Moving Ahead After a Foreclosure

The housing market debacle that occurred in 2008 is still giving millions of US citizens stress. Many families are yet to recover completely from the difficult situations they had to face. Families invest their biggest resources into buying a home. Even more than money, it takes a world of emotions and dreams to build homes. Losing a home can be a very distressing situation, emotionally as well as in financial terms.

Many people, owing to loss of income and other negative economic events, had to lose the ownership of their much loved home due to a foreclosure. A foreclosure is a legal process in which the mortgage lenders force the sale of the asset (home, in this case) used as a collateral in the loan documents. Following the years after the economic recession of 2008, even people with good credit scores faced extenuating financial circumstances.

As per Mortgagee Letter 2013-26, people who went through a foreclosure are eligible to be a part of the Back to Work Home Mortgage Loan program. This program, which gives would be homeowners a second chance at mortgage after foreclosure, was welcomed by borrowers as they no longer had to wait for three years to seek a new home loan. The program reduced the waiting period to just one year after the foreclosure date.

If you have been through a foreclosure, it is best to look for a Federal Housing Administration (FHA) approved lender who assures you of sustainability throughout your loan duration and helps you with the new program. Borrowers have time till September, 2016, as the program will not be in effect after that.

When taking part in the program, you will not face any premium on your interest rate or additional closing fees.

To be eligible, borrowers need to meet a few requirements. They must submit documentation to prove that they have been through adverse financial situations.

HUD Mortgagee Letter 2013-26 defines an economic event as, "Any occurrence beyond the borrower’s control that results in a 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”.

Borrowers must demonstrate a strong intent to make future payments, and thus lenders look for job stability in borrowers. Borrowers must attend a counseling session on mortgage loans before applying. Further, a minimum credit score of 500 is a pre-requisite. However, those with no credit scores also qualify for the Back to work home mortgage loan. Also, the credit history should be without any delinquency in the last 12 months of applying.

The Back to Work program has made life better for millions of Americans, giving them a second chance at mortgage after a foreclosure.