For borrowers who went through a recession-related financial event, FHA stated it realizes “their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

In order to be eligible for the more lenient approval process, provided documents must show “certain credit impairments” were from loss of employment or loss of income that was beyond the borrower’s control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.

Additionally, borrowers must demonstrate they have fully recovered from the event that caused the hardship and complete housing counseling.

According to the letter, recovery from an economic event involves reestablishing “satisfactory credit” for at least 12 months. Criteria for satisfactory credit include 12 months of good payment history on payments such as a mortgage, rent, or credit account.

The new guidance is for case numbers assigned on or after August 15, 2013, and is effective through September 30, 2016.

FHA rules typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days, but HUD notes that the housing market’s downturn led to an outsized rise in defaults, and consequently a rapid increase in vacant foreclosed homes. Though efforts to keep families in their homes have averted millions of foreclosures and helped to mitigate some of the damage from the crisis, HUD says foreclosures remain “unacceptably high” and affect not only the families that lost their homes, but entire neighborhoods and communities.

While the agency’s primary goal is to help homeowners remain in their homes, HUD says in cases where that’s not possible, waiving the FHA regulation on property flipping will help stabilize neighborhoods and communities where foreclosure activity has been high.

The waiver is applicable to all single-family properties being resold within 90 days of the seller acquiring the property and is not limited to foreclosed homes. The waiver is subject to certain conditions and is not applicable to mortgages insured under HUD’s Home Equity Conversion Mortgage (HECM) Program.