FHA Changes, Post September 14 (Continued)

  • Income calculation, hourly – it is now a more defined policy. For those employees who are paid hourly: (1) Hours do not vary – the borrower’s current hourly rate is used to calculate effective income; (2) hours vary – the income must be average over the previous two years. If an increase in pay rate is documented, then the most recent 12-month average of hours may be used at the current pay rate; (3) total-document per AUS; (4) manual – copies of paystubs covering most recent consecutive 30 days (if paid weekly or bi-weekly), paystubs must cover a minimum of 28 consecutive days showing YTD earnings; (5) copies of IRS W-2 forms from previous two years.
  • Project income – relaxed policy. There is a need to verify and document the amount of the expected income with the employer, it must begin within 60 days of closing: (1) Verify sufficient income of funds to support obligations until income received; (2) VOE’s to document two-year work history; (3) paystub from current job; (4) new job must be in same line of work; (5) FAMC to confirm start date; (6) SSI-retirement income may be used if it is guaranteed to begin within 60 days of closing.
  • Re-verification of employment – Became a more restrictive policy, where an initial verbal VOE (or written VOE) must be in the file at time of submission to FAMC, and FAMC is to complete verbal re-verification within ten calendar days of closing.
  • Zoning – the policy is not only more restrictive, but also more defined. If a property does not comply with the current zoning, but is accepted by the “local zoning authority, the appraiser must report the property as “Legal-Non-Conforming.” All properties stated as such must meet the following elements: (1) Appraiser must proved a brief explanation and include a statement whether the property can be rebuilt in the event of full or partial destruction; (2) the appraiser ends up statingĀ  that the property cannot be rebuilt, the property is ineligible for FHA financing.
  • VA disability – it has become a more defined policy in that there is a need to obtain VA Form 26-8937, showing the amount of assistance and any of the following: (1) Federal tax returns, and (2) the most recent bank statement showing funds received from VA.
  • Significant derogatory credit (i.e. bankruptcy, foreclosure, deed in lieu, short sale) – more defined policy. The applicable waiting period must have elapsed since the date of the derogatory event of the time of case number assignment.
  • Living rent free, manual underwrite – policy has become more restrictive and more defined. The policy required for the borrowers who indicate they are living rent-free, provide verification from the property owner where they are living. It must indicate the amount of time borrower has been living rent free.
  • Building on own land – Became a more restrictive and a more defined policy due to additional requirements being added: (1) Eligible if the land is already owned by the borrower for greater than six months from the case number assignment; (2) the borrower must have contracted with a builder to construct the improvements; (3) the builder must be a licensed contractor; (4) the borrower may act as the general contractor, only if the borrower is a licensed contractor.

To be continued………