Washington Report

Advocacy Updates from Washington D.C.

Underwriting Changes Announced for FHA; Includes Collections and Judgments

April 2, 2012

The US Department of Housing and Urban Development (HUD) announced Mortgagee Letter 2012-3, Miscellaneous Underwriting Issues for loans insured by the Federal Housing Administration (FHA). The Mortgagee Letter changes requirements for borrowers with individual or multiple disputed credit collections. Borrowers with a singular or cumulative balance over $1,000 must resolve the accounts prior to or at the time of closing. Resolution can be paying of the debt or establishing payment arrangements with a minimum of three months of verified payments made. This guidance goes into effect on April 1, 2012, and REALTORS® should work with clients early to ensure this issue is addressed prior to closing. The letter also makes changes to 1) year-to-date profit & loss statements and balance sheet requirements, and 2) the definition of family members.