The Special Credit Requirements / HUD Mortgagee Letter 2013-26 “Back to Work”:
This guidance applies to purchase transactions only.
The provisions of this mortgagee letter apply when a borrower experienced an Economic
Event, as defined in the ML, which resulted in a foreclosure, short sale, bankruptcy or other
negative impact on their credit, AND whose application has been issued a “Refer”
recommendation by TOTAL Scorecard, or received an “Accept/Approve” but must be manually
downgraded.
All other FHA eligibility and policy requirements apply in addition to these requirements.
Borrowers that may be otherwise ineligible for an FHA mortgage due to the waiting period for
bankruptcy, foreclosure, deed 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 mortgage if the borrower
can document that the delinquencies and/or indications of derogatory credit are the result
of an Economic Event as described below has completed satisfactory Housing Counseling as described below, AND
meets all other HUD requirements
Definitions:
An Economic Event is 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 to
the borrower’s Household Income of 20% or more for a period of at least 6 months.
The Onset of an Economic Event is the month of the Loss of Employment/Income.
Recovery from an Economic Event is the re-establishment of Satisfactory Credit (as
defined below) for a minimum of 12 months.
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