Updates to FHA Programs

HUD issued an updated version of the 4000.1 on October 26, 2021.  The updates include improvements and clarifications to HUD’s existing policy.  Highlights of the updates are detailed below.

FHA Program Updates

Contingent Liability

If the contingent liability was created as a result of a divorce decree or other court order, the requirement to document the legally obligated party made on-time payments for the previous 12 months is no longer required

NOTE:  A copy of the divorce decree or other court order is still required

Temporary Reduction in Income

The following guidance is applicable to federal, state, tribal, or local government employees ONLY:

  • If a federal, state, tribal or local government employee is temporarily unemployed due to a temporary government shutdown, or similar temporary event, and the lost income is anticipated to be recovered, the income prior to the shutdown may be considered as qualifying income

Access Letter to Checking/Savings Accounts

An access letter, acknowledging the borrower has full access to the account funds, is no longer required from the non-borrowing account holder

Gift of Land

HUD included a gift of land as an eligible gift type. The following is required:

  • Documentation confirming proof of ownership of the land by the donor, and
  • Evidence of the transfer of title to the borrower

Section 8 Income Voucher Income

Section 8 income voucher income has been added as an eligible type of non-taxable income that may be grossed up

  • The Section 8 voucher subsidy may only be used as effective income if it is not used to offset the monthly mortgage payment

Affordable Housing Condo Eligibility

HUD clarified that condo units designated as affordable housing and owned by an eligible governmental or non-profit are not included when determining if the individual investor concentration limit is < 10%

203(k) Program Updates

Repair Escrows

HUD clarified that mortgages in forbearance, where the borrower is meeting the terms of the forbearance agreement, should not be considered delinquent and repair escrow funds may be released

NOTE:   If the borrower is delinquent and/or not meeting the terms of the forbearance agreement, repair escrow funds may be withheld

The FHA and FHA 203(k) Standard and Limited guidelines have been updated and posted on the Homebridge website at www.HomebridgeWholesale.com

These improvements may be applied to both new submissions and loans currently in the pipeline

If you have any questions, please contact your Account Executive