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According to the Los Angeles Times:

FHA is now easing some of the lender rules for borrowers who had to let their properties go through foreclosure and/or filed for bankruptcy protection.  To qualify for the break, FHA borrowers must show that their foreclosure or bankruptcy was caused by external economic factors which reduced their income by 20% or more for six months.

Borrowers need one year of timely rent and credit-card payments before they can apply to buy a home with an FHA-insured loan.

Before this policy change borrowers were not eligible for a new FHA loan until three years after a foreclosure or two years after a bankruptcy.  One exception was the death of a spouse or a medical emergency which would reduce the period to one year.

According to a recent FHA bulletin, in order to qualify for this new loss income exception borrowers must have one year making timely rent and credit-card payments before they can apply to buy a home with an FHA-insured loan.  In addition, they must obtain housing counseling from an agency approved by the Department of Housing and Urban Development.

We have several videos on our web site.  Below are a few that might be of interest:

  • “Lender’s Foreclosure Rights in Arizona”
  • “Should I keep my home or let it go into foreclosure?”
  • “Options in Bankruptcy, with Notes on Getting Help”
  • “Meet Ms. Drain and Suggestions on How to Hire an Attorney”

We make financial decisions based on our current situation, influenced by what we hope will be our future.  Sometimes life gets in the way of our well laid plans resulting in a financial crisis.  The culprit could be medical, loss of job or divorce.  Add to those unexpected changes could be a downturn in the economy.  My point is that we can plan all we want, but reality is for most of us we are just a few months away from being on the street.

Never look down on someone going through a rough patch.  Filing for bankruptcy or letting their home go through foreclosure may be the best economic decision they can make.  Support these folks because they are in pain and need to know they are not failures.