Our long climb out of the “Great Recession” has been a slow one. In the face of a rapidly failing economy, millions of Americans lost their jobs and thousands upon thousands lost their homes. Many were forced to file for bankruptcy, while many more saw their credit ratings battered by missed payments and defaulted accounts.
Many continue to struggle to this day, while those that have returned to work still carry the burden of a damaged credit history. Recognizing that many qualified, hard-working Americans who would otherwise qualify for Federal Housing Administration (FHA) insured loans are unable to receive those loans due to circumstances beyond their control, the U.S. Department of Housing and Urban Development (HUD) has created the Back to Work program.
How does Back to Work work?
The idea behind the Back to Work program is to help qualified borrowers receive FHA insured loans. Normally a poor credit rating and the derogatory marks that lead to a poor score would be interpreted as signs that a borrower may be incapable or unlikely to successfully pay back a mortgage. However, when a nationwide economic downturn leads to a loss of job or employment, which then leads to things like defaulted loans, short sales, foreclosures, and bankruptcy, those derogatory marks may not be an accurate reflection of a borrower’s current ability to successfully repay their mortgage.
Or, to put it a bit simpler: just because you suffered a tough setback a few years ago because of a bad economy doesn’t mean you don’t deserve a home loan now.
There are three basic criteria needed for consideration:
- Credit impairments were the result of an Economic Event which resulted in a loss of employment or a significant loss of income
- The borrower has fully recovered from the event
- The borrower has completed housing counseling
For the purposes of this program, an Economic Event is defined as “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.” Being “fully recovered” essentially means having sufficient income and no derogatory marks on your credit within the previous 12 months.
The final required criteria for the program is that borrowers complete housing counseling no less than 30 days prior to the submission of the housing application. MMI is very pleased to offer housing counseling specifically designed for this program. The counseling session lasts approximately one hour and, in addition to providing the skills necessary to be a successful homeowner, also addresses each borrower’s Economic Event, analyzing what caused the event and providing advice on how to avoid and overcome similar issues in the future.
If you’re interested in learning more about Back to Work housing counseling, call 866.232.9080.