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Last updated on February 3rd, 2021 at 11:06 am
On 10th September 2020, a guidance was provided by the U.S. Department of Housing and Urban Development (HUD), in the form of a Mortgagee Letter 2020-30, on the underwriting of applicants for FHA insured mortgage loans who were granted a previous mortgage forbearance on the subject property or another residence due to COVID-19 or a presidentially declared major disaster.
The guidance applies to FHA Title II single-family forward mortgage loan programs.
FHA lenders may implement the guidance immediately and must implement the guidelines for loans with case numbers assigned on or after November 9, 2020.
Usually, a borrower who was granted a mortgage forbearance is eligible for a new FHA insured mortgage loan provided
Any borrower who had continued to make regularly scheduled payments, and granted a forbearance, then the forbearance plan is terminated;
In case of cash-out refinance loans, the borrower has completed the forbearance plan and made at least 12 consecutive monthly payments post forbearance; or
In case of purchase money loans and no cash-out refinance loans, if the borrower has completed the forbearance plan and made at least three consecutive monthly payments post forbearance; or
The borrower for credit qualifying streamline refinance loans, in addition to the conditions noted below, he either is still in forbearance or has completed the forbearance plan and made less than three consecutive monthly payments post forbearance; and
Borrowers for all streamline refinance transactions if they have made at least six payments on the FHA-insured mortgage being refinanced (when the FHA insured mortgage has been modified after forbearance, they must have made at least six payments under the modification).
The guidance addresses the underwriting of loans using the Technology Open To Approved Lenders (TOTAL) mortgage scorecard and manual underwriting.
The guidance also provides details for the situations noted above, including the general standards that apply, payment history requirements, and documentation requirements.
Reference Source: JDSUPRA
