CONFIRMED!! FHA loan with defaulted student loan in rehab!

[hardins242]

I can tell you how ours went down. We ended up not being able to get a FHA loan with the old loan in default. We entered a rehab program and our mortgage broker was able to qualify is for a conventional loan. We had to supply all documentation and contact info from the rehab company. On top of this, we also battled un payed taxes on my husbands part. That was paid as well and we closed on our house in September. We managed to also qualify for down payment assistance through the state of NC. I owe it all to my mortgage broker. But can say, FHA will not happen with anything in default.

[Loke00]

Thank you so much for the update. You are so fortunate to have had a good mortgage broker.

[Tavery]

That is complete BS!! this is an email I received DIRECTLY from the FHA! NOT a lender who does FHA loans. Tell them to get off their butts and research!!


Dear Tavery ,

Thank you for contacting the FHA Resource Center. A response to your inquiry is provided below. If the information does not fully address your question, please forward this email (do not reply) to answers@hud.gov, and provide additional information so that we may better serve you. You may also speak directly to a customer service representative by calling 1-800-CALL-FHA (1-800-225-5342) or visit our online knowledge base at www.hud.gov/answers, 24 hours/7 days a week.

Your question was regarding Student loan CAIVRS  .

Please see below the following excerpt from the HB 4000.1 regarding student loans. The highlighted portion best pertains to your question.

4000.1 II. A. 4. iv. (H) Student Loans (TOTAL)

(1) Definition

Student Loan refers to liabilities incurred for educational purposes.

(2) Standard

The Mortgagee must include all Student Loans in the Borrower’s liabilities, regardless of the payment type or status of payments.

(3) Required Documentation

If the payment used for the monthly obligation is:

less than 1 percent of the outstanding balance reported on the Borrower’s credit report; and

less than the monthly payment reported on the Borrower’s credit report;

the Mortgagee must obtain written documentation of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor.

(4) Calculation of Monthly Obligation

Regardless of the payment status, the Mortgagee must use either:

the greater of:

1 percent of the outstanding balance on the loan; or

the monthly payment reported on the Borrower’s credit report; or

the actual documented payment, provided the payment will fully amortize the loan over its term.



If the repayment plan will fully amortize the loan over its term, then yes, it can be used.

DE underwriters are expected to exercise due diligence in their review of the case file and apply basic underwriting criteria to their specific situation and make the appropriate determination.

Sincerely,

FHA Customer Service Team

[stRealT]

When we went to buy our house, I was a year into my rehab and we wanted to do an FHA, our mortgage broker gave it to us straight and said flat out leave me of the loan or would risk not being approved or having to go conventional with a higher dp. He said let my loans be in repayment a bit longer and refinance back into an FHA adding me on. Doing that worked, we ended with a lower interest rate and payments, we did that exactly at the 1 year mark. THe only way that hurts more then helps is if the person with the bulk of the income is the defaulter. If any of you find yourself thinking you have a default and it isn't a private student loan check https://www.nslds.ed.gov/nslds/nslds_SA/ and click on Financial Aid Review, that will tell you the balance and who the current servicer is to try to get it rehabbed or consolidated.

[Juney]

I'm sure this is too late but I was faced with the same dilemma. My LO checked the CAIVRS database 2 days after I made a bid on the home I wanted. Since I was already enrolled in Loan rehab 8 months, I was able to negotiate a later closing. My suggestion would have been to consolidate and have realtor and loan officer adjust your closing date if possible. If you consolidate the defaulted loan you get removed from CAIVRS faster if that's all you really care about the most. I believe within 30 days of consolidating you'd receive clearance. The better option is to go through the loan rehab program but it takes 9-10 months to clear database. Through loan rehab you'll be able to have the the default removed from your credit reports but not the late payments. Once you make the 9th payment it takes 7 business days for another servicer to pick up your loan and then you can call to request removal from CAIVRS. That worked for me and I'll be able to close on my home for September 30th. You can only consolidate or do the loan rehabilitation one time so if you default again you're in trouble. Hope this helps someone.

[Tmitchell]

Hi,

So I can consolidate my default loan once I’m in the rehabilitation program

[Juney]

No. Either pick Consolidation or pick loan rehabilitation. If you're trying to get an Fha loan and you've been reported to the CAIVRS database, you want to consolidate to get off that database fast. If you do the loan rehab, you have to pay for 9 months then you'll be removed. Loan rehab will remove your default from your credit report, but not late payments.

[Tmitchell]

Ok got it. I called to have them consolidated they told me I couldn’t bc it defaulted.

[Juney]

Hmmm....I immediately opted for loan rehab since the default would be removed from my credit report. I was told I had two options. Are you trying to qualify for an FHA loan?

[Juney]

You're supposed to be able to do one or the other.