March 4, 2015
When a borrower applies for an FHA home loan for the first time, it’s normal to wonder how long it might take and how the borrower might be contacted when the decision has been made.
When it comes to the length of time to process the loan, there is no set answer–it can depend a great deal on the lender’s workload, how easy or difficult it is to track down a borrower’s credit information, etc. But once a decision has been made, FHA loan rules in HUD 4155.1 tell the lender how to proceed.
Once the decision has been reached, FHA loan rules state, “The lender is responsible for notifying the borrower of the approval, either in writing or verbally, immediately after receipt of the underwriter’s decision.”
That is found in HUD 4155.1 Chapter One, Section A. In cases where the loan has been denied, Chapter One adds:
“When a borrower is rejected for unacceptable credit characteristics on the basis of information contained in his/her credit report, he/she must be notified and given the name, address, and where available, the telephone number of the credit reporting agency.” That, the FHA notes, is a requirement of the Fair Credit Reporting Act (FCRA).
There’s more to the FHA loan rule for loan rejections–Chapter One says if an FHA loan application is turned down, the lender must complete a rejection notice, and in some cases, as required, “an Equal Credit Opportunity Act (ECOA) notice, forwarded
to the borrower.”
“At least one credit aspect” Chapter One states, “must be rejected before the lender can issue an overall rejection.” The rejection notice the lender issues, “must provide specific reasons for the rejection. Delinquent credit accounts need not be listed. The rejection notice must contain all the reasons for denial/ineligibility and any counter proposals to effectuate loan approval, such as reduced mortgage.”
As you can see, FHA loan denials aren’t as simple as being told, “No”. The lender will need to furnish the information listed above in order to full comply with FHA loan rules in such cases. No borrower wants to be in the dark about the reasons why a loan was denied; these rules are designed to help.
Do you have questions about FHA home loans? Ask us in the comments section. All questions are moderated and held for review.
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Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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