FHA rules 12 month purchase after SHORT SALE, BK, AND FORECLOSURE

FHA issued a Mortgagee Letter last week adding to the list of extenuating circumstances "Economic Event." We have summarized the letter for you to make it easy to read, but have also attached it for further information.

Per FHA, an "Economic Event" is defined as any occurrence beyond the borrowers' control that results in Loss of Employment, Loss of Income or a combination of both which causes a reduction in the borrowers' household income of 20% or more for a period of 6 months.

Under the new guidlines, FHA is allowing for the consideration of borrowers who have experienced an Economic Event that resulted in:

·  Collections and Judgements

·  Short-Sale

·  Foreclosure

·  Bankruptcy


Borrowers who have experienced an Economic Event must be able to document that:

1.     A 12-month minimum of time has elapsed from the event

2.     The certain credit impairments were the result of a loss of employment or a significant loss of household income beyond the borrower’s control

3.     The borrower has demonstrated full recovery from the event, and the borrower has completed housing counseling*. 
*One on One Counseling by a HUD-approved Agency

Borrowers who cannot prove a reduction in overall household income and/or borrowers who had a "strategic" short sale or foreclosure will be ineligible.

Click this link If you want to speak to a lenders we work with to see if this program may work for you