New FHA underwriting guidelines for IBR people
Posted: Thu Jul 23, 2015 1:42 pm
I can't link the actual policy because allregs is stupid. Go to
4000.1: FHA Single Family Housing Policy Handbook
II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES (09/14/15)
4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) (09/14/15)
b. Credit Requirements (TOTAL) (09/14/15)
iv. Evaluating Liabilities and Debts (TOTAL)
(H) Installment Loans
FHA loans before September 14, 2015:
-If student loan is 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 (<- This means if your IBR payment is $1/mo, your liability will be calculated as $1 per month, even if the loan balance is [insert jaw-droppingly huge law school debt])
-If deferred (regardless of how long), will use future payment amount
-If loan is in deferment and/OR future payment cannot be determined, will use 2% of the balanced owed <- i.e, make a single month's payment on IBR first or you're fucked.
-If there is no payment to P&I, mortgagee uses 2% of total <- if you don't make enough to have an IBR payment, you're fucked.
4000.1: FHA Single Family Housing Policy Handbook
II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES (09/14/15)
4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) (09/14/15)
b. Credit Requirements (TOTAL) (09/14/15)
iv. Evaluating Liabilities and Debts (TOTAL)
(H) Installment Loans
This is different from a student loan in deferment which is subject to (G) (or, presumably, if the IBR amount is 0 because income is so low).(H) Installment Loans (TOTAL)
(1) Definition
Installment Loans refer to loans, not secured by real estate, that require the periodic payment of P&I. A loan secured by an interest in a timeshare must be considered an Installment Loan.
(2) Standard
The Mortgagee must include the monthly payment shown on the credit report, loan agreement or payment statement to calculate the Borrower’s debts.
If the credit report does not include a monthly payment for the loan, the Mortgagee must use the amount of the monthly payment shown in the loan agreement or payment statement and enter it into TOTAL Mortgage Scorecard.
(3) Required Documentation
If the monthly payment shown on the credit report is utilized to calculate the monthly debts, no further documentation is required.
If the credit report does not include a monthly payment for the loan, or the payment reported on the credit report is greater than the payment on the loan agreement or payment statement, the Mortgagee must obtain a copy of the loan agreement or payment statement documenting the amount of the monthly payment.
tl;dr: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.
FHA loans before September 14, 2015:
-If student loan is 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 (<- This means if your IBR payment is $1/mo, your liability will be calculated as $1 per month, even if the loan balance is [insert jaw-droppingly huge law school debt])
-If deferred (regardless of how long), will use future payment amount
-If loan is in deferment and/OR future payment cannot be determined, will use 2% of the balanced owed <- i.e, make a single month's payment on IBR first or you're fucked.
-If there is no payment to P&I, mortgagee uses 2% of total <- if you don't make enough to have an IBR payment, you're fucked.