What is Happening in the Mortgage Market

FHA rules change to makes it easier to qualify for Texas home buyers with recent short sales, foreclosures or bankruptcy.  Everything depends on when your loan officer seeks acceptance from HUD on your behalf.  This is called requesting a case number.

Conversely for home buyers with large outstanding collections the process could become a little more difficult. If you are one of those buyers you will want to plan ahead.

With Mortgagee Letters 2013-24, 25, & 26, the policy change in several areas of derogatory credit makes it easier for borrowers to qualify. Here's what you need to know about these changes:

Effective for case numbers assigned on or after August 15, 2013 through September 30, 2016

1. For Purchase Money Loans only (excluding the HECM). Borrowers that experienced an Economic Event (a decrease of income by 20% or more for at least six months) that resulted in serious derogatory credit such as a short sale, foreclosure, or bankruptcy, may be eligible if:


  1. A. The loss of employment or income was due to an extenuating circumstance beyond his or her control and can be documented;
  2. B. A Satisfactory credit history has been restored for a period of 12 months; and
  3. C. Housing counseling has been completed.


Effective for case numbers assigned on or after October 15th, 2013.

Changes below apply to all FHA programs except FHA Non-Credit Qualifying Streamline Refinances and the Home Equity Conversion Mortgage.

1. Judgments must be paid off or the borrower must have a payment arrangement that has at least a 3 month payment history prior to the loan application and paid according to terms.

2. On manually underwritten loans with collections totaling less than $2,000, FHA does not require resolution of the accounts. However, the underwriter must document an acceptable reason for approving the loan and the borrower must provide a letter of explanation and supporting documentation if necessary.

3. For loans with Collections or Judgments that receive a TOTAL Mortgage Scorecard decision of 'Accept/Approve' the lender DOES NOT have to provide a letter of explanation or documentation from the borrower. If TOTAL generates a 'Refer' decision, the loan must be manually underwritten.

4. In all cases, if the total of all collections is equal to or greater than $2,000, the borrower will have to do one of the following:


  1. A. Pay off collections in full (funds must be verified).
  2. B. Make payment arrangements with the creditors (monthly payment to be included in the ratios).
  3. If no payment arrangement is made, then 5% of the balance(s) must be included in the ratios (borrower must qualify with this additional payment).


5. For disputed accounts totaling less than $1,000, the loan is not automatically required to be manually underwritten when an 'Accept/Approve' is received. Loans with disputed accounts equal to or greater than $1,000 must be manually underwritten.

6. Medical collections and charge offs are excluded from the above guides and DO NOT require resolution.

To get started now on your new home purchase call us today at 972-661-5136 I click the link below to apply online.

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Posted by Richard Woodward on August 20th, 2013 5:47 PMPost a Comment (0)

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