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Old 08-20-2013, 12:00 PM
Location: Scottsdale, AZ
1,987 posts, read 3,785,721 times
Reputation: 2888


This just in from one of our partner lenders:

The Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale to reenter the market in as little as 12 months, according to a mortgage letter released Friday.

Borrowers who experienced a foreclosure must wait at least three years before getting a chance to get approved for an FHA loan, but with the new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered even earlier.

For borrowers who went through a recession-related financial event, FHA stated it realizes “their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

In order to be eligible for the more lenient approval process, provided documents must show “certain credit impairments” were from loss of employment or loss of income that was beyond the borrower’s control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.

Additionally, borrowers must demonstrate they have fully recovered from the event that caused the hardship and complete housing counseling.

According to the letter, recovery from an economic event involves reestablishing “satisfactory credit” for at least 12 months. Criteria for satisfactory credit include 12 months of good payment history on payments such as a mortgage, rent, or credit account.

The new guidance is for case numbers assigned on or after August 15, 2013, and is effective through September 30, 2016.
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Old 08-20-2013, 03:03 PM
7,598 posts, read 17,614,249 times
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Our industry has had quite a bit of chatter on this and the bottom line is going to be who will be offering the financing without overlays.? And in a sense, it's deja vu with FHA, we've been here before, such as, in 2005 when they priced themselves out of the market and had to find something to keep them alive, when they removed the property restrictions.

With rising rates, it's going to drive a few into some very expensive mortgages (a la subprimish) for life. Personally, I think it's a terrible deal and reminds me of what was (is) already broken. However, many are gearing up their marketing plans to target the recent foreclosure/short sale/BK individual.

You can bet with QM being front and center, these folks will not be able to exceed 41 or 42% ratios. Few lenders will be brave to take these on, because if the ATR (ability to repay) is not there, the borrower (yes, the borrower) can sue the lender for putting them in that bad, bad mortgage. And you can bet, someone will be saying they didn't know what they were signing, even though we now have 14 forms saying they understand the documents.

And is being back in the workforce for 1 year really enough time to say someone has recovered? What about those that didn't have a BK/short sale/FC and we are still raking them over the coals about their job history? Is that going to lighten up, too? Or, what about when we start seeing major employers putting full-time workers part-time to avoid providing health care?

Too many cooks in the kitchen.
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Old 08-21-2013, 04:32 PM
Location: Maryland
18,563 posts, read 15,768,765 times
Reputation: 6259
Here we go again.
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