Is the FHA Back to Work Program Still Available?

The FHA Back to Work program is no longer available. Officially titled “Back to Work – Extenuating Circumstances,” the initiative accepted applications only for FHA case numbers assigned through September 30, 2016, and HUD has not renewed or replaced it.¹ If you had a foreclosure, short sale, deed-in-lieu, or bankruptcy, you now fall under FHA’s standard waiting periods, with a narrower hardship exception that still allows some flexibility for events beyond your control.

What the Program Offered While It Existed

Back to Work was HUD’s response to the 2008 financial crisis. It shortened the FHA waiting period after a foreclosure from three years to 12 months, and after a Chapter 7 bankruptcy from two years to 12 months, for borrowers who could prove their credit damage was caused by a specific “Economic Event” rather than ongoing financial mismanagement.¹

HUD defined an Economic Event as any circumstance beyond the borrower’s control that caused household income to drop by 20 percent or more for at least six months. Job loss, reduced hours, and business closure all qualified if documented. The borrower then had to show a full 12 months of satisfactory credit after the event and complete one-on-one housing counseling with a HUD-approved agency before applying.¹

Why the Program Ended

Back to Work was always temporary. The final case number assignment date was September 30, 2016, and HUD did not extend it. The program is not referenced in the current FHA Single Family Housing Policy Handbook (4000.1).² By that point, unemployment had dropped and the pool of borrowers who could tie a recent default directly to a crisis-era job loss had shrunk.

Current FHA Waiting Periods

Without Back to Work, standard FHA waiting periods apply. They run from the date of the credit event to the date a new FHA case number is assigned.

Foreclosure or deed-in-lieu: three years from the date ownership transferred or the deed-in-lieu was executed.³
Short sale, borrower delinquent at the time: three years from the sale date.⁴
Short sale, borrower current at the time: no waiting period, provided the sale proceeds were accepted as full payment.⁴
Chapter 7 bankruptcy: two years from the discharge date.⁵
Chapter 13 bankruptcy: one year into the payout period with all payments made on time. If already discharged, the discharge must be at least one year before case number assignment.²

For someone who lost a home to foreclosure, that is a two-year longer wait than Back to Work allowed. In a rising housing market, the difference matters.

The Extenuating Circumstances Exception That Remains

FHA’s current handbook still lets lenders shorten some waiting periods when the borrower’s credit damage came from events beyond their control. For a Chapter 7 bankruptcy, documented extenuating circumstances combined with responsible financial management since the filing can drop the wait from two years to as little as 12 months.⁵ For foreclosures, deeds-in-lieu, and delinquent short sales, lenders may grant exceptions to the three-year rule for the same reason.³

The definition is tighter than Back to Work used. HUD’s current examples of qualifying events are serious illness and the death of a wage earner. Divorce does not qualify. Neither does an inability to sell a property after a job transfer or relocation.⁶ Job loss during a downturn, which was the whole basis of Back to Work, is no longer treated as an automatic extenuating circumstance under the standard rules.

You also need to show re-established credit since the event, and the lender must document everything in the file.

Expect Manual Underwriting

A loan approved under the extenuating circumstances exception will not clear automated underwriting. It gets downgraded to manual review by a human underwriter.² Manual underwriting brings tighter qualifying ratios, generally capped at 40 percent front-end and 50 percent back-end debt-to-income, and requires compensating factors such as cash reserves above the minimum, minimal increase in housing payment, or additional income not used to qualify.

Other Loan Programs With Shorter Waits

If FHA’s timelines feel too long, two other government-backed programs may help, depending on your eligibility.

VA-guaranteed loans typically require a two-year wait after foreclosure, already shorter than FHA’s three years. They are available to eligible service members, veterans, and certain surviving spouses.

USDA guaranteed loans, available for properties in eligible rural areas and to borrowers within income limits, require a 36-month wait after foreclosure, bankruptcy, deed-in-lieu, or short sale on files that do not receive an automated approval. USDA lenders can grant exceptions when the hardship was “temporary in nature, beyond the applicant’s control, and unlikely to reoccur.”⁷ That language is closer to what Back to Work used, so it may be worth exploring if you meet the service or location and income requirements.

Get a HUD-Approved Counselor Involved Early

Pre-purchase housing counseling is no longer mandatory the way it was under Back to Work, but it remains one of the most useful steps if your credit history includes a major event. A HUD-approved counselor can identify which waiting period applies to your situation, tell you whether an extenuating circumstances argument is realistic, and help you assemble documentation that will hold up under manual underwriting.

HUD publishes a searchable directory of approved agencies at hud.gov. The Consumer Financial Protection Bureau also maintains one at consumerfinance.gov/find-a-housing-counselor, and you can reach the CFPB by phone at 1-855-411-CFPB (2372).⁸ Many agencies offer free or low-cost sessions, and starting early gives you time to clean up remaining credit issues before you apply.

1
U.S. Department of Housing and Urban Development. Mortgagee Letter 2013-26: Back to Work – Extenuating Circumstances
2
U.S. Department of Housing and Urban Development (HUD). FHA Single Family Housing Policy Handbook 4000.1
3
U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1
4
U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1
5
FHA FAQ. How Does a Bankruptcy Affect a Borrowers Eligibility for an FHA Mortgage
6
U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1
7
U.S. Department of Agriculture (USDA) Rural Development. Single Family Housing Guaranteed Loan Program Overview – 101
8
Consumer Financial Protection Bureau. Find a Housing Counselor