HUD announced changes to student loan calculations in Mortgagee Letter 2016-08 issued April 13, 2016.
HUD will no longer calculate the student loan payment based on the payment type. Student loans that are deferred, in forbearance, or income based will now be subject to the same calculations.
Calculating the Minimum Monthly Payment – Regardless of Payment Status
The following is used to calculate the minimum monthly payment regardless of the payment status of the loan:
- The actual documented payment if the payment will fully amortize over the loan term, or
- The greater of:
- 1% of the outstanding loan balance as reported on the borrower’s credit report, or
- The monthly payment reported on the borrower’s credit report.
- The creditor/servicer must provide written documentation of the loan details (actual monthly payment, payment status, outstanding balance, and loan terms) only when the actual payment used is:
- Less than 1% of the outstanding loan balance shown on the credit report, and
- Less than the monthly payment reported on the borrower’s credit report.
The new guidelines apply to case numbers issued on or after June 30, 2016.
Loans currently in the pipeline and new loan submissions that will benefit from HUDs updated guidelines may use the new guidelines immediately. Existing guidelines may also continue to be used for loans with a case number assigned prior to June 30, 2016. The new guidelines must be used for case numbers assigned on or after June 30, 2016.
The FHA Program guidelines have been updated with this information and posted on the HomeBridge website at www.homebridgewholesale.com under Programs and Guidelines.
If you have any questions, please contact your Account Executive.