The FHA Back to Work Extenuating Circumstances program ran from August 2013 through September 30, 2016. It allowed borrowers who experienced a documented economic event to apply for an FHA loan after just 12 months instead of the standard 2-to-3-year waiting period. The program was not renewed and no federal replacement exists.
What the Program Required
- ✦A documented loss of household income of 20% or more lasting at least 6 months
- ✦Income fully restored for at least 12 months prior to application
- ✦12 months of on-time payments on all accounts after the economic event
- ✦HUD-approved housing counseling completed at least 30 days before application
- ✦Credit score meeting standard FHA minimums (580 for 3.5% down)
Current Waiting Periods Without the Program
Standard FHA waiting periods now apply in full. Chapter 7 bankruptcy: 2 years from discharge. Chapter 13 bankruptcy: 1 year of on-time plan payments with trustee approval. Foreclosure: 3 years from the sheriff sale or trustee deed date. Deed in lieu or short sale: 3 years. These are minimums and lender overlays commonly add 6 to 12 months.
What Exists Today for Hardship Borrowers
Borrowers with recent financial hardship have limited but real options. Non-QM lenders offer programs starting as early as 1 day out of foreclosure or bankruptcy with FICO requirements of 600 or above and down payments of 20% or more. Manual underwriting under FHA allows documented extenuating circumstances to be presented as compensating factors after standard waiting periods, but does not shorten them. Portfolio lenders with local community bank relationships sometimes accommodate hardship stories that cannot fit agency boxes.
Aria can walk through current FHA waiting period requirements for any derogatory event and identify which non-QM programs accept borrowers with past hardship. Ask at vicariointel.com.
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