The Federal Housing Administration has introduced a new program that should be good news to Maryland homeowners who have gone through foreclosure or who are among the many going through the process now. The program, Back to Work – Extenuating Circumstances, should make it easier for some borrowers to jump back into the housing market.
Usually, it takes three years for someone who has gone through a foreclosure or a personal bankruptcy to qualify for an FHA-backed home mortgage. Back to Work reduces the time to 12 months, if the borrower meets some fairly stiff criteria.
A homeowner can fall behind on mortgage payments for a number of reasons, and some of those reasons are beyond the borrower’s control. For example, the financial crisis of 2008 and the recession that followed cost many people their jobs or their nest eggs. Finding a new job took longer than it had in the past, and, at times, the people who could find work took pay cuts.
Borrowers with the best of intentions, borrowers who worked hard to keep their homes, could not keep up. The next thing they knew, their homes were in foreclosure.
A year down the road, though, the same borrowers could be back on their feet and able to afford a home again, but the mandatory waiting period would disqualify them immediately.
According to the memo announcing Back to Work, the FHA realizes how unfair it is to keep those borrowers from owning a home again. The FHA also recognizes that the economic recovery depends in large part on the rebound of the housing market, and that means putting more people in their own homes.
To qualify for Back to Work, borrowers must meet basic FHA criteria and must have gone through a major financial event like a foreclosure, a short sale, Chapter 7 or Chapter 13 bankruptcy, a job loss or a loan modification, even a deed in lieu of foreclosure, just to name a few. Borrowers must have credit histories free of debts 30 days or more past due and must meet certain income guidelines.
The process may be a little more complicated than their last loan application was, but the FHA is banking on borrowers signing on for the opportunity to own their own homes again, so soon after a serious financial setback.
Source: Bay State Banner, “Foreclosed homeowners get government help to buy new homes,” Charlene Crowell, Sep. 6, 2013