Kentucky FHA Mortgage Loans Impacted by COVID-19


via Kentucky FHA Mortgage Loans Impacted by COVID-19

 

COVID-19 Questions and Answers
Last revised: March 27, 2020
Q1. What is FHA’s Office of Single Family Housing doing to prepare for possible disruptions in its business operations should the Coronavirus (COVID-19) warrant office closures?
A1. All of FHA, including Single Family, is prepared to operate remotely to ensure our business operations continue with as little disruption as possible in the event of office closures.
Q2. Is FHA continuing to endorse loans?
A2. Insurance endorsements for all FHA Title I loans and Title II forward and reverse mortgages continues; however, there may be processing delays if staff is working remotely.
Q3. Is the FHA Resource Center continuing normal operations?
A3. Yes. However, if the Homeownership Centers (HOCs) are closed there will not be FHA staff members available to receive escalated calls. If this occurs, we recommend that stakeholders email their questions to the FHA Resource Center at: answers@hud.gov for a quicker response.
Q4. (REVISED 3.18.20) Must lenders still complete the annual recertification by March 31, 2020?
A4. (REVISED 3.18.20) FHA has extended the due date for annual recertification to April 30, 2020 for those lenders with a December fiscal year end. However, lenders that can complete the annual recertification before April 30th are encouraged to do so.
Q5. Are requests for lender insurance (LI) authority being processed?
A5. Yes. The LI approval process is electronic, so lenders may continue to submit these requests.
Q6. Can lenders still submit applications to become FHA-approved lenders?
A6. Yes. The FHA lender approval process is electronic, so lenders may continue to submit these requests.
Q7. Will FHA still conduct lender monitoring and/or loan reviews?
A7. Yes. FHA staff will conduct these reviews remotely. All on-site reviews are suspended until further notice.
Q8. Will the Credit Alert Verification Reporting System (CAIVRS) be available if there are office closures?
A8. Yes. CAIVRS will be available to determine if a borrower has a delinquent federal debt.
Q9. Will the FHA TOTAL Scorecard be available for lenders?
A9. Yes. The FHA TOTAL Scorecard will be available.
Q10. (Revised 3.27.20) Will FHA still conduct in-person lender trainings?
A10. (Revised 3.27.20) No. All FHA Single Family in-person trainings are suspended. Online webinar trainings will continue. FHA will continue to assess the situation to determine when in-person trainings can resume.
Q11. Are there special loss mitigation program options available to borrowers who may be negatively impacted by the Coronavirus?
A11. As with any other event that negatively impacts a borrower’s ability to pay their monthly mortgage payment, FHA’s suite of loss mitigation options provides solutions that mortgagees should offer to distressed borrowers – including those that could be impacted by the Coronavirus – to help prevent them from going into foreclosure. An example of one of these options is our Special Forbearance for unemployed borrowers. The SFB-Unemployment Option is a Home Retention Option available when one or more of the Borrowers has become unemployed and this loss of employment has negatively affected the Borrower’s ability to continue to make their monthly Mortgage Payment. These home retention options are located in FHA’s Single Family Housing Policy Handbook 4000.1 (SF Handbook) Section III.A.2. See FHA INFO 20-18 for more details. FHA is closely monitoring the situation and will provide updated guidance, as needed.
Q12. Is FHA requiring servicers to conduct occupancy exterior inspections during this time?
A12. Yes. The standard in FHA’s SF Handbook states that the mortgagee must perform a visual exterior inspection. No physical contact with the borrower and/or occupants is required. For more information, please see SF Handbook, Section III.A.2.h.xi — Occupancy Inspection.
Q13. Does FHA require physical contact with the borrower and/or occupants when acquiring possession of a property in connection with occupied conveyances?
A13. No. When identifying property occupants, FHA does not require physical contact with the borrower and/or occupants. For more information, please see SF Handbook, Section III.A.2.s. —Acquiring Possession.
Q14. Will I be able to place a bid on a HUD-owned property via the HUD Homestore bid site?
A14. Yes. The bidding site is available.
Q15. Is FHA continuing to process claims?
A15. FHA will continue to process claims; however, servicers may experience slightly longer processing timeframes if there are office closures, particularly for any claims submitted manually and Title I claim submissions and Title I manufactured housing endorsements.
Q 16. Is HUD suspending credit reporting for FHA-Insured mortgages?
A 16. FHA requires servicers to comply with the credit reporting requirements of the Fair Credit Reporting Act (FCRA); however, FHA encourages servicers to consider the impacts of COVID-19 on borrowers’ financial situations and any flexibilities a servicer may have under the FCRA when taking negative credit reporting actions.
Q17. (REVISED 3.27.20) Is FHA continuing to require appraisals with interior property inspections for Single Family programs?
A17. (REVISED 3.27.20) In accordance with Mortgagee Letter 2020-05, exceptions for two additional appraisal inspection scope of work options may be used for certain cases. The exterior-only appraisal and the desktop-only appraisal options are permitted when circumstances warrant. The FHA roster appraiser must complete all required appraisals in accordance with acceptable Appraisal Reporting Forms and Protocols. See ML 2020-05 for more program specific details.
Q18. Are face-to-face interviews still required under FHA’s Default Servicing early default intervention requirements?
A18. FHA has published a regulatory waiver and an accompanying SF Handbook waiver to allow mortgagees to utilize alternative methods for contacting borrowers, in lieu of face-to-face interviews, to meet the requirements of SF Handbook, Section III.A.2.h.xii. For more information, please see Regulatory Waiver and Handbook Waiver.
Q&As (3.18.2020)
Q19. Will lenders be penalized if they are unable to submit case binders to FHA within 10 business days of the binder request as a result of temporary lender office closures or reductions in on-site staff?
A19: No. Lenders should make every effort to submit case binders to FHA as quickly as possible, but they will not be penalized for overdue binder requests caused by their temporary office closures or staff reductions related to Coronavirus disease 2019 (COVID-19).
Q20. Will FHA suspend foreclosures and evictions on single family properties now that a Presidentially-Declared COVID-19 National Emergency has been declared? A20. Yes. FHA published Mortgagee Letter (ML) 2020-04, “Foreclosure and Eviction Moratorium in connection with the Presidentially-Declared COVID-19 National Emergency,” on March 18, 2020. This ML announced an immediate foreclosure and eviction moratorium for all FHA-insured single family mortgages for a 60-day period.
Q21: Is FHA providing an automatic extension to foreclosure deadlines following the expiration of this moratorium? A21: Yes. FHA is providing mortgagees an automatic 60-day extension following the moratorium expiration date to commence or recommence foreclosure action or evaluate the borrower under HUD’s Loss Mitigation Program.
Q22. Why is FHA granting a foreclosure moratorium for HECMs instead of an extension to the HECM foreclosure timelines?
A22. FHA is authorizing a foreclosure moratorium for Home Equity Conversion Mortgages (HECMs) through guidance in ML 2020-04, which is being provided in response to the unprecedented national emergency and the exigent circumstances surrounding the COVID-19 crisis. HUD’s
Presidentially-declared major disaster rea (PDMDA) guidance concerning extensions of HECM foreclosure timelines as provided in FHA INFO 18-40 is unaffected by the guidance.
New Q&As (3.27.2020)
Q24. When are exceptions to the appraisal inspection protocols for the use of exterior-only and desktop-only scope of work permitted?
A24. An exception for the exterior-only option is limited to purchase cases, rate and term refinances, simple refinances, and HECMs. An exception for the desktop-only option is limited to purchase cases.
Q25. What precautions should appraisers take while conducting a property appraisal report with inspection?
A25. Appraisers are advised to establish safety policies and procedures for their clients per the current guidance and recommendations provided by the Centers for Disease Control (CDC) as well as local, state, and federal resources. When scheduling property inspections, appraisers should discuss established protocols to reduce the risk of COVID-19 exposure.
Q26. Does the appraiser have to perform an interior inspection of the subject property?
A26. Certain FHA cases may now be completed with exterior-only or desktop-only scope of work. The appraiser should monitor the client’s engagement letters and instructions. For cases requiring the standard protocols of a complete interior and exterior viewing, the appraiser should follow safe practices and keep the client informed.
Q27. When performing an exterior-only or desktop-only scope of work, should the appraisal subject to inspection be completed at a later date?
A27. The appraisal does not need to be subject to an inspection at a later date solely because an interior or physical inspection was not performed. The appraiser must identify any necessary extraordinary assumptions based on the limited inspection scope of work and complete the appraisal based upon these assumptions. The appraisal will be completed “AS IS” unless deficiencies in Minimum Property Requirements (MPR) are observed or known to the appraiser based on the scope of inspection.
Q28. Which appraisal forms will be used for the exterior-only and desktop-only appraisals?
A28. The current acceptable appraisal reporting forms based on property/assignment type will continue to be used for all appraisals, including those with limited inspection scope of work. The appraiser must include the amended model certification and scope of work with the appraisal form. See acceptable reporting forms below:
Q29. Where should the appraiser get the subject property data necessary to complete the appraisal form for an exterior-only or desktop-only scope of work?
A29. To identify the property characteristics necessary to develop the appraisal, the appraiser may rely on third party data from the following sources: prior appraisals, tax assessor’s property record, and the Multiple Listing Service (MLS). The Appraiser may also obtain and rely on information from the homeowner with disclosures. Extraordinary assumptions are permitted when necessary in the development of a credible appraisal and should be clearly stated.
Q30. Are there any additional changes to the appraisal form data requirements to clearly communicate that a modified scope of work was completed?
A30. Yes. To better identify a modified scope of work appraisal, the Map Reference text field within the subject section of the form should be used to state “desktop” or “exterior,” when applicable.
Q31. Is the appraiser still responsible for identification of property deficiencies and minimum property requirements?
A31. While the FHA minimum property requirements (MPR) has not changed, the appraiser is required to observe, analyze, and report only what is evident based on the assignment scope of work.
Property/Assignment
Type
Acceptable Reporting Form
Single Family, Detached, Attached or Semi-Detached Residential Property
Fannie Mae Form 1004/Freddie Mac Form 70, Uniform Residential Appraisal Report (URAR); Mortgage Industry Standards Maintenance Organization (MISMO) 2.6 Government-Sponsored Enterprise (GSE) format
Single Unit Condominium
Fannie Mae Form 1073/Freddie Mac Form 465, Individual Condominium Unit Appraisal Report; MISMO 2.6 GSE format
Manufactured (HUD Code) Housing
Fannie Mae Form 1004C/Freddie Mac Form 70B, Manufactured Home Appraisal Report; MISMO 2.6 Errata 1 format
Small Residential Income Properties(Two to Four Units)
Fannie Mae Form 1025/Freddie Mac Form 72, Small Residential Income Property Appraisal Report; MISMO 2.6 Errata 1 format
Update of Appraisal(All Property Types)
Summary Appraisal Update Report Section of Fannie Mae Form 1004D/Freddie Mac Form 442, Appraisal Update and/or Completion Report; MISMO 2.6 Errata 1 format
Compliance or Final Inspection for New Construction or Manufactured Housing
Form HUD-92051, Compliance Inspection Report, in Portable Document Format (PDF)
Compliance or Final Inspection for Existing Property
Certification of Completion Section of Fannie Mae Form 1004D/Freddie Mac Form 442, Appraisal Update and/or Completion Report; MISMO 2.6 Errata 1 format

“Grossing-Up” Non-Taxable Income for a Kentucky Mortgage Loan Approval


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“Grossing-Up” Non-Taxable Income

Did you know that you can gross up non-taxable income?

You may gross up non-taxable income for income qualifying purposes. The non-taxable income source being “grossed-up” must be documented.

Non-taxable income refers to types of income not subject to federal taxes, which includes, but is not limited to:

  • some portion of Social Security Income;
  • some federal government employee Retirement Income;
  • Railroad Retirement benefits;
  • some state government Retirement Income;
  • certain types of disability and Public Assistance payments;
  • Child Support;
  • military allowances; and
  • other income that is documented as being exempt from federal income taxes.

The percentage to be grossed-up varies by agency:

  • FHA the greater of 15% or the appropriate tax rate for the income amount
  • USDA 25%
  • VA 25%
  • Freddie Mac  25% or the amount of the current federal and state income tax withholdings tables
  • Fannie Mae 25% or the amount of the current federal and state income tax withholdings tables
  • Jumbo – 25% (see guidelines for specific restrictions)

 

mortgage qualification

 

Now let’s talk about what it takes to qualify for a mortgage.

First off, you’ll need an adequate credit score, along with sufficient income to make the proposed mortgage payment each month.

[What credit score do I need to get a mortgage?]

Generally speaking, a credit score below 620 is considered subprime in the mortgage world and will make qualifying for a mortgage that much more difficult. But it’s still possible depending on lender and loan type.

If you’ve got previous foreclosures on your credit report, things will get even more problematic and you may not even be eligible for a certain period of time.

But if your credit score is above 740 and you’ve got some decent credit history to back it up, you should have access to the lowest mortgage rates and a wide array of loan options.

Credit scores in between should still work, though there might be pricing hits associated, which all else being equal, may bump up your interest rate.

Tip: Lenders want to see a minimum of 3 active credit tradelines with two-year history on each to assess your creditworthiness.

As far as job history goes, it’s important to show the mortgage underwriter you’ve had (and still have!) a steady job, typically for two years or longer.

This essentially proves that you will continue to receive regular income to make those costly mortgage payments each month for the next 30 years.

If you just graduated and have held a job for a mere two months, don’t expect to qualify for a mortgage unless your new position directly correlates with what you studied in school.

For example, if you went to medical school, and now have a job as a doctor, this might be sufficient to qualify for a mortgage.

But if you were an art history student who has been working as a flight attendant for two months, mortgage lenders probably won’t feel comfortable lending to you just yet. Make sense?

When seeking out your mortgage, you’ll also need to consider the mortgage down payment requirements, which vary depending on the type of loan you’re after.

While there are still some zero down mortgages around, namely VA loans and USDA loans, it certainly helps to set aside some assets so you’ve got something to put into your home purchase.

Obviously, the amount of money needed will also vary based on the purchase price of the home. If you want a more expensive house, expect to put more down in order to qualify.

If we’re talking about a mortgage refinance, you’ll need a certain amount of home equity to qualify for the mortgage, as determined by loan-to-value ratio constraints.

Use Common Sense and Think Like the Mortgage Lender

  • Would you approve YOU for a mortgage?
  • If not, address those red flags immediately
  • Don’t guess, run the actual numbers with a professional
  • And ask plenty of questions if you’re unsure about anything early on

When it comes down it, it’s all pretty much common sense. Do you think you can/should qualify for a mortgage?

Do you have a track record of making on-time payments, carrying large amounts of debt and paying it down, holding a job, and saving money?

Are you ready to make a big commitment? If you were the bank, would you lend you a mortgage…hmm.

 

I would guess that most prospective homeowners could assess the situation beforehand and determine if they should be granted a mortgage.

But without running the numbers, you won’t know for certain. So be sure to do plenty of calculations and speak with a loan officer or two to see where you stand.

They’ll be able to get you a quick answer so no one’s time is wasted.

What You Need to Qualify for a Mortgage

Here’s a general list of what you need to qualify for a mortgage. Keep in mind that qualification requirements vary greatly by lender and loan type.

In some cases, you won’t need all of these things, but it should certainly make life easier to satisfy everything on this list.

  • Credit History – minimum of 3 active trade lines with 2-year history on each (credit score minimums vary)
  • Job History – at least 2 years on same job or in same line of work (recent graduates with new jobs in certain fields like doctors and lawyers may be exempt)
  • Income – verifiable income (tax returns, pay stubs) for the past two years that satisfies debt-to-income ratio limits
  • Assets – enough to cover down payment, closing costs, and at least two months of mortgage payments (known as reserves)
  • Rental History – proof of clean rental history for the past two years is also important to show the lender you have a propensity to pay on time each month (those currently living with their parents may be excluded from this rule).

If you can’t satisfy these basic requirements, you may want to keep renting, saving, and working on your credit until you can.

Or consider adding a co-signer who is better qualified to apply for a mortgage.

Either way, don’t be discouraged. There are lots of home loan programs and creative options out there to suit all different needs. As noted, one lender may say no while another says YES.

 

Joel Lobb


Mortgage Loan Officer

Individual NMLS ID #57916

Text/call:      502-905-3708