FHA Back To Work Mortgages — New Loans In 12 Months

(Note to readers: This program ended September 30, 2016.)

If you’ve been shut-off from new mortgage financing because of hard times you might want to take a look at the new FHA Back To Work mortgage program. Here, finally, is a program which can allow you to get an FHA loan in as little as 12 months after a foreclosure, short sale or deed-in-lieu of foreclosure — a much better deal than the three years HUD used to require after a foreclosure or two years after a bankruptcy.

The new FHA mortgage program is designed to help those with a history of good credit but who have lost income or employment, what the government calls an “economic event” such as a foreclosure, short sale, deed-in-lieu of foreclosure, mortgage modification, collection, judgment, or a Chapter 7 or Chapter 13 bankruptcy.

“As a result of the recent recession,” said HUD in Mortgagee Letter 13-26, “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,” HUD continued, “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.”

FHA Back To Work Mortgages

So how does the program work?

There are three criteria:

First, there must be “credit impairments” which were the result of lost income or employment beyond your control. Think of a business which closes or cuts back on hours; a firm which downsizes, right-sizes or smart-sizes — or simply moves its workplace outside our borders.

According to HUD, an “economic event” is “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 20 percent or more for a period of at least six months.”

The start of an economic event is the month of loss of employment or income. Recovery from an economic event occurs with the re-establishment of satisfactory credit for a minimum of 12 months.


Second, borrowers must show that they have recovered from their loss of income and employment and now have satisfactory credit. This can be demonstrated, says HUD, if the borrower’s credit history is clear of late housing or installment debt payments, and major derogatory credit issues on revolving accounts.


Third, the borrower must complete required housing counseling services. This is not a big deal because the government only requires one hour of one-on-one counseling from a HUD-approved housing counseling agency. The session(s) can be completed in person or through an online course and must be completed at least 30 days before making a mortgage application — but not more than six months before submitting an application.

If you go through these steps what do you get? A shiny, new FHA mortgage to buy or refinance a home, financing that requires just 3.5 percent down.

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1 Comment on "FHA Back To Work Mortgages — New Loans In 12 Months"

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  1. Trying says:

    The problem is lender’s (that we applied to) are not willing to work with borrows for the FHA Back to Work Mortgage Program. Scores in high 670’s to 690’s, one year 7 months out from DIL/D4L signed. And 13 months out from date recorded and removed from Deed.

    Fannie Mae granted the deed 4 lease and we are grateful to have a roof over our heads; thank you Fannie Mae.

    A broker tells us “90% approved” then cannot help us and must be 5 yrs. from DIL. One CU also takes full app info; we get denied and told “we must wait 7 years” in a message left on our phone. Another credit union says 5 years and another 3 yrs…
    Outcome- more inquires on credit report and although we’ve recovered, we informed the institutions of our situation prior to completing applications. Go figure because “THEY CLAIM THEIR OWN RULES”.

    Another reason we think is having a 15 or 20 year mortgage at current rates and lower home prices, we can pay it off sooner which lowers profits for these lenders.

    Thanks FHA FOR TRYING TO HELP but LENDERS SEEM TO NOT GRASPS THE program that loosening regulations to assist mortgage borrows with extenuating circumstances WILL HELP. You can have but so many inquiries on your credit report because this will affect your score.

    Opinion;create a list of financial institutions who are willing to work with your “Back To Work” mortgage program and do not let any of them on that list who’s not willing to help borrowers purchase again. Monitor the list for compliance and reporting and set the scores “(oh you did that already)”. This may cut down on the number of properties becoming vacant and hopefully stabilize communities.

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