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Saturday, September 21, 2013

FHA Shortens Wait Time to 1yr. for "Boomerang Buyers"...​Here's the Specifics!

The FHA’s Back to Work mortgage was announced August 15. (HUD Mortgagee Letter 2013-26).
Extenuating
Circumstances
Extenuating circumstance exceptions are typically very vague and rarely granted.
The “Back to Work” loan program gives us a very clear definition for qualifying.
Former homeowners who lost their homes due to:

a) a loss in employment or income now have the ability to buy as soon as 12 months after a bankruptcy, foreclosure, short sale or a deed in lieu.
b) Excluded from this loan will be borrowers who have previously defaulted on a FHA loan.
Caution:
As with any new guidelines, we must approach your buyers very methodically.
Their application will be “manually underwritten” at a underwriter’s discretion (there is no automated computerized approvals).

Count on a 30- 45 day closing.
Borrowers need their credit (mortgage) report reviewed before we even get started.
Click here for a credit authorization and here for a FHA buyer’s checklist.
The cost $25 and is refundable at the time of closing.
Since it is estimated only 1/3 of all buyers will fit the program, you shouldn’t be showing property until your buyer has completely filled out all paperwork and
addressed all extenuating circumstances.


Remember the RE agent saying: “buyers are liars” (and “sellers are worse”).
“Back to Work” – Definitions
FHA introduces several new terms that are vital to
determining eligibility for loan.

Economic Event” is an occurrence beyond your control that results in a loss of employment, loss of Income or a combination of both, which causes a reduction in income of 20% or more for a period of at least 6 months.
Onset of an Economic Event” is the month of the loss of employment / income.
Recovery from an Economic Event” is the re-establishment of satisfactory credit for a min. of 12 months.
“Satisfactory Credit” means no major derogatory credit history on all mortgages (if home retained after BK) and /or all revolving and installment accounts listed on your credit report.
It is unclear at this time what the minimum credit score
will be….probably “640”.

“HousingCounseling” is required for all to meet all of the qualifying requirements for this exception.
At this point we are not sure who HUD will designate as
housing counselors.

Eligible Economic Events
Loss of Income must be documented in one of two ways:
A written “Verification of Employment” (click here for the form) documenting date and amount income dropped, and when it was restored.
Tax returns or W-2s showing a minimum 20% loss in income can also be used.
Loss of Employment:
a written Verification of Employment (VOE) showing termination date, or when the prior employer went out of business.
Other acceptable evidence is:

a) A written termination notice or a publicly available documentation of the business closure when the prior employer went out of business.
b) Documentation of receipt of unemployment income.

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