Articles Tagged With: Fair Housing Act

August 30, 2013

FHA Loan Short Sale Eligibility Rules

We get many questions about borrowers who want to apply for an FHA loan in the wake of a short sale. What do FHA loan rules, as described in HUD 4155.1, say about applying for an FHA mortgage after a short sale? Much depends on whether your previous loan was current or delinquent when the short sale occurred. Borrowers who were current on all mortgage payments at the time of the short sale may find a lender willing to work with them based on HUD 4155.1 Chapter Four Section C, which states: “A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all • mortgage payments on the prior mortgage were made within the month due for the 12-month | 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 27, 2013

FHA Loan Reader Questions: Spouse Credit Issues

By Joe Wallace

A reader asks, “My husband and I are looking to apply for an FHA loan. We just recently got married. He is more than qualified to apply on his own, with a good credit score and great income. I, unfortunately, have terrible credit and unresolved debts (prior to marriage). Is it possible for him to apply on his own without factoring in my debt? Our loan agent told us that I had have my credit checked and my debt would also be factored into the debt to income ratio, but not my income. Is this true?” The answer to this question is fairly simple–it depends on the laws of your state. The first thing a borrower in this situation should do is check to see if they are living in | 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 15, 2013

FHA Mortgage Insurance Rules Update

By Joe Wallace

The FHA rules for mortgage insurance changed when the FHA and HUD issued Mortgagee Letter 2013-04, which featured, “Revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP”. All of the scheduled changes to the MIP rules have taken place. Among the major features of those changed rules? According to the introductory paragraphs of the FHA/HUD mortgagee letter: “Consistent with FHAs ongoing efforts to strengthen the Mutual Mortgage Insurance Fund, FHA is: revising the period for assessing the annual MIP; removing the exemption from the annual MIP for loans with terms of 15 years or less and Loan to Value (LTV) ratios of less than or equal to 78 percent at origination; and increasing the annual MIP on | more...

August 12, 2013

FHA Loan Questions: Applying For a Loan Following a Chapter 13 Bankruptcy

By Joe Wallace

A reader asks, “I was just released from Chapter 13 Bankruptcy and I would like to buy a house. What do I have to do to achieve this? My credit score is 635, 635 and 643.” FHA loan rules printed in HUD 4155.1 state that simply having a Chapter 13 bankruptcy does not disqualify you from getting an FHA loan, but there are certain standards a borrower needs to meet which must also be documented by the lender. Specifically, HUD 4155.1 Chapter Four Section C states, Chapter 13 bankruptcy”does not disqualify a borrower from obtaining an FHA-insured mortgage provided that the lender documents that: • one year of the pay-out period under the bankruptcy has elapsed • the borrower’s payment performance has been satisfactory and all required payments have been | more...