Home >> Daily Dose >> FHA Strengthens Eligibility for Borrowers Impacted by the Pandemic
Print This Post Print This Post

FHA Strengthens Eligibility for Borrowers Impacted by the Pandemic

The Federal Housing Administration (FHA) has announced new flexibility for lenders when qualifying borrowers who experienced previous employment gaps or loss of income due to the pandemic. Through updates contained in Mortgagee Letter 2022-09, salaried and hourly wage-earners, as well as self-employed individuals impacted by the pandemic, who now have stable income, will have a greater opportunity to purchase a home using affordable FHA-insured mortgage financing.

As defined by the FHA, a COVID-19 related economic event is deemed a “temporary loss of employment, temporary reduction of income, or temporary reduction of hours worked during the Presidentially Declared COVID-19 National Emergency.”

“The changes we are announcing today further our efforts to facilitate recovery from COVID-19, and support access to homeownership, particularly for populations most deeply impacted by the pandemic,” said Federal Housing Commissioner Julia Gordon. “The pandemic affected the livelihoods of tens of millions of workers in this country, particularly workers of color and those at the lower end of the wage scale. Limiting these families’ homeownership opportunities because of the unavoidable impacts of an unprecedented global health crisis, when they are otherwise well-qualified for a mortgage, is unnecessary and contrary to this Administration’s goals and FHA’s mission.”

On March 13, 2020, by Proclamation 9994, the White House declared a national emergency concerning the coronavirus. The pandemic continued to cause significant risk to the public health and safety of the nation, and the national emergency declared on March 13, 2020, and beginning March 1, 2020, continued in effect beyond March 1, 2022.

Today’s actions by the FHA includes provisions for salaried and non-salaried wage earners and addresses the needs of those who are employed full-time, self-employed, employed part-time, earn a bonus or tip income, and/or earn commission income. Lenders may begin using the new policies mandated by Mortgagee Letter 2022-09 immediately, but must implement the new policies for FHA case numbers assigned on or after September 5, 2022.

Today’s actions by the FHA are the latest by Commissioner Gordon continuing her mission of getting people into affordable housing, despite extraordinary conditions.

“We want to provide alternatives to plain, vanilla single-family housing,” said Gordon in a recent interview with Forbes. “Right now, single-family housing is upward of $400,000, which is well out of reach for most households.”

Earlier this year, the FHA added a 40-year mortgage modification option for mortgage servicers to use in conjunction with its partial claim option to assist additional borrowers who are behind on their mortgage payments for FHA Title II forward mortgages.

“Over the last year, we have made substantive changes to our COVID-19 recovery options that are showing strong results in helping homeowners with FHA-insured mortgages recover from the devastating financial effects of the pandemic,” said former Principal Deputy Assistant Secretary for Housing and the FHA, and current SVP of Commercial Real Estate for M&T Bank Lopa P. Kolluri. “Adding a 40-year modification with partial claim to our toolkit for servicers today reaffirms our long-term commitment to continue helping as many struggling homeowners as we can to keep their homes.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
x

Check Also

Survey: Homeownership Remains Elusive for Baby Boomer Renters

A recent look into housing affordability by NeighborWorks America has found that three in five long-term baby boomer renters feel homeownership remains unattainable.