FHA Extenuating Circumstances...

[jefflegg]

First off let me commend whoever is responsible for this amazing resource. My hat is off to you folks who spend time answering questions on a daily basis. Some of these stories bring tears to my eyes. Not to mention bring back memories I have been trying to forget...

I have been doing a ton of reading and understand FHA requires 3 years after a foreclosure to be eligible for a new mortgage. If there were extenuating circumstances, 2 years. Would complete loss of income from the primary wage earner be "extenuating" enough?

[Evan Bedard]

I have been doing a ton of reading and understand FHA requires 3 years after a foreclosure to be eligible for a new mortgage. If there were extenuating circumstances, 2 years. Would complete loss of income from the primary wage earner be "extenuating" enough?

Welcome and thanks you so much for the kind words! We have countless members here who take time out of their day to help other people here in the community, most members are homeowners just like yourself looking for ways to avoid foreclosure or walk away from their property.

Your research is correct about the waiting period to qualify for a new FHA mortgage after foreclosure. If you can prove to the lender that your income was cut off completely and caused the foreclosure this may be suffice and looked at as an "extenuating circumstance."

[jefflegg]

Welcome and thanks you so much for the kind words! We have countless members here who take time out of their day to help other people here in the community, most members are homeowners just like yourself looking for ways to avoid foreclosure or walk away from their property.

Your research is correct about the waiting period to qualify for a new FHA mortgage after foreclosure. If you can prove to the lender that your income was cut off completely and caused the foreclosure this may be suffice and looked at as an "extenuating circumstance."

Thanks Evan!! That was quick! And very appreciated. Have you actually witnessed this gameplan working? This is EXACTLY my situation. 15 years of on time mortgage payments, 2009 I lose my job like millions of others, after 5 months I was back to work and have been so every since. I would love to read any posts you can point me to on this great forum if there are any...

[Cat Damiano]

Extenuating circumstances which if met, reduce the required waiting periods to 2 years on a bankruptcy and 3 years on a foreclosure, for a new FHA loan. Extenuating circumstances are credible excuses for the bankruptcy or foreclosure that can be interpreted to mean that the likelihood of a recurrence is very low. The lender will be looking for an explanation that involves multiple causes for the bankruptcy or foreclosure. People lose their jobs, they get sick, they have accidents, they suffer deaths in the family, they are victimized by fraud, etc. One of these in and of itself is not likely to be viewed as an extenuating circumstance, but a combination of them might. Another note is that extenuating circumstances do not include the inability to sell the house because of a job transfer or relocation to another area.

The lender will also look for evidence that, whatever was the cause of the past problem, is likely one that is not going to reoccur. In addition, they want the borrower to document that since the occurrence of the bankruptcy or foreclosure, the borrower’s capacity to handle financial affairs has improved. A rising credit score and an ability to make a significant down payment on a new loan are good evidence of this.

The major hurdle facing the borrower who wants to plead extenuating circumstances is convincing the lender, but the prospect of success is much lower than it was before the financial crisis. Every aspect of loan underwriting has gotten tougher, and the ability to plead extenuating circumstances is very difficult. If you claim these types of circumstances, you will have to back up your claim in some way. They're not just going to take your word on it. Mortgage lenders must verify that extenuating circumstances actually did exist, typically through the use of certain documents:

• Notice of job layoff
• Job severance letter
• Divorce decree
• Tax returns that show a loss of income
• Other documents that might support your claim

Again, the goal here is to show that you suffered from events that were largely beyond your control events that reduced your income or increased your expenses (or both).