Articles Tagged With: FHA Loan Application

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”

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 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 Extends Unemployment Foreclosure Avoidance Program Indefinitely

By Joe Wallace

The FHA has extended a program designed to help unemployed borrowers avoid FHA loan default and foreclosure. A recent FHA mortgagee letter announced, “the extension of the unemployment special forbearance policies detailed in Mortgagee Letter 2011-23, Unemployment Special Forbearance: Temporary Program Changes and Clarifications.” This program allowed FHA borrowers, “having trouble making their mortgage payments due to unemployment postpone or reduce their monthly mortgage payment while they look for work” according to a letter by Assistant Secretary For Housing Carol J. Galante, who also writes, “Beginning in August 2011, HUD required FHA servicers to offer suspended or reduced payments for at least 12 months or until the struggling borrower found a job.” That FHA loss mitigation program was set to expire August 1, 2013. But now, that program has been | 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 9, 2013

FHA Loan Answers: Tax Documentation

By Joe Wallace

One question many borrowers have about applying for an FHA loan for the very first time involves the type of documentation a lender may require for loan approval. The tax question is a common one–do FHA loan rules require the borrower to furnish tax documentation in addition to other credit-qualifying details? According to HUD 4155.1 Chapter One Section B, “The lender must obtain federal income tax returns for the most recent two years, both individual and business, including all applicable schedules, for self-employed borrowers, and individual federal tax returns for commissioned individuals.” As you can see, not everyone may be required to supply tax data, but for those who are required, there are additional rules that may apply. “The lender must obtain signed forms IRS 4506, IRS 8821, Tax Information | more...

August 8, 2013

FHA Loan Answers: Employment Verification by Fax or Internet

By Joe Wallace

When applying for an FHA home loan, your loan officer is required to verify your employment history–current and former–as a condition of loan approval. Some borrowers live and work in the same area for extended period of time, while others may have crossed the country to accept new employment or even transitioned from overseas locations to stateside (as is often the case with military families and other government employees). In such cases, how does the lender verify employment? It may not be practical for the borrower to return to an old office or workplace to request verification and telephone or emailed requests for mailed documentation may not be done as quickly as needed. Can the lender or borrower request a faxed document from an old employer instead? Here’s what FHA | more...

August 8, 2013

FHA Loan Reader Questions: Minimum Employment Rules

By Joe Wallace

A reader asks, “My son-in law has been employed for the past two years, but only 19 months with the current employer. He is paid on a 1099. Another job opportunity has been offered by a different company, and different industry, but he will be making more money with this second company. He also will be paid via a 1099. Will he meet the employment requirement under these circumstances?” FHA loan rules for employment verification are found in HUD 4155.1. This document gives instructions to the lender for verifying employment, among many other things. According to HUD 4155.1, “The lender is required to verify the applicant’s employment history for the previous two years. However, direct verification is not required if all of the following conditions are met: the current employer | more...

August 7, 2013

FHA Mortgage Insurance Rules

By Joe Wallace

FHA mortgage insurance rules changed earlier this year–there were a variety of alterations that included a “lifetime of the loan” mortgage insurance premium requirement. Starting in June of 2013, all FHA with case numbers assigned on or after June 3 will be charged annual mortgage insurance premiums “for the maximum duration permitted under statute.” In FHA Mortgagee Letter 2013-04, the new rules state, “For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.” Additionally, “For any mortgage involving an original principal obligation (excluding financed UFMIP) with | more...

August 6, 2013

FHA Loan Questions: Is It Ever “Impossible” To Deny An FHA Loan Application?

By Joe Wallace

A reader asks, “I was awarded permanent disability on June 2011; with a ‘long term re-evaluation’ in 5 to 7 years per SS; will the lender under FHA loan qualifications, not be able to decline loan because of said re-evaluation?” Assuming we understand this reader’s question properly, it seems the issue at hand is whether or not the FHA loan is “guaranteed” to be approved because of Social Security income status. FHA loan rules as written in HUD 4155.1 Chapter Four Section D state that one requirement of FHA loan approval is an examination of income and how likely that income is to continue. “The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrower’s income level can be | more...

August 2, 2013

FHA Reverse Mortgage Program To Get Changes

By Joe Wallace

A recent article published by American Banker observes that lawmakers in Washington D.C. have passed legislation authorizing the FHA and HUD to make changes to the FHA Home Equity Conversion Mortgage program, also known as FHA HECM. The changes have not yet been signed into law by President Obama. But according to the Reverse Mortgage Stabilization Act passed by the House in June 2013 and now by the Senate in July 2013, “the agency can make certain changes by mortgagee letter, such as requiring financial assessments of a borrower’s budget and limiting the amount borrowers can take out as a lump sum up front” according to the American Banker article, titled Congress Passes Narrow Bill to Fix Reverse Mortgages at FHA. “Carol Galante, the agency’s commissioner, implored lawmakers on | more...