A year ago, before the bandwagon was even built, we told you about what we called "shadow consumers" (who have since been dubbed "boomerang buyers") — people who lost their homes to foreclosure but who would re-enter the housing market as soon as they could.
Depending on their circumstances, that could take three, seven, or 10 years.
FHA won’t give a loan until three years have passed from a foreclosure. And foreclosures and short sales typically stay on your credit report for seven years. (Bankruptcies last for 10.)
We’re seeing those people enter the market now, and they might be one reason inventory has been so low.
Now FHA is cutting its ‘waiting period’ from three years to one year — at least for some borrowers. The idea is that FHA realizes that "their credit histories may not fully reflect their true ability or propensity to repay a mortgage." In other words, it wasn’t entirely their fault. Ergo, it’s probably safe to give them a (reasonable) mortgage.
That doesn’t mean everyone who was foreclosed on can get an FHA loan within a year, of course — only those whose hardship was related to the recession.
Borrowers must be able to show their household income fell by 20 percent or more for at least six months and was tied to unemployment or another event beyond their control. They also must prove they have had at least one hour of approved housing counseling and, among other things, have had 12 months of on-time housing payments.
The new rules, er, guidance is for people who apply for a loan between August 15, 2013 and September 30, 2016.