Articles in Category: HUD Regulations

September 30, 2013

FHA Loan Modification Trial Payment Plans-What If The Borrower Fails?

Recently the FHA changed some of its policies related to loss mitigation and foreclosure avoidance on FHA guaranteed home loans. In our last look at these changes, we examine what the latest guidance from the FHA and HUD has to say about borrowers in financial difficulty who cannot or do not successfully navigate a Trial Payment Plan. Borrowers and lenders are advised in Mortgagee Letter 13-32, “If a mortgagor fails to successfully complete a Trial Payment Plan under a Loan Modification or FHA-HAMP, pursuant to 24 C.F.R. § 203.355, mortgagees must still re-evaluate the mortgagor’s eligibility for other appropriate Loss Mitigation Options. If the mortgagor’s circumstances have not changed, the mortgagee must evaluate the mortgagor for FHA Loss Mitigation Home Disposition Options prior to initiating foreclosure.” While the Trial Payment | more...

August 29, 2013

HUD Brings Housing Discrimination Charges Against Fifth Third Bank, Fifth Third Mortgage Company and Cranbrook Mortgage Corporation

By Joe Wallace

The FHA/HUD official site has issued a press release announcing charges against Fifth Third Bank, Fifth Third Mortgage Company and Cranbrook Mortgage Corporation. According to HUDNo.13-128, “The U.S. Department of Housing and Urban Development (HUD) announced today that it is charging Fifth Third Bank, Fifth Third Mortgage Company and Cranbrook Mortgage Corporation with discriminating against a couple with disabilities who were attempting to refinance their home mortgage. HUD’s charge alleges that the Cincinnati, Ohio-based mortgage lender and the Clinton Township, Michigan-based mortgage broker required unnecessary medical documentation in order to qualify the couple for a Federal Housing Administration (FHA) loan.” Fair Housing Act laws forbid discrimination in the home loan process or loan modification process, “based on disability, race, color, religion, national origin, sex, or family status, including imposing different application or | more...

August 26, 2013

Back To Work: The FHA’s New Program Requires Housing Counseling

By Joe Wallace

The FHA has a new program called Back To Work, designed to help borrowers who have experienced what the FHA terms an Economic Event that resulted in negative credit information but may not necessarily be an accurate indicator of a borrower’s creditworthiness or ability to repay the FHA mortgage. Back To Work, according to FHA Mortgagee Letter 2013-26, lets lenders evaluate these Economic Events to see if the borrower may still be a good credit risk for an FHA loan. “FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage. To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that: certain credit | more...

August 23, 2013

Back to Work: How the new FHA Loan Guidelines Apply to Foreclosures and Short Sales

By Joe Wallace

In recent blog posts we’ve explored a new FHA program called Back To Work, which allows lenders to be more lenient with credit requirements for borrowers who have experienced what the FHA terms an Economic Event. Borrowers who have a qualifying Economic Event under Back To Work may be able to get an FHA mortgage in spite of negative credit data that lender determines does not realistically affect the borrower’s ability to afford mortgage payments on the FHA loan. The FHA’s Back to Work program rules are described in FHA Mortgagee Letter 2013-26, which states, “FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that: certain credit impairments were the result of a Loss of Employment or a significant loss of Household | more...

August 22, 2013

Back to Work: How the new FHA Loan Guidelines Apply to Bankruptcy

By Joe Wallace

In our last several blog posts we’ve been examining an important new development from the FHA, a program known as Back To Work that allows lenders to work with borrowers who may have negative credit information due to the recession that doesn’t necessarily reflect the ability to pay for an FHA mortgage. The FHA describes an applicable financial setback as an “economic event” and allows borrowers to be more lenient with credit requirements for qualified borrowers. Back To Work rules were issued in FHA Mortgagee Letter 2013-26, which says “FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that: certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control; the | more...

What you should know about FHA 203(h) Loans For Disaster Victims

August 21, 2013

New FHA Loan Rules For Borrowers With Financial Difficulties: Evaluating an “Economic Event”

By Joe Wallace

We’ve been taking a look at the new FHA loan guidelines for lenders who are working with borrowers who have had what the FHA terms an “economic event” that affects credit but may not necessarily be a good indication of a borrower’s ability to repay an FHA mortgage loan. FHA Mortgagee Letter 2013-26 describes an FHA program known as Back To Work. The mortgagee letter was issued in order to, in the words of the FHA, “provide minimum underwriting standards and criteria for evaluating borrowers who have experienced an Economic Event, as defined in this ML, that resulted in a severe reduction in income due to a job loss or other circumstances resulting in reduced Household Income; describe the use of housing counseling to qualify under the provisions of this | more...

August 21, 2013

New FHA Rules For Borrowers Who Have Faced an “Economic Event”

By Joe Wallace

In recent blog posts, we’ve examined some of the new guidelines for FHA borrowers who may have negative credit information on their records as a result of financial difficulties the FHA describes as an “economic event”. The FHA/HUD issued Mortgagee Letter 2013-26 outlining new guidelines for lenders who are working with borrowers affected by such circumstances. According to the mortgagee letter, “Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage. To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that: certain credit impairments were the result | more...

August 20, 2013

New FHA Loan Guidelines For “Back to Work”

By Joe Wallace

The FHA recently issued a mortgagee letter detailing new guidelines for lenders working with borrowers who have had financial setbacks that might not indicate their ability to make monthly mortgage payments or other financial obligations. According to FHA/HUD Mortgagee Letter 2013-26, “FHA is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances.” The letter continues, “As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively | more...

August 19, 2013

FHA Revises Loan Policies For Credit Issues Related to Unemployment, Economic Hardship

By Joe Wallace

The FHA has issued a new mortgagee letter which revises its policies related to credit evaluation for FHA loan approval. FHA Mortgagee Letter 2013-26 says the FHA is committed to helping borrowers who need FHA mortgage loans who may have financial difficulty due to reduced or terminated employment, bankruptcy, and other financial difficulties. “FHA is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances. As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre- foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts.” Mortgagee Letter 2013-26 continues | more...

August 13, 2013

FHA Loan Reader Questions: Buying a Home With a Power of Attorney or Attorney In Fact

By Joe Wallace

A reader asks, “Can I use an AIF to apply for a mortgage loan in my absence? Namely fill out entirely on his own and sign the Uniform Residential Loan Application?” We’re assuming by using the acronym “AIF” the reader means “attorney in fact”. A search of the FHA loan rules in HUD 4155.1 reveals nothing specifically about using an attorney in fact, but FHA loan rules that cover who is permitted to sign the documents committing a borrower to the FHA loan are very clear. Chapter One, Section B of HUD 4155.1 states: “All borrowers applying for the mortgage and assuming responsibility for the debt must sign Fannie Mae Form 1003, Uniform Residential Loan Application (URLA), and all addenda. Either the initial loan application or the final, if one | more...