The Federal Housing Administration (FHA) is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances. In a recent letter, the FHA announced that some borrowers may be eligible for an FHA loan within 12 months, instead of waiting three years.
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 pre-foreclosure 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.
For more information, visit: http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee
The new guidance is for applications on or after August 15, 2013, and is effective through September 30, 2016.