Mortgage lenders work with housing market crash victims
The 2008 housing market crash created millions of foreclosed homes alongside millions of families in negative financial situations.
The Federal Housing Administration (FHA) released Mortgagee Letter 2013-26 on August 15 of last year, which states, “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 pre-foreclosure sale, deed-in-lieu or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts.”
The letter brought forth FHA’s “Back to Work - Extenuating Circumstances program,” which allows families facing an unfortunate economic event to apply for a new mortgage only twelve months after losing a home.
The program waives lending agencies’ traditional three-year waiting period after foreclosure, short sale and deed-in-lieu, and bankruptcy’s traditional two-year waiting period. Borrowers may put down only 3.5 percent with no premiums nor additional fees at closing. Mortgage rates are the same as other FHA rates.
To be eligible, borrowers must be fully recovering from their economic event. “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 20 percent or more for a period of at least six months,” Mortgagee Letter 2013-26 states.
To prove a full recovery, borrowers must show at least twelve months of credit history that is clear of late housing, installment debt payments, derogatory credit issues and delinquency. Credit scores below 500 are not allowed, but borrowers with no credit score remain eligible.
Back to Work program lenders must be able to verify and document a loss of employment by receiving written verification of employment that shows evidence of a termination date or where the borrower’s prior employer is no longer in business.
Borrowers facing Chapter 13 bankruptcy who have yet to be discharged must gain written permission from the Bankruptcy Court to begin a new mortgage. Such document is to be given to their lending agency.
Another way FHA is working with “Back to Work” borrowers is by requiring one hour of housing counseling. The counselor must be approved by the U.S. Department of Housing and Urban Development and address the cause of the economic event.
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.”
The 2008 housing market crash created millions of foreclosed homes alongside millions of families in negative financial situations.
The Federal Housing Administration (FHA) released Mortgagee Letter 2013-26 on August 15 of last year, which states, “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 pre-foreclosure sale, deed-in-lieu or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts.”
The letter brought forth FHA’s “Back to Work - Extenuating Circumstances program,” which allows families facing an unfortunate economic event to apply for a new mortgage only twelve months after losing a home.
The program waives lending agencies’ traditional three-year waiting period after foreclosure, short sale and deed-in-lieu, and bankruptcy’s traditional two-year waiting period. Borrowers may put down only 3.5 percent with no premiums nor additional fees at closing. Mortgage rates are the same as other FHA rates.
To be eligible, borrowers must be fully recovering from their economic event. “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 20 percent or more for a period of at least six months,” Mortgagee Letter 2013-26 states.
To prove a full recovery, borrowers must show at least twelve months of credit history that is clear of late housing, installment debt payments, derogatory credit issues and delinquency. Credit scores below 500 are not allowed, but borrowers with no credit score remain eligible.
Back to Work program lenders must be able to verify and document a loss of employment by receiving written verification of employment that shows evidence of a termination date or where the borrower’s prior employer is no longer in business.
Borrowers facing Chapter 13 bankruptcy who have yet to be discharged must gain written permission from the Bankruptcy Court to begin a new mortgage. Such document is to be given to their lending agency.
Another way FHA is working with “Back to Work” borrowers is by requiring one hour of housing counseling. The counselor must be approved by the U.S. Department of Housing and Urban Development and address the cause of the economic event.
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.”
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