Back in the Game! FHA Lends to Recent Short Sellers and Bankruptcies Sep 122013 The Federal Housing Administration’s (FHA) Back-to-Work-Extenuating-Circumstances Program offers a second chance on home ownership to those who have filed bankruptcy or lost a home through short sale or foreclosure by reducing the time restrictions to qualify for a new mortgage. FHA Mortgage Guidelines originally demanded those befallen to bankruptcy, foreclosure, or short sale to wait 2-3 years before being eligible to apply for a FHA-backed mortgage. Effective for FHA cases filed on, or after, August 15, 2013, the new Back-to-Work Guidelines only require a 1-year waiting period and also extends the Guidelines to deed-in-lieu’s, forbearance agreements, loan modifications, and pre-foreclosure sales. “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,” FHA Commissioner Carol Galante stated in a letter announcing the program. Back-to-Work applicants must meet several requirements before participating in the program. At a minimum, borrowers must experience an “economic event” such as a short sale or foreclosure. Other accepted economic events are loss of employment, loss of income or a combination of both. A valid economic event must produce a 20 percent reduction in household income. W2s, federal tax returns and written Verification of Employment can be used to show a 20 percent loss in household income. Next, the borrower must demonstrate a recovery from the economic event and agree to complete a one-hour counseling session with a HUD-approved agency. FHA’s Back-to-Work-Extenuating-Circumstances Program is set to expire on September 30, 2016; three years after the Mortgage Debt Relief Act’s (MDRA) imminent expiration. Distressed homeowners must mind MDRA’s December 31, 2013 expiration. Homeowners who do not take advantage of the MDRA may be taxed on cancelled debt. Meaning the IRS will consider debt cancelled from a foreclosure, deed-in-lieu, or a short sale as taxable income. With barely 4 months until the MDRA’s expiration, interested participants must act quickly as short sales or deed-in-lieu may take 3-to-6 months to complete. By bundling MDRA tax relief benefits with the advantages of FHA-loan reduced waiting periods, distressed homeowners can quickly find renewed hope.
Posted on: Thu, 12 Sep 2013 13:53:22 +0000
Trending Topics
Recently Viewed Topics
© 2015