When the Tampa, Florida housing counseling center where Linda Van Doren works stopped paying its employees a full salary in 2007, she couldn’t pay all her bills. In a twist of irony, she lost her home in a short sale. She didn’t, however, sour on home ownership despite the stress, anger and damage to her credit rating.
"In the back of my mind I knew what I was going to do; I was going to purchase another home when I could, and I did exactly that," she said. After renting for three years, Van Doren bought a home last summer, using a loan insured by the Federal Housing Administration (FHA).
Since the housing crash began, 7.2 million homes have been lost to foreclosure or short sale, according to Black Knight Financial Services. Most of those former owners became renters and still are, but some are slowly, carefully moving back into homeownership. A new government program is making that happen faster than ever before.
"We see a lot of boomerang buyers. I'd say about 20 percent of my current clientele has either suffered a short sale or a foreclosure in the past and are now re-buying back into the marketplace," said Matt Weaver, a lender with PMAC Lending Services in Florida.
The bulk of those borrowers are using a new program launched last summer by the FHA, the government's insurer of home loans. The program requires that applicants show they lost at least 20 percent of their income for at least six months and that that caused them to lose their home. They then must show they recovered from that hardship and have had clean credit for at least one year. The loans are fully documented, with all the borrowers finances considered.
"You still have to have the right housing-to-debt ratio, that's key," said Sylvia Alvarez, executive director of the Housing & Education Alliance in Tampa. "If you are over-indebted, you're not going to get a mortgage."
Once borrowers clear the hurdle, they are eligible for regular FHA loans which can carry low interest rates and require just a 3.5 percent down payment. The FHA has no hard number yet on how many borrowers have taken advantage of the new program, but it is a tiny percentage of those who lost their homes.
"Based on the fact that the homeownership rate isn't rising again and demand for single-family rentals is historically high, the comeback buyer is not a significant phenomenon in the market," said Mark Fleming, chief economist at CoreLogic. "Given the duration of the recovery, it's likely that many of the initially foreclosed borrowers have repaired their credit and are now creditworthy, but the scale at which they will enter the market is not sufficient to significantly influence demand."
While the opportunity to get a home loan may be increasing for those with damaged credit, housing affordability is deteriorating, and confidence in both housing and the overall economy is still wavering.
It takes a strong desire to bounce back and boomerang into homeownership again, a desire Linda Van Doren never lost.
"It's mine, I can do what I want to do. I love it. I come home from work and I know what I'm working for."