 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, and major derogatory credit issues on revolving accounts;
- any open mortgage is current and shows twelve (12) months satisfactory payment history. Mortgages may have been brought current through loan modification, which may be “temporary” or “permanent” so long as all payments have been documented as being received in accordance with the modification agreement(s); and
- the borrower meets the requirements of this ML.”