Articles in Category: HUD Regulations

April 15, 2016

FHA Loan Rules In HUD 4000.1: Escrow

FHA loan rules in HUD 4000.1 have several things to say about escrow accounts. FHA loan rules don’t require escrow for every single home loan or refinance loan, but there are cases where escrow is a must and there are also lender standards which may require setting up an escrow account to pay certain expenses associated with the transaction. FHA loan transactions may require escrow for payments to builders in association with construction loans, rehab loans or reverse mortgages. The standards and circumstances vary from loan to loan, so if you aren’t sure whether an escrow account is needed for your FHA loan transaction, discuss your situation with the loan officer. In some cases escrow is used to pay property taxes, in others it may be used to disburse funds | more...

April 14, 2016

New FHA Loan Policy For Student Loan Debt

By Joe Wallace

Recently we wrote about the new FHA loan guidelines for student loan debt. The FHA and HUD have issued a mortgagee letter updating previous policies. According to FHA Mortgagee Letter 2016-08, the old FHA loan policy for student loan debt “required Mortgagees to calculate a monthly payment for deferred Student Loans using 2 percent of the outstanding balance, and include the payment in the Borrowers Debt-to-Income ratio for qualification purposes. Further, FHA policy currently does not differentiate between non-deferred Student Loans, which are in payment plans that do not fully amortize the loan, and other Installment Loan debt.” But now, FHA loan rules have changed, and while the “effective date” for these new policies isn’t until summer, the FHA states lenders can start using the new guidelines right away. “This | more...

April 14, 2016

FHA Clarifies Deferred Obligation/Student Loan Rules For FHA Loans

By Joe Wallace

The FHA is updating and clarifying the rules for deferred obligations as they pertain to how a lender is to calculate student loan debt. Lenders have, to this point, been required to include the amount of a borrower’s monthly student loan payment–or in the case of deferred payment, a percentage of the total amount. However, the FHA recently issued a mortgagee letter informing lenders of changes to FHA policy. According to HUD Mortgagee Letter 2016-08, the new guidance will affect “all FHA Title II forward mortgage programs with the exception of non-credit qualifying streamline refinances” and “provides documentation requirements and the standard for calculating monthly obligations for all student loans, regardless of payment type or status of payments”. As background, the mortgagee letter states: “With the implementation of Handbook 4000.1, | more...

April 13, 2016

HUD Launches Improved Manufactured Housing Dispute Resolution Program

By Joe Wallace

The Department of Housing and Urban Development has launched improvements to its manufactured housing dispute resolution program, according to a press release on the FHA/HUD official site. According to HUDNo.16-046, the program is designed to “help consumers and the manufactured housing industry to resolve disputes involving the purchase and installation of manufactured housing.” The HUD Office of Manufactured Housing Programs (OMHP) has created a new website for homeowners, manufacturers, retailers and installers to, “navigate the dispute resolution process in those states that do not have their own process” According to the press release, there are more than twenty states that don’t have their own manufactured housing dispute resolution programs. “HUD is updating its dispute resolution program in the following states: Alaska, California, Connecticut, Hawaii, Idaho, Illinois, Indiana, Iowa, Louisiana, Maryland, | more...

April 11, 2016

Department of Justice Announces Settlement In Wells Fargo Improper Lending Practices Case

By Joe Wallace

The Department of Justice has announced a settlement in the improper lending practices case brought against Wells Fargo. According to a DoJ press release, “…the United States has settled civil mortgage fraud claims against Wells Fargo Bank, N.A. (Wells Fargo) and Wells Fargo executive Kurt Lofrano, stemming from Wells Fargo’s participation in the Federal Housing Administration (FHA) Direct Endorsement Lender Program. In the settlement, Wells Fargo agreed to pay $1.2 billion and admitted, acknowledged and accepted responsibility for, among other things, certifying to the Department of Housing and Urban Development (HUD), during the period from May 2001 through December 2008, that certain residential home mortgage loans were eligible for FHA insurance when in fact they were not, resulting in the Government having to pay FHA insurance claims when some of | more...

April 4, 2016

FHA and HUD Kick Off Fair Housing Month

By Joe Wallace

April is Fair Housing Month, a time when efforts are made to raise the awareness of fair housing issues and federal law that protects those seeking a place to live from discrimination. That’s why the FHA and HUD began Fair Housing Month 2016 with the launch of a national media campaign designed to help the public, “to envision what communities with shared opportunity for all might look like. The new campaign is designed to further educate the public about their housing rights and the ideals behind HUDs new Affirmatively Furthering Fair Housing (AFFH) initiative” according to a 1 April press release. “The campaign, which was developed in partnership with the National Fair Housing Alliance (NFHA), will include print Public Service Announcements (PSAs) in various languages, television PSAs in English and | more...

April 1, 2016

FHA Loan Appraisal Questions: The Roof

By Joe Wallace

We get many questions about the FHA home loan appraisal process, including specific questions about certain conditions that may or may not affect the sale of a given home. Here’s one of the most recent: “Can I get an FHA Loan on a house if it has 2 layers of shingles, and the 2nd layer is less than 20 years old?” What borrowers should know in these cases is that there are FHA minimum standards, and then there are Federal, State, and local building codes which also may apply. FHA minimum standards are not intended to address every single possible condition of the home or the various components of a home, but there are some areas that are specifically addressed as common issues. Regardless, FHA loan appraisal requirements such as | more...

March 31, 2016

FHA Loan Questions: Mixed Use Property

By Joe Wallace

We answer many questions about FHA home loans in the comments section. Here’s one of the most recent, on the subject of mixed-use properties, co-borrowing, and more: “My sister and I want to buy a house that is 1/2 apartment, 1/2 store. I already own a home and have an 820 credit score. She has a 620 score, and would be the owner occupant. I am married. Does my husbands income affect the debt to income ratio? If not, am I only calculated as responsible for 1/2 of our mortgage payment each month?” There are several issues that can affect the answers to these questions. To begin with, let’s examine what FHA loan rules in HUD 4000.1 say about transactions with non-occupying co-borrowers: “A Non-Occupying Borrower Transaction refers to a | more...

March 30, 2016

FHA Loan Rules For Income and Debt Calculation: Collections

By Joe Wallace

FHA loan rules cover a lot of ground when it comes to a borrower’s creditworthiness. There are minimum FICO score requirements, instructions to the lender for reviewing the borrower’s record on-time payments (12 months of reliable payments on all financial obligations is strongly recommended), and much more. One area that is also covered in HUD 4000.1 is what the lender should do if collections are included in borrower’s credit history. The presence of a collection action on a loan applicant’s record may be cause for concern, but there are instructions to the lender on how to view collection accounts and what to do if those collections fall within the lender’s “tolerance” for loan approval. What will the lender require under FHA loan rules if the loan can move forward? HUD | more...

March 29, 2016

FHA Loan Rules For Debt Calculation: Installment Loans, Revolving Charge Accounts

By Bruce Reichstein

It’s easy to forget that FICO scores are not the only credit issue lenders will examine when reviewing your FHA mortgage loan application. A lender isn’t just concerned with your scores; your ability to repay the loan and make your monthly mortgage payment requires a review of a potential borrower’s income and debt. The lender has different standards depending on the type of debt. For example, changes to FHA loan rules published last year require the lender to take student loan debt into account–even if the loan isn’t payable yet. Such debts are known as “deferred obligations” and if no monthly payment is available, the lender must take a percentage of the total debt to make the monthly payment estimation. FHA loan rules in HUD 4000.1 also include standards for | more...