FHA Changes, Post September 14 (Continued)

  • Non-borrowing spouse, community property – more restrictive and more defined policy. The additional  have been added to this policy: (1) An authorization from a non-borrowing spouse must be obtained to verify information needed for the application processing which includes consent to verify their SSN with the SSA; (2) the credit report must indicate the non-borrowing spouse’s SSN where an SSN exists, was matched wit4h the SSA, or the file must contain separate documentation indicating the SSN was match with SSA or provide a statement that non-borrowing spouse does not have an SSN. When SSN does not exist, a manual credit report must be provided and contain at minimum the NBS full name, DOB, and previous two-year address history.
  • Definition of family member – is a more defined policy, based on the following: Family member is defined as follows, regardless of actual or perceived sexual orientation, gender identity, or legal marital status: (1) Child, parent, or grandparent where a child is defined as a son, stepson, daughter, or stepdaughter and a parent/grandparent includes a step-parent/grandparent or foster parent/grandparent; (2) spouse or domestic partner; (3) legally adopted son or daughter, including child who is placed with the borrower by an authorized agency for legal adoption; (4) foster child; (5) brother, step-brother; (6) sister, step-sister; (7) Uncle; (8) Aunt; or (9) son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law of the borrower.
  • Secondary financing. refinance – relaxed policy. A new subordinate financing is permitted under the same terms as a purchase, except in the case of a streamline -which does have restrictions.
  • Secondary financing purchase, family member – it is a more defined policy as to where there is a CLTV ratio if the base loan amount and secondary financing can not exceed 100%.
  • Secondary financing purchase, institutional or private – policy is more defined because (1) the CLTV ratio of the base loan amount and secondary financing must not exceed the applicable FHA limit, and (2) the base loan amount and secondary financing amount must not exceed the Nationwide Mortgage limits.
  • Rental income – the policy has not only become a more restrictive policy, but also a more defined police and in quite a long list of ways. When it comes to rental income from the subject property, for a two to four family dwelling unit, and there is limited or no history of recent income, it is necessary to verify and document the proposed rental income from the appraisal showing fair market rent. With small residential income property, that has an appraisal report and the prospective leases, if the borrower has a history of rental income for the subject property since the precious tax filing, verifying the existing rental income by obtaining the most recent tax returns, including a Schedule E, from the previous two years will work. For properties with les than two years of rental income history, documentation of the date the property was acquired is necessary, by providing the deed, settlement statement, or similar legal documents, As for the calculation requirements: The net subject property rental income must be an adjustment to the borrower’s gross monthly income. The borrower’s total mortgage payment can not be reduced by the net subject properties rental income. Further, if there is limited to no rental income history verification, the lesser of the following must be used: 75% of the lesser of (1) the fair market rent reported by the appraiser or (2) the rent reflect in the lease or rental agreement.

To be continued…….