October 4, 2011
Newcomers to FHA loans and home buying in general often wonder how extensive the credit check might be; some wonder if the lender goes beyond examining credit scores and employment history.
Given the amount of detail lenders require in order to process FHA home loan applications, it’s not unreasonable to wonder if a background check is part of the application process.
FHA requirements for FHA insured mortgage loans do state a credit check is needed that includes residency information, employment history and other details to give an accurate picture of an applicant’s background. The borrower is not “investigated” for details outside of the information needed to determine whether he or she is a good credit risk, but a 2010 law does require additional steps for some types of refinancing loans
The FHA published instructions to lenders in 2010 with regard to FHA refinancing to home owners who are currently underwater on their mortgages—those who owe more than their homes are currently worth on the open market.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires financial institutions to inform borrowers of the requirements listed in Section 1481(d) of the reform act–and get signed statements from borrowers seeking some types of refinancing stating the borrower understands the following from the Wall Street Reform and Consumer Protection Act:
“Section 1481(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed July 21, 2010, prohibits anyone convicted within the last 10 years, in connection with a real estate or mortgage transaction, of any of the following: (a) felony larceny, theft, fraud, or forgery; (b) money laundering; or (c) tax evasion from receiving assistance authorized or funded by EESA” (The Emergency Economic Stabilization Act of 2008).
This requirement is for a specific set of circumstances–borrowers who seek FHA insured refinancing on an underwater mortgage “authorized or funded by EESA.
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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