FHA recently announced changes to the existing student loan policy that will positively effect FHA mortgage loan approvals going forward in regards to borrowers with student loans that are deferred.. The changes can be found outlined in Mortgagee Letter 2016-08. Highlights to the changes include:

• Outstanding balance of student loan calculation utilizing 1% instead of the previously posted 2% in the 4000.1
• Must use the greater of the outstanding balance, payment listed on the credit report, or the documented fully amortized payment (this means income based repayment on loans currently in default may not be used unless the payment is fully amortized and must be documented as such by the lender).

The guidelines below will replace the existing section of our student loan guidance:

Required Documentation

If the payment used for the monthly obligation is:

• Less than 1% of the outstanding balance reported on the borrower’s credit report, and
• Less than the monthly payment reported on the borrower’s credit report;

The lender must obtain written documentation of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor.

Calculating the Student Loan Obligation

Regardless of the payment status, the lender must use either:

• The greater of:
  • 1% of the outstanding balance on the loan; or
  • The monthly payment reported on the borrower’s credit report; or
• The actual documented payment, provided the payment will fully amortize the loan over its term.

If you have any questions about these new guidelines, please give us a call.

—

 

Joel Lobb
Senior  Loan Officer

(NMLS#57916)

 

American Mortgage Solutions, Inc.

10602 Timberwood Circle, Suite 3

Louisville, KY 40223

phone: (502) 905-3708

 Fax:     (502) 327-9119

kentuckyloan@gmail.com

 

 

 

http://www.mylouisvillekentuckymortgage.com/