HUD Back to Work Extenuating Circumstances Versus NON-QM Loans

HUD Back To Work Extenuating Circumstances Versus NON-QM Loans

This BLOG On HUD Back To Work Extenuating Circumstances Was UPDATED On January 2nd, 2019

HUD came out with a special program called Back to Work Extenuating Circumstances,

  • HUD Back To Work Extenuating Circumstances is not a mortgage loan program
  • It is an extenuating circumstances exemption where it shortens the waiting period to qualify for FHA Loans
  • The waiting periods gets shortened from two years to one year from the discharge date of someone who has filed Chapter 7 bankruptcy
  • It also shortens the waiting period from three years to one year from the recorded date for someone who had a foreclosure or a deed in lieu of foreclosure
  • It also shortens the waiting period from three years to one year for someone who had a short sale in qualifying for FHA Loans

Waiting Period Shortened To One Year After Bankruptcy And Foreclosure

Although this new extenuating circumstances implemented by HUD went into effect on August 15, 2013, many lenders are not offering the Back to Work Extenuating Circumstances FHA mortgage program quite yet.  I do offer the Back to Work Extenuating Circumstances FHA mortgage program to qualified borrowers who meet the specific guidelines.

FHA Back To Work Extenuating Circumstances Are Manual Underwrites

The HUD Back to Work Extenuating Circumstances mortgage program is not a follow the guidelines checklist program like you get with an automated approval by Fannie Mae’s Automated Underwriting System.

  • DU will not recognize this so all HUD Back to Work Extenuating Circumstances mortgage loan applications need to be manually underwritten
  • Majority of lenders do not do manual underwrites so you need to choose a mortgage lender that does manual underwrites

HUD Back to Work Extenuating Circumstances Qualification Requirements

Fannie Mae’s Automated Underwriting Systems will not read FHA Back to Work Extenuating Circumstances mortgage applications correctly.

  • Chances are that it will get denied so a manual underwrite is necessary
  • Every single mortgage loan application needs to be manually underwritten
  • Each file will be reviewed individually and a good letter of explanation concerning the extenuating circumstances need to be clearly explained with proper documentation to ensure success in underwriting the loan

Letter Of Explanation For Back To Work Mortgage

Prior to submitting the full application and documents for processing and underwriting, mortgage loan originator should go over case scenario with a mortgage underwriter.

  • Need to evaluate whether the extenuating circumstances qualify for HUD Back to Work Extenuating Circumstances FHA mortgage loan program
  • If the mortgage underwriter deems it qualifies and proof and proper documentation can be provided, the mortgage process can proceed

HUD Mortgagee Letter For Back To Work Loans

There is a 15 page mortgagee letter published and released from FHA.

  • There will be a great deal of variance in the processing and execution of the Back to Work Extenuating Circumstances FHA mortgage loan program from one individual lender to another on how they interpret the Back to Work Extenuating Circumstances

Manual Underwriting Guidelines

Each underwriter is different than the other one in interpreting the underwriting opinion of each file.

  • This program will mainly rely on the underwriter’s opinion
  • The mortgage underwriter will ultimately have the power to render his or her decision depending on his or her opinion of the subject file
  • Most underwriters base their opinion on the completeness and accuracy of the subject mortgage loan file
  • The way how the mortgage loan application is packaged and processed prior to submission to the mortgage underwriter is what can make or break the loan approval

Denial Factor In HUD’s Back To Work Extenuating Circumstances FHA Mortgage Loan Program

The denial ratio in HUD Back to Work Extenuating Circumstances FHA mortgage loan program will definitely be greater than the conventional FHA mortgage loan program with the standard waiting period requirements with an automated approval by Fannie Mae’s Automated Underwriting System.

  • I strongly recommend that borrowers do their due diligence when choosing mortgage loan originator and lender. 
  • Borrowers need to feel extremely comfortable with their loan officer
  • The loan officer should specialize in helping borrowers with prior credit issues and be knowledgeable and have access to lenders who have zero overlays

Mortgage Process

Every FHA mortgage loan requires FHA registration with FHA and is given a FHA case number.

  • Once you have a FHA case number and has been noted that is has been declined in the FHA registry system, this declined decision will follow the file which means other lenders who you reapply with will know that your mortgage loan application has been declined, which is a negative
  • Many FHA mortgage lenders have their own overlays where they do not look at second hand mortgage applications
  • What this means is that if you got denied by a mortgage company they will not do the loan and will not take your mortgage application
  • All FHA loans require registration with FHA through a case number    
  • Also, you need to take into consideration that every FHA mortgage underwriters have DE certification and are somewhat like members of a brotherhood or fraternity
  • It is somewhat difficult to reverse the course once a FHA loan have been formally declined by a particular lender

UPDATE: NON-QM Loans

HUD Back To Work Extenuating Circumstances has been discontinued. This mortgage program turned out to be a flop. However, The Gustan Cho Team now offers NON-QM Loans where there is no waiting period after the following:

  • Bankruptcy
  • Foreclosure
  • Deed In Lieu Of Foreclosure
  • Short Sale

To qualify for NON-QM Loans, borrowers need 20% down payment and a minimum of 640 credit scores. We also offer Bank Statement Loans for Self Employed Borrowers where no tax returns are required.

However, I can help those borrowers who have been declined for a FHA loan elsewhere.   Borrowers who have been denied from a FHA loan due to not meeting the mandatory waiting period after bankruptcy and/or foreclosure, please contact Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. Or visit The Gustan Cho Team at Loan Cabin Inc. at www.gustancho.com .

Gustan Cho NMLS ID # 873293

Related> FHA Back To Work Mortgage Guidelines

Related> Do You Qualify For The FHA Back To Work Mortgage Program?

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