FHA Announces Several Underwriting Changes
FHA recently announced several changes that will impact underwriting in several areas. These changes are effective April 1, 2012.
Here's a quick summary of these changes:
For self-employed borrowers: P&L statements are now required if the last business tax return is more than 3 months old; in addition, statements must be audited if P&L income is greater than the two year average, and the higher income is needed for qualification purposes. If the two year average income is sufficient for qualification purposes, the P&L is still required, but does not need to be an audited one.
For loans with disputed accounts that receive an "Accept" by TOTAL: These are not required to be referred to a DE underwriter for review as long as the total amount of combined balances (1) does not exceed $1,000 and (2) the dates of last activity are older than 2 years. If singular or combined balances total more than $1,000 they must be paid in full at or prior to closing, or provide proof of payment arrangements with 3 months of payments verified.
For collection accounts: If the total balances of all collection accounts are less than $1,000, the borrower is not required to pay them off as a condition of approval. If singular or combined balances total more than $1,000 they must be paid in full at or prior to closing, or provide proof of payment arrangements with 3 months of payments verified. Judgments must be paid unless payment arrangements have been made and 3 months of payments are verified.
For definitions: The following are now included in the definition of family member for the purposes of Identity of Interest transactions: Brother, Stepbrother, Sister, Stepsister, Uncle, and Aunt.
If you have any questions about these updates, and what they might mean, give me a call or send me an email and I'll be happy to discuss this or any other pertinent matters with you.
Here's a quick summary of these changes:
For self-employed borrowers: P&L statements are now required if the last business tax return is more than 3 months old; in addition, statements must be audited if P&L income is greater than the two year average, and the higher income is needed for qualification purposes. If the two year average income is sufficient for qualification purposes, the P&L is still required, but does not need to be an audited one.
For loans with disputed accounts that receive an "Accept" by TOTAL: These are not required to be referred to a DE underwriter for review as long as the total amount of combined balances (1) does not exceed $1,000 and (2) the dates of last activity are older than 2 years. If singular or combined balances total more than $1,000 they must be paid in full at or prior to closing, or provide proof of payment arrangements with 3 months of payments verified.
For collection accounts: If the total balances of all collection accounts are less than $1,000, the borrower is not required to pay them off as a condition of approval. If singular or combined balances total more than $1,000 they must be paid in full at or prior to closing, or provide proof of payment arrangements with 3 months of payments verified. Judgments must be paid unless payment arrangements have been made and 3 months of payments are verified.
For definitions: The following are now included in the definition of family member for the purposes of Identity of Interest transactions: Brother, Stepbrother, Sister, Stepsister, Uncle, and Aunt.
If you have any questions about these updates, and what they might mean, give me a call or send me an email and I'll be happy to discuss this or any other pertinent matters with you.
About the Author
Shawn Kaplan is an active, 50 state Licensed loan officer with Access National Mortgage. Email Shawn at skaplan@accessnational.com or call 615-426-3182.
Bonus: Click to get a free, no-obligation rate quote. I love to work with my readers!
