Dear Friends,
The financial crisis took its toll on Wall Street and Main Street alike. Mistakes were made on both sides of the fence. However, while bailouts have brought Wall Street back from the brink, Main Street still teeters on the edge. Specifically, with respect to the housing market, borrowers who have suffered bankruptcies, foreclosures, and short sales have been unable to qualify for a shot at the American Dream in the midst of economic recovery. That is finally changing.
The Department of Housing and Urban Development (HUD) unveiled a new set of guidelines under the FHA program geared toward past and prospective homeowners adversely impacted by the Great Recession. The “Back to Work” program, as it’s called, doesn’t constitute a free pass but it does reopen the door to many who would otherwise need to wait two to seven years for a serious credit issue to age before applying for a home loan.
According to FHA: “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.”
The program will require prospective borrowers to thoroughly document the nature of the “economic event” that resulted in derogatory credit and that there has been satisfactory recovery during a minimum 12 month period of time. For purposes of this program, an “economic event” is defined 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 twenty (20) percent or more for a period of at least six (6) months.”
Many of us know friends and family members who have been financially challenged. The FHA “Back to Work” program may be their second chance necessary to achieving home ownership while prices are still reasonable and interest rates are still low.
As always, please do not hesitate to contact me or my lending partner Daniel C. Cote at Cobalt Mortgage (425-232-9180) if you have any questions or require assistance.
As always, if you would like a private consultation on your home, please don’t hesitate to contact me.
Warm regards,
Patti Chalker
John L Scott