Lenders Have Until September 5th To Comply With New FHA Guidelines Ignoring COVID-Era Employment Lapses
The Federal Housing Administration (FHA) announced new flexibility for lenders when qualifying borrowers for an FHA loan. FHA says the program is aimed at applicants who had employment gaps or a loss because of COVID-19.
FHA announced the changes in Mortgagee Letter 2022-09 on Wednesday. The program is for salaried and hourly wage-earners, as well as self-employed individuals affected by COVID-19. FHA hopes the program will open the door for people affected by Covi9d-19 to purchase a home. However, they must provide documentation they now have a stable income.
FHA defines a COVID-19 related economic event as a temporary loss of employment, temporary reduction of income, or temporary reduction of hours worked during the Presidentially Declared COVID-19 National Emergency.
The new guidance includes provisions for salaried and non-salaried wage earners. They also address the needs of people who are employed full-time and self-employed. In addition, it makes provisions for people employed part-time and tip incomed employees. As well as, earned commission income.
Lenders may begin using the new policies immediately but must implement them for FHA case numbers assigned on or after Sept. 5, 2022.
FHA is also introducing the new guidelines as the US is entering what appears to be a recession due to the US recovering from Covid-19.
Fannie Mae and Freddie Mac began accepting rental income as credit.
Experts say the government is trying to keep the housing market thriving. Lenders have been laying off workers by the thousands and property values are beginning to drop.