topic Re: FHA changing guidelines on deferred student loans - 6/15/15 in Mortgage Loans

FHA changing guidelines on deferred student loans - 6/15/15

ShanetheMortgageMan — Wed, 25 Feb 2015 01:34:22 GMT

If you weren't aware, FHA is coming out with a revised underwriting manual on 6/15/15. Currently Handbook 4155.1 is used, and while there are minor tweaks every now and then, for the most part it's remained pretty similar throughout the years. However on 6/15/15 the new Handbook 4000.1 (not sure why it's a lower number) is going into effect, and I've noticed some bigger changes (haven't gone through every section yet), one of which is a change in deferred obligations (including student loans).

It reads:

(G) Deferred Obligations (TOTAL)
(1) Definition
Deferred Obligations refer to liabilities that have been incurred but where payment is deferred or has not yet commenced, including accounts in forbearance.

(2) Standard
The mortgagee must include deferred obligations in the Borrower’s liabilities.

(3) Required Documentation
The mortgagee must obtain written documentation of the deferral of the liability from the creditor and evidence of the outstanding balance and terms of the deferred liability. The mortgagee must obtain evidence of the anticipated monthly payment obligation, if available.

(4) Calculation of Monthly Obligation
The mortgagee must use the actual monthly payment to be paid on a deferred liability, whenever available.

If the actual monthly payment is not available for installment debt, the mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment.

For a student loan, if the actual monthly payment is zero or is not available, the mortgagee must utilize 2 percent of the outstanding balance to establish the monthly payment.

"Mortgagee" means the lender.

This means if you are planning on applying for an FHA loan and have deferred student loans (or other deferred obligations) that would disqualify you if their payment was included in your debt ratio, you should get moving sooner rather than later, or adjust your plans to get qualified for a mortgage.

This is effective for new FHA case numbers on/after 6/15/15. To get an FHA case # you need to submit an application and also have either an address (refinance) or an accepted purchase contract (purchase).

Re: FHA changing guidelines on deferred student loans - 6/15/15

Anonymous — Wed, 25 Feb 2015 01:59:51 GMT

So.... apply and get a case # prior to June 15th and even if you close after June 15th you are fine.?

Re: FHA changing guidelines on deferred student loans - 6/15/15

ShanetheMortgageMan — Wed, 25 Feb 2015 02:53:06 GMT

@Anonymous wrote:
So.... apply and get a case # prior to June 15th and even if you close after June 15th you are fine.?

Correct, just need to get an FHA case # prior to then, and you can close after then.

Re: FHA changing guidelines on deferred student loans - 6/15/15

Anonymous — Wed, 04 Mar 2015 23:42:42 GMT

i Think this should be a Sticky ! Did not know about this until today.

Re: FHA changing guidelines on deferred student loans - 6/15/15

Anonymous — Fri, 06 Mar 2015 20:24:31 GMT

Can you guys provide some insight into aquiring a case #.
Is one given when you simply apply?

How long is it usually good for?
For instance, if I get one in June, how long is it good for?

Re: FHA changing guidelines on deferred student loans - 6/15/15

Anonymous — Sat, 07 Mar 2015 17:55:52 GMT

Anyone?

Re: FHA changing guidelines on deferred student loans - 6/15/15

justrock — Sat, 07 Mar 2015 18:21:41 GMT

It says you have to have an application and an accepted purchase contract to get a number, so your number would be good for however long it took you to close on your house. You can't get a number first and then start shopping.

Re: FHA changing guidelines on deferred student loans - 6/15/15

backtoreality — Sat, 07 Mar 2015 18:21:43 GMT

I think the case number is valid for 6 months unless the appraisal expires before that time. Someone correct me if i'm wrong.

Re: FHA changing guidelines on deferred student loans - 6/15/15

DanaM86 — Mon, 30 Mar 2015 15:55:17 GMT

Hello! I have been lurking on these forums for quite some time now and was hoping for some clarification on this post. I recently began the footwork for the pre-approval process fpr a mortgage. I wanted to go FHA because I have large amounts of student loans and am in school for my doctorate. I brought this post and the linked handbook to my mortgage loan officer's attention. He looked into it and told me that his senior underwriter said there are NO changes being made to deferred student loans and that I could take my time before I formally apply for pre-approval. This is from a very reputable mortgage company in my area. Also, when I was at an open house a realtor said that these are proposed changes but haven't been approved/probably won't go through. Could anyone tell me if this is the case? I really wanted to buy late summer (August-September) but will get creative to make it happen before June 15th if I really need to. Student loans will severly limit how much I will qualify for and I really need to know. Thank you so much.

Re: FHA changing guidelines on deferred student loans - 6/15/15

GATEMOM09 — Mon, 27 Apr 2015 18:42:48 GMT

So, my husband and I were in the same situation. We were looking into building a home in the later part of this year when the loan officer stated that if we do not start the build and get a case number by the 15th of June, we would no longer qualify due to our school loans.

Re: FHA changing guidelines on deferred student loans - 6/15/15

frugalQ — Mon, 27 Apr 2015 21:43:35 GMT

DanaM,

You may want to ask your LO to relook at the document. Here's the link which states it was written in March 2015 and effective June 2015. It's on page 141/142 of the document (numbered at the bottom right corner).

and, it's now 2% of the balance instead of 1% of the balance.

http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

Re: FHA changing guidelines on deferred student loans - 6/15/15

Anonymous — Mon, 27 Apr 2015 22:41:06 GMT

Is there language about whether an income-based repayment plan counts as a sufficient calculation of the monthly obligation if that is what appears on the credit report? I believe I have seen discussions about how with USDA loans, underwriters won't accept IBR payment amounts for their DTI calculations but I am not sure what the case is here with the FHA. Is the only cause for concern is that a loan in total deferment will be calculated with a monthly payment of 2% of the loan, when previously it could be excluded if deferred for more than 12 months, or will loans in IBR be calculated at 2% too, regardless of what payment amount shows on the credit report? (I am closing on my house soon, but if I ever want to sell it and qualify for an FHA-backed loan... The house I'm buying is not my forever home.)

Re: FHA changing guidelines on deferred student loans - 6/15/15

StartingOver10 — Tue, 28 Apr 2015 15:03:28 GMT

@Anonymous wrote:
Is there language about whether an income-based repayment plan counts as a sufficient calculation of the monthly obligation if that is what appears on the credit report? I believe I have seen discussions about how with USDA loans, underwriters won't accept IBR payment amounts for their DTI calculations but I am not sure what the case is here with the FHA. Is the only cause for concern is that a loan in total deferment will be calculated with a monthly payment of 2% of the loan, when previously it could be excluded if deferred for more than 12 months, or will loans in IBR be calculated at 2% too, regardless of what payment amount shows on the credit report? (I am closing on my house soon, but if I ever want to sell it and qualify for an FHA-backed loan... The house I'm buying is not my forever home.)

Don't worry about it then. ^^^One thing about mortgage guidelines is that they change all the time. What is true today may be entirely different than what is true for the time you go for your new mortgage.

FHA changes their guidelines. Lenders change their overlays. Conventional loans change too. It is the nature of the business. When you do decide to sell, check with a lender prior to selling to see what you qualify for based on the sale of your home. That way you know the specifics required at the time of sale.

Re: FHA changing guidelines on deferred student loans - 6/15/15

Anonymous — Sun, 31 May 2015 02:52:24 GMT

FHA loans before September 14, 2015:

-Will use actual documented loan payment

-If deferred for less than 12 months at closing, will use 5% of balance owed if future payment can not be proved with documentation

-If deferred for more than 12 months at closing, debt is not counted

FHA loans on or after September 14, 2015:

-Will use actual documented loan payment

-If deferred (regardless of how long), will use future payment amount

-If loan is in deferment and future payment cannot be determined, will use 2% of the balanced owed

Re: FHA changing guidelines on deferred student loans - 6/15/15

Anonymous — Mon, 11 May 2015 18:00:22 GMT

I'm a bit confused ont he "effective date" listed here. I am looking at the link attached in the OP but it says "Issued April 30th, 2015" and "Effective September 15th 2015", but the OP is stating 6-15-15? I'm so confused, please advise. I am still in school and my items are in-school deferred and I am getting my stuff situated for a PRIOR-9/15 mortgage to beat the changes, but I can't beat the 6/15/15 deadline.

Please advise

Re: FHA changing guidelines on deferred student loans - 6/15/15

frugalQ — Mon, 11 May 2015 18:27:16 GMT

According the 1st part of the handbook in the link above, the effective date was changed to 9/15/15.

Shane's original post references the effective date of 6/15/15 before it was changed to 9/15/15....the handbook states that the effective date was changed on 4/30/15.

Re: FHA changing guidelines on deferred student loans - 6/15/15

Anonymous — Mon, 11 May 2015 19:30:46 GMT

Oh WHEW! I didn't notice that the last email update was from 4/27 and the change you saw which I overlooked was 4/30. So I still have a TINY bit more of time. Why would HUD change the date 3 months forward? My loan officer said they need to look at my "estimated payment amount" even though I am in-school deferred until 2018. Should I tell them something? My estimated payment says $360 which is a nice chunk...even if I don't start paying it until 2018 at that point I have have it lowered due to other payment options.

Re: FHA changing guidelines on deferred student loans - 6/15/15

CS800 — Mon, 11 May 2015 19:47:44 GMT

Can a lender half way through tell us this? We already started a mortgage with BOA and have a loan number. Supposed to clsoe June 30th. Can BOA coma back and say now we have to re-evaluate your file?

Re: FHA changing guidelines on deferred student loans - 6/15/15

frugalQ — Mon, 11 May 2015 21:49:44 GMT

CS...I'm guessing you are ok. The original guidelines said all case files opened after 6/15...so, you were grandfathered in with the 1st round of changes.

Re: FHA changing guidelines on deferred student loans - 6/15/15

Anonymous — Wed, 13 May 2015 00:38:55 GMT

Hello Everyone!

My Loan Officer said that he has no knowledge of this occurring. I called FHA Resources and the gentleman on the phone asked me to repeat my questions because he had not heard of this... He said there is nothing that he can see that mentions this change. He sent this to my email:

AQ: Do I have to count loans with deferred or projected
payments?

If a debt payment, such as a student loan, is scheduled to begin
within twelve months of the mortgage loan closing, the lender must include the
anticipated monthly obligation in the underwriting analysis, unless the borrower
provides written evidence that the debt will be deferred to a period outside
this timeframe. Similarly, balloon notes that come due within one year of loan
closing must be considered in the underwriting analysis.

Handbook 4155.1:
4.C.6.a
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh

So verification that the change is happening Jun 15, 2015. Sigh.