Back to Work Lending Program Waives Waiting Periods

Families battling foreclosure, bankruptcy and other events are ready for a new mortgage with the “Back to Work” loan program


FHA back to work program lender by 1stalliancelendingllc

Last August, the Federal Housing Administration (FHA) began sharing their support for families facing unfortunate economic events. The administration launched a program that waives lending agencies’ traditional three-year waiting period after foreclosure, short sale, and deed-in-lieu, as well as the two-year waiting period after bankruptcy.

The Back to Work lending program is designed for families facing an economic event, which the FHA defines as “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 20 percent or more for a period of at least six months.” This applies to everyone in the household, not only the borrower.

To verify a loss of employment, lending agencies must obtain a written document that shows evidence of termination or where the borrower’s prior employer is no longer in business.

Borrowers that have yet to be discharged from Chapter 13 bankruptcy must gain permission from the Bankruptcy Court before beginning a new mortgage, which also must be verified by lending agencies.

The program’s popularity derives from the housing market crash of 2008, when millions of families lost their homes after becoming unable to repay their mortgages. Now, these borrowers may put down only 3.5 percent on a new mortgage with no premiums nor additional fees at closing.

Mortgagee Letter 2013-26 states, “FHA is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances.”

To become eligible for the program, borrowers must complete at least one hour of one-on-one housing counseling in person, by phone or online. The counseling must be completed a minimum of 30 days, but no more than six months prior to submitting an application. The U.S. Department of Housing and Urban Development provides applicable agencies on its website, www.hud.gov.

The FHA’s letter states, “Housing counseling enables borrowers to better understand their loan options and obligations, and assists borrowers in the creation and assessment of their household budget, accessing reliable information and resources, avoiding scams, and being better prepared for future financial shocks, among other benefits to the borrower.”

Housing counseling also gives borrowers a better idea of how to obtain satisfactory credit, which is another requirement to be eligible in the Back to Work loan program. Satisfactory credit means the borrower’s credit history is clear of late mortgage, installment debt payments, derogatory credit issues and delinquency.

If a borrower’s lending agency is not yet participating, it’s not too late to find a new one. There are participating agencies in all 50 states and the program ends Sept. 30, 2016.