FHA News :: FAQ Results from Recent HUD Webinar

About The Author

Stacey Sprain - As an NAMP® staff writer, Ms. Stacey Sprain is currently a NAMP® member in good standing, and is a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. If you would like to become a volunteer writer for us, please email us at: blog@mortgageprocessor.org.

I was quite impressed with the HUD webinar I listened in on April 20th. I was thrilled to see that a lot of commonly asked questions were addressed and explained. In the past, many of these same questions received different answers from various interpretations of the guidelines over the years. I’m excited to pass on some of the test questions and FAQS from the session! Test your own knowledge by reviewing the questions below. I’ve provided the answers at the bottom of this writing.

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QUESTIONS:

1. Borrower currently owns a primary residence secured by FHA financing and wishes to purchase another home with FHA financing to accommodate the needs of a larger yard for Rex, the new family dog. Does this need meet FHA’s requirements for increase in family size which allows for ownership of more than one FHA-insured property?

2. Borrower is purchasing a property in a community property state with a non-purchasing spouse. Review of the borrower’s IRS tax transcript, as required by the lender, indicates a Schedule C business loss for the non-purchasing wife. Does the lender need to take the income losses of the non-purchasing spouse into account for the borrower’s qualifying purposes?

3. Borrower just returned to the work force after a job gap of 4.5 years due to her spouse’s consistent military transfers all over the country. She has been back on the job for 30 days. Can her income be used for qualifying purposes?

4. Review of borrower’s credit report shows obligation for a mortgage rated current with 2 x 30 late payments reflected in the most recent 12 month period. Borrower provides copy of divorce decree with settlement showing that the divorce awarded the prior marital home to the ex-spouse and that the mortgage was to have become the ex-spouse’s responsibility. Is the lender correct in omitting this debt from the borrower’s qualifying requirements?

5. Borrower’s credit report indicates a bankruptcy discharge just two years ago and review of documentation reflects that a home with mortgage liens was included in the bankruptcy. Is the borrower eligible for FHA financing?

6. Borrower’s credit report reflects an individual auto loan currently in repayment but the borrower states his sister makes payments on the auto since she now drives the car. He can provide 12 months cancelled checks to substantiate this. Can this debt be omitted from the borrower’s qualifying ratio?

7. Borrower earns commissions as a Schedule C sales person. The credit report reflects a large auto loan payment but borrower states that her business makes the payments. Is the lender correct in omitting this debt from qualifying if the tax returns demonstrate that the auto expenses are indeed being covered by the business?

8. Borrower’s credit report reflects a disputed account with a zero balance and AUS/TOTAL Scorecard has approved the loan. Does the automated approval require a downgrade to refer and must the loan be manually underwritten?

9. Borrower recently accepted new employment at a higher salary which has been used in qualifying, loan is AUS approved but borrower isn’t set to start the job until 30 days after the loan closes. Is this acceptable if a signed employment offer is obtained from the new employer confirming the salary and that the start date is within 60 days of loan closing?

10. Is a credit report required for a non-purchasing spouse when the non-purchasing spouse is an illegal alien with no valid social security number?

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

ANSWERS:

1. Unfortunately no. Increase in family size must be documented by the borrower providing documentation of an added dependent or extension of family as well as by an increase to the number of bedrooms when comparing the capacity of the current home to that of the proposed home. The definition of family member does not include pets for FHA’s purposes.

2. No. Business losses for non-purchasing spouses do not need to be accounted for in qualifying the purchasing borrower.

3. Unfortunately no. FHA requires a minimum of six months return to the work force after an extended period of absence as well as documentation that the borrower had a minimum two year employment history prior to the gap.

4. Yes. When documented by a divorce decree or court order, the debts of an ex-spouse may be omitted.

5. Unfortunately no. When a home mortgage is written off in a bankruptcy discharge, it is considered a foreclosure for FHA qualifying purposes and is subject to the minimum three year requirement before the borrower is allowed to purchase a home secured with FHA financing.

6. The auto payment can only be omitted if the sister is on the auto loan with the borrower. If the auto loan was obtained solely in the borrower’s name, the debt cannot be omitted even if another party provides evidence that someone other than the borrower has been repaying the loan.

7. Unfortunately no. A Schedule C Sole Proprietorship business which means the borrower is still solely responsible for all income, expenses and debt. The business would not be considered a co-obligor on the debt and thus, the obligation cannot be omitted from qualifying.

8. Yes. Regardless of the disposition of a disputed account, the loan must be downgraded from AUS Approve or Accept to Refer and must be manually underwritten.

9. It may be acceptable to the FHA guideline requirements but if the AUS findings require review of the most recent or 30 days paystubs, the lender cannot meet the documentation requirements because the borrower hasn’t yet started the new job for which income is being used to qualify. In this situation, the AUS approval must be downgraded to a Refer and the loan must be manually underwritten.

10. The lender must provide evidence of due diligence in attempting to obtain a credit report for the non-purchasing spouse. However, if the non-purchasing spouse does not have a valid SSN, it is unlikely to render a credit report result.

How did you do? I thought these were great questions that HUD addressed on the webinar. Am hoping you find the answers helpful as well!

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

SOURCE: Published by NAMP® Publishing Group, a division of the National Association of Mortgage Processors (NAMP) (http://www.mortgageprocessor.org)