topic FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly in Mortgage Loans

Fannie Mae, FHA, & VA Guidelines

Anonymous — Tue, 29 Sep 2015 16:01:31 GMT

For those who would like to look up any FHA or Fannie Mae guidelines, I want to provide a link straight to 'em.

FHA (all 867 pages in one PDF) - I recommend using "ctrl + F" to find keywords

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

Fannie Mae

https://www.fanniemae.com/content/guide/selling/b/index.html

Fannie Mae Selling Guides (guideline updates) in one PDF

https://www.fanniemae.com/content/guide/sel082515.pdf

http://benefits.va.gov/warms/pam26_7.asp

Hopefully this is helpful to some out there!

FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly

Anonymous — Tue, 27 Oct 2015 00:59:00 GMT

There is a charter school in Houston, Texas that has many hard working teachers trying to keep current on the latest research based best practices for their classroom. To do that, they had to return to college. Many of them obtained a Masters degree in Education, and some teachers are still attending college. I am one of those teachers. I have obtained my MA in Reading so I can provide more research based help to my students who are struggling to learn English, as they have come to this great country from places like India, Asia, Africa, and South America.

For the last 50 years, HUD has been helping many people live the dream. At least that's what they say... I recently decided to buy a home. I found a real nice realtor and applied for an FHA loan. My credit was good, and I wasn’t worried about not qualifying. I took an 8 hour class to learn about the home buying process and then to my surprise, I was told by my lender that my DTI ratio is too high and that I could not get an FHA loan. He stated that a new rule from FHA mandates all student loan debt, regardless of deferral status, teacher loan forgiveness programs, etc., be factored in at 2%. For me, this equates to $2,000 of additional DTI. Sadly, this disqualified me from having a home of my own. I was under the impression that FHA was supposed to help people like me. Isn’t that why it was started in the first place? Firefighters, police officers, and teachers are paid very little and undervalued to begin with, and now we are discriminated against because of student loan debt.

This new rule is discriminatory, and I am looking into available actions that I can take to get this rule/law overturned or changed.

Can anyone explain to me why it is not OK to discriminate against race, sexual orientation, etc., but it is fine to ignore the options that students have for loan repayment from Fed Loan Servicing, another Federal agency, and mandate all student debt be added, regardless of deferral status, teacher loan forgiveness programs, etc., at a 2% rate.

A message I received from the National Association of Realtors:

"Thank you for your message. I would send your note to answers@hud.gov and address it to Kathleen Zadareky (Biniam Gebre is no longer there) and your email will be assigned a number and tracked by HUD. In the meantime, we will use your story as an anecdote when NAR advocates for adjustments to student loan debt calculations (which we told FHA we would be watching closely). We have heard that FHA is considering lowering it to be consistent with Fannie and Freddie loans. "

Does anyone know how I can get more students with student loan debt to file a complaint with HUD? Maybe if enough people complain, they will lower this dti rule?

I was told to email answers@hud.gov and address it to Kathleen Zadareky.

Re: FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly

Anonymous — Sat, 05 Dec 2015 05:17:30 GMT

The reason they don't take forgiveness programs into consideration is because there is no guarentee you'll complete the program to qualify. You might change schools to teach at, and no longer be in a high need area, you may decide to have kids and leave the profession, etc...

I do think there should be a stipulation for people who have been in the profession for several years, and have returned to school vs someone fresh out of school in their 1st year of teaching - there is a difference.

That said - as far as I'm aware, the 2% rule only applies to loans without a payment amount, so once you are done with school, and loans are in repayment, it wont be an issue. I have over $100k in student loans, am on IBR, and will qualify for public service loan forgiveness, and got my mortgage based on my IBR payments. It was a bit of a process and had to do a 3-way call with the mortgage underwriter and SL servicer while they verified each loan number and payment (some payments only $2).

You could also chose to put school on hold while you buy, so that your loans will go into repayment and post a monthly payment on your credit report, and then after you've secured your mortgage, continue classes.

Re: FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly

1449 — Fri, 27 May 2016 19:05:08 GMT

When I had a work slow-down in the end of '13 and needed temporary some loss mitigation help, having an FHA loan helped not at all. I don't even see the advantage now of having your loan federally insured. Your bank is supposed to follow certain rules under HUD and FHA in a foreclosure situation which they totally don't and no agency will help you. Skip the FHA. It's useless as far as I can see.

Re: FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly

StartingOver10 — Sat, 28 May 2016 00:04:18 GMT

@1449 wrote:
When I had a work slow-down in the end of '13 and needed temporary some loss mitigation help, having an FHA loan helped not at all. I don't even see the advantage now of having your loan federally insured. Your bank is supposed to follow certain rules under HUD and FHA in a foreclosure situation which they totally don't and no agency will help you. Skip the FHA. It's useless as far as I can see.

^^^This statement is a common fundamental misunderstanding of the purpose of an FHA loan.

FHA insures the loan to induce lenders to make high LTV loans to those borrowers that do not have large down payments but who do meet specific income, credit and debt criteria. FHA is not a lender, but essentially insures payment of X% to the lender if the borrower defaults and loses their home to foreclosure. This particular insurance is a federal government program and not a private program like conventional loans have with PMI (Private Mortgage Insurance).

FHA guidelines are relatively loose when you compare their allowed guidelines to those for a high LTV type conventional loan. FHA payments for mortgage insurance are lower for borrowers with lower credit scores. A very large portion of the buying public would not qualify for a mortgage if there were no FHA loans available.

FHA is not there to help the borrower directly at all, the program was never designed to protect the borrower - only to insure the lender in case of borrower default. FHA is there to protect the lender in case of borrower default so that more borrowers can qualify for an affordable mortgage. The lender still has to underwrite the loan appropriately and the borrower has to qualify for the loan. Lenders are allowed to make their qualifying criteria more strict than what FHA requires because it is their money they are lending.

Note: if you default and the lender doesn't follow the guidelines set forth for foreclosure, that is the individual lender servicer & the investor that owns the loan that is at fault. Not FHA... FHA just pays the lender up to 35% of the loan amount (approx) when the lender sells the property in foreclosure to make the lender whole. Do some research so you have a solid handle on what exactly you are committing to when you sign for your mortgage.

Re: FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly

Anonymous — Thu, 22 Dec 2016 21:20:53 GMT

Thank you.

Re: Fannie Mae, FHA, & VA Guidelines

missyme11 — Tue, 24 Jan 2017 13:24:29 GMT

Whoa... how did you manage that? Who was your lender? I am a medical school graduate (now doctor in an anesthesiology residency) who is in IBR with payments of $230. That's a far cry from the $4750 they want to include in my DTI ratio. I was told only fully amortized plans count. And then it was the greater of the loan payment amount or 1% whichever was higher. Right now struggling to try and bring up my mortgage FICOs (which show a whopping 60-70 point difference from the FICO8 scores) so I can get an MD mortgage. Bancorp South will do them at a 640 middle score. My FICO 8's are around 670. My FICO 2,3,4? 599-609. It really sucks. It appears to stem from some old medical collections that are inaccurate.

Re: FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly

DallasLoanGuy — Tue, 24 Jan 2017 17:45:08 GMT

@Anonymous wrote:

This new rule is discriminatory, and I am looking into available actions that I can take to get this rule/law overturned or changed.

they changed the rule after finding that people with high student loan debt deferred were defaulting on loans at a high rate.

i think it would be discriminitory to ignore your student loans and not ignore someone else's credit cards they ran up to start their business. but this isnt discrimination

Re: Fannie Mae, FHA, & VA Guidelines

Anonymous — Wed, 25 Jan 2017 12:46:15 GMT

The problem with this world is everyone feels so entitled. You feel like a mortgage is a right and not a privilege. And the same types of people will expect handouts when they default on debt, too. I have to wonder why you incurred so much student loan debt from a masters degree? $2,000 payment? That's a LOT!

Re: Fannie Mae, FHA, & VA Guidelines

Anonymous — Thu, 18 May 2017 00:01:54 GMT

Fannie Mae recently changed their rules again in the last month and will use your actual IBR monthly payment.

Re: Fannie Mae, FHA, & VA Guidelines

Anonymous — Sat, 15 Jul 2017 09:40:41 GMT

so if someone is still in school and all their student loans are in deferrment, then what? I cant leave school in the middle of a doctoral dissertation... so then does that 2% thing apply.. and exactly how is that calculated... where can I figured that out. Looking at info online, I should qualify for a FHA, with a pretty decent amount that I can borrow... my dti ratio was very low.. like 11% I think... how does the 2% thing factor in?

Re: Fannie Mae, FHA, & VA Guidelines

ejm201 — Fri, 21 Jul 2017 22:13:56 GMT

I have to agree with the OP. When I first heard about FHA, I too thought it was easier. Not! You'd have an easier and cheaper time doing a 3% conventional than the FHA considering all the hoops.

It seems to be more of a deterrent than a we want to help young families and public service professionals. I will give you an example from personal experience. My wife wanted to teach Math, but we calculated between home prices in FL being 180-225k easily, her 58k in student loans and 40k in pay, along with two CCs, there is no way in hell she'd be able to get approved.

Home prices and student loans alone completely kill the DTI percentages (as far as keeping them low). One can buy a home with FHA but it's FAR from easy like many in MSM Finance articles try to sell. OP's makes a great point.

I think we are seeing the continued effects of 2008 financial crisis and MANY potential first time home buyers are paying. My wife's an Accountant so she is always telling me about this stuff.

I will reach out HUD for MD. This is an issue that needs to be addressed for sure with legislation.

Re: FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly

ejm201 — Sat, 22 Jul 2017 19:20:26 GMT

I think often timeswe are quick to pass blame on the consumer when financial institutions and the same federal governement who played a HUGE role in the financial crisis of 2008 were largely at fault. And guess who paid them, when they "defaulted" their investors(who are comprised of taxpayers/not just big fat cats on wall street/regular people who followed the rules and were screwed by a fraudulent system).

FHA is no more than a governemt "controlled" deterrent [kinda makes you wonder which party is for "the little guy"?]. Its not meant to help the little guy. I quite frankly do not understand why people coninue to peddle this idea? MOST can only use this with the help of family,friends and government subsidies(also paid by other tax payers) But what about the middle class that makes too much for this but not enough to be considered well off[I call this the housing donut hole but theres no "part D" fillers]. Fannie Mae and Freddie Mac wil cause another housing bubble due to their OVER reactions via regulations. As interest rates rise, what the borrower can get approved for now goes down and simultaneously home prices will continue to rise while rent prices skyrocket which makes even the most financially responsible person harder to save for a down payment[would an average 5-10 years which means the house you started saving for5-10 years ago depending on the location is now 100k more than it was before and the 3.5%,5%,20% you saved is NOW not enough). Also, DPA programs have income limits, typically given in high property tax proned areas (common for city living where home prices are high) so I don't see how this is supposed to help the average joe making 55k[someone who makes too much for the DPA program but not realistically enough to keep DTI low].

I am simply trying to offer a new perspective. I don't like blaming good borrowers caught in a [bank govt hell storm] and act as if the banks and even government are the good moral financial leaders. Everything affectsyour score. You make ONE mistake and a credit score will ALWAYS remind you for at least 7 years. The lenders don't care you made 5 years of on time payments, just care about your score is a 600 now because of ONE mistake which can lower your score by depending on the mistake up to 10-100points.

Re: Fannie Mae, FHA, & VA Guidelines

ejm201 — Sat, 22 Jul 2017 19:29:52 GMT

Then are you blaming baby boomers and generation X who felt so entitled to buy a home that they brought the world financial economy to its knees in 2008(their actions has VASTLY restricted good people like myself who pay bills on time for years)? But God forbid they miss a $5 pmt and now its considered a HUGE derog on your FICO score[this mistake now says you're a risk]. But guess who has the long record of credit history and who can AGAIN buy another home after ONLY 4yrs wait of filing bankruptcy? No one is saying entitled,but to simply make it fair and transparent. Ifyou are going to score someone,tell the EXACTLY how[which we are NOT told but many seem to just accept this as "the norm". Asking for fairness is not entitlement.

Re: FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly

Anonymous — Sun, 23 Jul 2017 01:04:10 GMT

I am in the same boat. Great credit, but dont qualify. I have student loans and I pay on time everytime but with these new FHA rules I am disqualified too. What is going to happen when more and more people can't buy homes?? I mean why would a person with perfect credit, 2 degrees in science, make 52000, wants a home that is cheap and not spending 200,000 or even 1700000 on a home, and she pays on time everytime be disqualified from home ownership? The more people I tell the less people want to even go to school. What will happen when more people refuse education because they will be punished and be pretty much homeless?? This MUST change. I honestly hope the whole system collapses. The government tricks people into going to school, then they all of a sudden made it a punishment to get a home?? Please. This is why more people are losing interest in government. America you are the worst. Honestly, I am ashamed of this country. No wonder so many people feel the way they do.

Re: FHA's discriminatory rule, Oct. 2015, student loan debt DTI at 2% monthly

Revelate — Sun, 23 Jul 2017 07:26:19 GMT

This is sliding into politics for what is an old informational post.

Locking the thread.