Is FHA eliminating the $1000 debt rule it created this year?
A few months Back FHA announced a new rule that would deny mortgages to home buyers that have
anding debt exceeding $1000 before closing escrow. This $1000 debt rule was problematic at best because it added a new wrinkle to purchasing a home, not just in Santa Clarita but everywhere, that was unnecessary.
So this week FHA announced it was eliminating this rule, in order to keep closing escrow on a home purchase more streamlined. This is good news for home buyers here in Santa Clarita where many of our home buying transactions are short sales and have long drawn out processes as it is.
Read more about the FHA debt rule here:
According to the old guidance, which is the current rule, “[i]f the credit report reveals that the borrower is disputing any credit accounts or public records, the mortgage application must be referred to a [direct endorsement] underwriter for review.” In other words, an FHA spokesperson explained it will “get a human eyeball” to more fully understand what is going on.
The proposed policy that has been rescinded as of Friday would have required a borrower to either cure the collections debt before closing or resolve the debt through a repayment plan, which would have to be maintained for a minimum of three months before closing.
From: DSnews.com on the FHA Debt Rule