FHA and Fannie Mae recently open the gates to homeowners who were displaced due to the housing crisis

It’s not really surprising, that after a foreclosure, most lenders aren’t eager to present the homeowners with an offer for a new mortgage loan. In fact, in most cases, homeowners who underwent a foreclosure are not eligible to receive a mortgage for many years, three to seven years, in fact. 

However, recently Fannie Mae and the Federal Housing Administration have noticed a problem that has occurred for a few years when it comes to reporting. Throughout the reporting process, several homeowners that were released from their mortgage due to a short sale were erroneously marked as a foreclosure on their credit reports, instead of “settled” or “settled for less than the amount due.”

When it comes to a foreclosure, a homeowner would normally have to wait double the amount of time to receive a new mortgage, in comparison to a short sale where the time is cut in half. Unfortunately, banks did not know how to report short sales when they were new to the housing market, and instead chose to report “foreclosure.” As a result, homeowners who completed a short sale now have to wait even longer to get mortgages.

However, Fannie Mae and the FHA are looking to remedy the situation. According the San Diego Tribune-Union, the FHA is now offering homeowners, who underwent a short sale, a second chance to get a mortgage.

The FHA’s plan, or the Back to Work-Extenuating Circumstances Program, allows homeowners to apply for a new mortgage only a year after their short sale, provided that they can prove that they are financially stable and that their short sale was the cause of an economic circumstances out of their control.

Some might ask, is this good news or bad news for the housing market?  Since the real estate crash of 2008, millions lost their homes through foreclosures or short sales. Now, the FHA is looking to offer these homeowners another option, one that will help them get another home sooner.

And it’s not just the FHA that is trying to set things right with these homeowners. According to columnist Ken Harney, Fannie Mae, is also offering a new program that will allow homeowners to apply for a new mortgage in two years, in comparison to the seven years they originally had to wait. Harney also mentions that this is the FHA’s way of fixing the errors on the credit report.

So what does this prove to homeowners? It proves that, when it comes to short sales and the recession, our government and loan lenders are a little more forgiving. Millions of homeowners have done short sales, and these new programs give them a chance to rebuild their lives.  If anything, it shows that big institutions, such as FHA and Fannie Mae, are recognizing the inequity in banks’ reporting errors, sellers’ good faith in negotiating short sales with their banks instead of forcing the banks to take their properties back in foreclosure, and the genuine efforts of short sellers to get their credit back on track.  These institutions have decided to be a little more lenient and open the mortgage world back up to these homeowners who need another home. 

For more info on short sales, please visit www.kayserlawfirm.com. 

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