October 24, 2021

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FHA Loan Answers: Back To Work Guidelines


Ever since the FHA published details of its new program “Back To Work” for borrowers who experienced economic hardship related to the recession, we’ve gotten a variety of questions and comments about the program.

While this website cannot and does not speak for the FHA, we do publish its guidelines, its press releases and its revisions to the rules when appropriate. It seems there is some confusion about Back To Work–now is a good time to review some of the basics of this program.

According to the FHA Mortgagee Letter 13-26, “Borrowers that may be otherwise ineligible for an FHA-insured mortgage due to FHA’s waiting period for bankruptcies, foreclosures, deeds-in-lieu, and short sales, as well as delinquencies and/or indications of derogatory credit, including collections and judgments, may be eligible for an FHA-insured mortgage if the borrower

  •   can document that the delinquencies and/or indications of derogatory credit are the result of an Economic Event as defined in this ML,
  •   has completed satisfactory Housing Counseling, as described in this ML, and
  •   meets all other HUD requirements.”

The FHA lists a set of definitions to explain its terms–what does “economic event” mean? What is the “onset of an economic event”? How does this affect the borrower or homeowner? According to the FHA:

“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 twenty (20) percent or more for a period of at least six (6) months.”

“The Onset of an Economic Event is the month of Loss of Employment/Income.”

“Recovery from an Economic Event is the re-establishment of Satisfactory Credit (as defined on page 5 of this ML) for a minimum of twelve (12) months.”

Many borrowers are approaching lenders asking about Back To Work; a number–we don’t know how many–are being told at some financial institutions that the bank in question has no provision for the Back To Work program at this time.

Borrowers should know that FHA lenders are considered “participating lenders” and cannot be forced to offer any program or extend credit to borrowers who don’t meet that financial institution’s minimum credit or other qualification standards.

It’s best to contact the FHA directly with concerns over Back To Work by calling 1-800 CALL FHA, but borrowers who believe they may qualify for an FHA loan under this or any other FHA program can apply or get pre-approved for an FHA mortgage loan at www.FHA.com (a private company, not a government website).

Joe Wallace - Staff Writer

By Joe Wallace

September 20, 2013

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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