Originally published in CNBC 

By Brandy King-Cutler

If the housing crisis was a horror show, then we are about to see the sequel.

Call it “The Foreclosed: Return of the Living Debtors.”

In 2015, those who lost their homes in the housing crisis of 2008 and 2009 will begin to hit the seven-year point where most default events fall off their credit report. And many are trying to find their way back to homeownership.

Many will say they don’t deserve it, that they should never have bought those homes in the first place. And if they can’t be prevented from getting another mortgage, they at least shouldn’t be helped.

Working with former homeowners who have been through this has shown me what a short-sighted position that is. Like the big financial institutions that we saved, this is a cohort that is too important to our financial recovery. This really is a population that is “too big to fail.”

It’s difficult to consolidate the data into a number that everyone in the industry can agree on, but the best estimates are that 10 million people have lost their homes to foreclosure or have been in the foreclosure process throughout the housing crisis. That number does not include other default events such as short sales, deed-in-lieu of foreclosure and bankruptcy.

This has left a large group of Americans locked out of the housing recovery by their bad credit histories. That’s bad for the economy, bad for lenders, bad for sellers of homes and especially bad for those with damaged credit seeking to make right.

Since losing their homes — an event typically triggered by a job loss or other unforeseen blow — many have found themselves fighting a financial spiral. A bad credit history forces people into expensive apartment rentals and higher borrowing rates and can even put good employment out of reach. Foreclosure creates all sorts of financial havoc for a family, such as relying on expensive storage space for their belongings and moving in with relatives.

About a quarter of renters today spend more than half of their pretax income on rent. That’s been great for the rental industry, but a mighty struggle for many families. And it’s corrosive to blighted communities and a country whose middle-class wealth has been largely built on the foundation of home ownership.

As the economy improves, many who have gone through all of this are starting to struggle out of it — finding jobs again, finding some stability. A new normal. Those who have trooped through this nightmare and come out in position for a new start deserve help. The banks got bailouts. Victims deserve no less.

Lending standards are evolving to help some of those who defaulted, but what is also key is for real-estate professionals, lenders and potential borrowers to better educate themselves on the options that are available.

For example, many prospective buyers, and some lenders, think borrowers who defaulted must wait the full seven years before another mortgage can be approved. In fact, it may take seven years for a default to fall off a credit report, but Fannie Mae and Freddie Mac guidelines state that a borrower may be eligible in two to four years.

In a promising start, the Federal Housing Authority (FHA) has launched a “Back to Work Program” designed to shorten the time frame from three years to one year for a borrower with a foreclosure on their record, if the borrower can prove that the foreclosure was due to a decrease in income of 20 percent or greater. Unfortunately, many lenders are shying away from the program because it is untested; such innovation requires risk.

Attitudes will need to be adjusted. There are lenders who believe those with bad credit will always be prone to bad credit, or that credit scores are a measure of personal integrity. Statistically this is untrue. The actual data show that people that had good credit before the default event are able to get their credit scores higher than they were before the default. Few want to look at the macro causes. Even fewer want to blame their own industry practices.

Most borrowers want to do the right thing. Many just don’t know how. Without access to good advice, some will, for example, pay off their credit cards and then close the accounts — which actually hurts their credit. Others will borrow against their 401(k) to pay off debts. Most cannot afford a private financial advisor, accountant and tax attorney to explain the harm of those moves.

So far, responses to this problem have been sub-par. The real estate and lending industries are skeptical of rehababilitated borrowers; they need to see there is real value in this niche market.

Early in the crisis, federal and state governments spent plenty of capital trying to save borrowers from default, and even more effort has been expended in drafting industry regulations as preventative measures.

It’s time now to focus on aiding those who were actually hit the hardest.

Commentary by Brandy King-Cutler, the manager of the Credit Care Division at American Financing, a national mortgage lender.