Firm Commentary: Increased real estate commissions and referrals from this Law Office can be expected as a result of changes to FHA loan guidelines. Effective August 15, 2013 H.U.D. has reduced the waiting period for “Fallen Angels” or “Boomerang Buyers” to obtain an FHA loan to refi or purchase a home. If a rehabilitated buyer can document the “economic event” which caused bankruptcy, foreclosure or short sale the waiting period is reduced to 12 months. This law office specializes in difficult real estate transactions for “Fallen Angels” and their real estate agents. By providing documented “economic event” legal opinions, managing the credit restoration process and ultimately originating the FHA loan in house, the law firm eliminates the need for a traditional loan officer and efficiently closes even the most challenging real estate transactions.
These new regulations open up the market for more real estate transactions and increased commissions. The Fallen Angel market exceeds 6 Million borrowers adversely affected by the Great Recession. FHA now recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.
To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:
Certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control;
The borrower has demonstrated full recovery from the event; and,
The borrower has completed housing counseling.
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 the HUD guidelines;
Has completed satisfactory Housing Counseling, as described in this ML, and
Meets all other HUD requirements.
An Economic Event is any occurrence beyond the borrower’s control that results in documented 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.
Recovery from an Economic Event is the re-establishment of Satisfactory Credit per HUD guidelines for a minimum of twelve (12) months.
- The borrower’s credit history is clear of late housing or installment debt payments, and major derogatory credit issues on revolving accounts;
- Any open mortgage is current and shows twelve (12) months satisfactory payment history.
- Mortgages may have been brought current through loan modification, which may be “temporary” or “permanent” so long as all payments have been documented as being received in accordance with the modification agreement(s);
- No history of delinquency on rental housing payments;
- No more than one thirty (30) days delinquency on payments due to other creditors;
- No collection accounts/court records reporting, other than medical and/or identity theft;
- A minimum of twelve (12) months have elapsed since the date of foreclosure, short-sale or deed-in-lieu which was caused by the Economic Event;
- A minimum of twelve (12) months have elapsed since the date of discharge of the Chapter 7 bankruptcy;
- A minimum of twelve (12) months of the pay-out period under the Chapter 13 bankruptcy has elapsed and all required bankruptcy payments were made on time