HUD’S: BACK TO WORK INITIATIVE
Table of Contents
Overview ............................................................................................................................................................. 2
Documenting an Extenuating Circumstance ......................................................................................................... 3
Evaluating credit after Economic Event ................................................................................................................ 4
Housing Counseling Agency .................................................................................................................................. 5
Required Documentation....................................................................................................................................... 6
FastTrac Updates ................................................................................................................................................... 7
HUD’s: Back to Work Initiative
Rev 9/19/2013
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HUD’S: BACK TO WORK INITIATIVE
Overview
The U.S. Department of Housing and Urban Development has launched a new initiative dedicated to those
borrowers who have been affected by the recession and suffered an “Economic Event”. As a result, HUD has
released mortgagee letter 2013-26 and is in effect for case numbers assigned > 08/15/13 – 09/30/16.
What is an Economic Event? HUD defines this term as any occurrence beyond the borrower’s control that results in
Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrower’s
Household Income of twenty (20%) percent or more for a period of at least six (6) months.
What does borrower’s household income mean? HUD defines this term as the gross income of the borrower and all
Household Members.
What does Household Member(s) mean? HUD defines this term as an individual residing at the borrower’s primary
residence at the time of the Economic Event and who was a co-borrower on the borrower’s previous mortgage.
Further clarification was provided from HUD which stated that whichever borrowers were on the existing loan i.e.,
borrower and co-borrower, whom was affected by the Economic Event which occurred is considered part of the
Household Member. In other words, if the borrower purchased a home with a non-borrowing spouse then later
went into foreclosure due to an Economic Event, only that borrower’s extenuating circumstance i.e., loss of job,
loss of income or both would be considered. The non-borrowing spouse was not a qualifying factor on the original
loan.
The base of this program is weighed heavily on the ability to document a strong case for an “Economic Event”
which is being added to HUD’s 4155.1 Mortgage Credit Analysis for Mortgage Insurance handbook Chapter 6
section G as an extenuating circumstance. Additional documentation will be required to support this event and
show the reduced likelihood of reoccurrence.
The Lender is burdened with documenting the loan file of the following:
1. The delinquencies and/or indications of derogatory credit are the result of an Economic Event creating an
extenuating circumstance which is not likely to reoccur
2. The borrower has completed satisfactory Housing Counseling
3. Borrower meets all other qualifying HUD requirements
Effective immediately, PRMG will be joining HUD in support of the above initiative by participating in Back to Work.
This material has been developed to assist in setting the proper expectations of the documentation required by
the borrower so that we are able to insure and deliver a well packaged loan file to our Investors.
This loan is considered a manual underwrite due to the borrowers extenuating circumstances. The underwriter is
required to use their Chums ID no.’s on the 92900LT and 92900a (page 3). The following Underwriting authority is
required to underwrite this loan type:
1. Level III and Level IV with a 2nd Level Review performed by a Corporate Underwriter or Corporate
Operations Manager
2. The Underwriter is required to complete the following checklist to ensure proper documentation for
extenuating circumstances as per ML13-26.
http://www.eprmg.net/training/Checklists/BacktoWorkChecklist-WS.doc
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HUD’S: BACK TO WORK INITIATIVE
How to document an extenuating circumstance due to an Economic Event
1. Credit Requirements (New loan):
Mid FICO score may not be less than 640
 Mid FICO score is 680 for < 90 day property flips with a sales price of > 20%
Satisfactory Credit
The Underwriter is to evaluate the borrower’s credit history and verify no late payments in the last
12mo’s since the Economic Event
 Borrower’s credit history is clear of late housing (with a VOR or credit supplement) or
installment debt payments and major derogatory credit issues on revolving debts;
 Any open mortgage is current and shows a 12mo history of satisfactory payments. Mortgage
payments brought current through a loan modification is acceptable so long as all payments are
documented as being paid on time as per the loan modification agreement.
 Borrower(s) had a satisfactory credit history 12mo’s (minimum) before the Economic Event.
2. Extenuating Circumstance – Documentation
Loss of Employment
The Underwriter must verify and ensure proper documentation is provided to reflect the loss of
employment by obtaining:
 A WVOE to show the termination date
o If employer went out of business document with
 Copy of borrowers severance package letter
 Other publicly available document that the employer went out of business
 Receipt of Unemployment income with timeframe
Loss of Income
The Underwriter must verify and ensure proper documentation is provided to reflect what the
borrower’s household income was prior to Economic Event
 2yrs signed tax returns and/or W2’s
After review of the documentation reflecting what they were earning prior to the Economic Event, the
Underwriter must then verify that either the loss of employment, the loss of income or the loss of both
triggered the Economic Event by documenting what the borrowers household income was after the
Economic Event was triggered. We must verify a minimum of 20% reduction of income for a minimum
of 6 months.
“Before” Income
20% reduction
“After” Income
Amt.
Amt.
$60,000/yr.
$12,000/yr. loss
$48,000/yr.
Note: Even if the Household Member is not on the new loan, the Underwriter is responsible for verifying
employment or income if they were part of the Economic Event that occurred. As a result, the
Mortgage Loan Originator, whether our broker or our retail is required to obtain the necessary
authorizations to validate the information needed.
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HUD’S: BACK TO WORK INITIATIVE
3. Evaluating Credit as a result of Economic Event
Open Collections and Judgments
Collections: Regardless of the initial AUS findings, if the total outstanding balance of ALL collections for
ALL borrowers is > $2,000, the Underwriter is required to perform 1 of the following choices:
 Condition the loan file for the collections to be paid off at closing
 Verify with a letter from the creditor on their letterhead or a credit supplement that borrower
has been in a satisfactory payment plan. Qualify the borrower with the verified payment
amount
 If no payment can be verified, qualify the borrower with each collection account using 5% of the
balance as the payment
Note: 1.
2.
3.
Medical collections and charge-offs are excluded from this policy
This policy includes the collection accounts for non-borrowing spouses who live in a
community property state i.e., Arizona, California, Idaho, Louisiana, Nevada, New
Mexico, Texas, Washington, and Wisconsin.
Collection accounts may NOT be paid down to less than $2,000
Judgment(s): Regardless of the initial AUS findings, the Underwriter is required to perform 1 of the
following choices:
 Judgment(s) must be paid in full through closing of the transaction
 Evidence judgment has been satisfactorily paid prior to close
 Evidence borrowers are in a payment plan with the following requirements:
o Provide a copy of the agreement
o Payment must have been made in a timely manner, and
o Evidence a minimum of 3mo’s scheduled payments have been made prior to credit
approval (credit approval = prior to close)
Note: 1.
Borrowers may not pre-pay scheduled payments in advance to reflect 3 payments
2.
This policy includes the judgments for non-borrowing spouses who live in a community
property state i.e., Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,
Washington, and Wisconsin
Mortgage Foreclosure, Short-Sale, Chapter 7 Bankruptcy
The Underwriter must verify and ensure proper documentation is provided to reflect that 12mo’s have
elapsed from the date of the foreclosure or deed in lieu and that it was a direct result of the Economic
Event which occurred.
Chapter 13 Bankruptcy
 Ch. 13 BK was a direct result of the Economic Event
 Ch. 13 BK was discharged prior to the loan application
o If not discharged prior to loan application, must receive written permission from the
Court to enter into a mortgage transaction for the subject property
 Evidence of satisfactory 12mo payment history
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4. Housing Counseling
The borrower(s) is required to provide satisfactory evidence that they have completed Homeownership
Counseling as per HUD’s approved housing counseling agencies
 The below resource may be used to assist in locating an approved HUD Housing Counseling
Agency: http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm . Choose the appropriate state.
The website will provide you with a complete list to choose from.
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
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Each particpant must receive a minimum of 1hr one-on-one counseling addressing the cause of
the Economic Event and the actions taken to overcome the cause thereby reducing the
likelihood of reoccurrance.
Must be completed a minimum 30 days prior to loan application and no more than 6mo’s prior
to submitting the loan to PRMG. NO EXCEPTIONS!
If there is a fee associated with the Housing Counseling requirement then, the initial GFE must
reflect a Written Provider in box 6 in order to be compliant. Otherwise, we are required to
redisclose this fee to the borrower within 3 days of submission to PRMG.
Housing Counseling may be conducted in person, via telephone or via internet.
The borrower must receive the following disclosures from the Housing Counseling Agency:
o A description of any financial relationships between the agency and any lender
o A statement that the borrower is not obligated to pursue a loan with a lender
o A statement that “Completion of this housing counseling program and receipt of a letter
of completion of counseling do not qualify {you/the borrower} for an FHA loan. A lender
will have to determine if [you/the borrower] qualify for a loan. You understand that you
may not be approved for a loan.”
o The housing agency must provide information on alternative services, programs and
products that are available
5. Required Documentation
The Underwriter must verify and ensure proper documentation is provided to reflect the following:
 The borrower has completed the required pre-purchase housing counseling by obtaining a letter
from the borrower issued by the Housing Counseling Agency on letterhead and that includes the
agency’s Tax Identification Number (TIN),
 The letter must state the borrower’s name, the counselor’s name, that counseling was delivered
in accordance with ML 2013-26 requirements, the date upon which counseling was completed,
borrower’s signature and the signature of an authorized official of the counseling agency
providing the counseling, and
 The letter must also state the borrower received the proper disclosures (as stated above) from
the Housing Counseling Agency.
 The Underwriter will be asking for evidence all required disclosures were provided to the
borrower by asking for evidence of the disclosures as described above. These are required to be
in our FHA HUD Case Binder at time of insuring and shipping.
The borrower is required to meet ALL other normal qualifying requirements for the new loan. This
means the borrower must show evidence of a 2yr residency history; 2yr work history with stable income
earnings; evidence of sufficient funds to close, and collateral must support the estimated value at time
of submission.
Again, the point of this initiative by HUD is to assist borrowers who suffered from an Economic Event
due to the recession and have since been able to recover allowing them to re-enter the housing market.
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6. FastTrac Updates
An FHA Back to Work feature has been added to FastTrac. The Underwriting Dept. is required to
complete this screen and is mandatory. In addition, all operational associates will have access to these
screens so that if at any time an update is required, that associate may update the screen accordingly
based on the documentation provided. Ensure accurate documentation has been uploaded into
Imageflow matching the information placed in this screen.
Back to Work
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