FHA Publishes Updates to Handbook 4000.1
FHA announced they are making updates to the 4000.1, which include enhancements, revisions to existing guidance as well as various technical edits. Changes to the Handbook can be implemented immediately but must be implemented for mortgages with case numbers assigned on or after 01/24/2022.
A brief summary of changes to the handbook are as follows:
- Contingent Liabilities
- Guidance was added providing that when a contingent liability is created by a divorce decree or other court order, evidence that the other legally obligated party has made 12 months of timely payments is not required.
- In situations where a copy of the divorce decree ordering the spouse or other legally obligated party to make payments is required, FHA has added for other court orders to be permitted in lieu of the divorce decree.
- Temporary Reduction in Income
- Guidance was added providing that, federal, state, tribal, or local government employees temporarily out of work due to a government shutdown or other similar, temporary events (where lost income is anticipated to be recovered), income preceding the shutdown can be considered as effective income.
- Pre-leave income received prior to and after the first mortgage payment due date is permitted to be used as effective income based on specific criteria.
- Section 8 Homeownership Voucher
- Updated guidance for acceptability of grossing up Section 8 Homeownership Voucher income.
- Documenting the Transfer of Gift Funds
- Guidance was added for gifts of land requiring proof of ownership by the donor and evidence of the transfer of title to the Borrower.
- 203(K) Rehab Program
- Updated list of eligible projects to include the interior space of a condominium unit excluding any areas that are not the responsibility of the Condo Association
- Checking/Savings Accounts
- FHA has removed the requirement for non-borrower parties on a shared account to provide a written statement that the Borrower has full access and use of the funds.
- Payment History Requirements
- Provided clarity that for both Mortgages underwritten through TOTAL Scorecard and manually underwritten, the mortgage payment history for the previous 12 months must be documented.
- Streamline Refinances
- Updated the Streamline Refinance’s Net Tangible Benefit guidance to specify the required minimum term reduction must be 3 years or more.
- Required Inspections for New Construction Financing
- Expanded guidance to allow, in certain circumstances, a qualified trades person or contractor to provide the required inspections and certifications.
- Condo Flood Insurance
- In addition to the form HUD-9991, the following is required (if applicable):
- the certificate of insurance or a complete copy of the NFIP policy; and
- the Letter of Map Amendment (LOMA), Letter of Map Revision (LOMR), or elevation certificate.
- In addition to the form HUD-9991, the following is required (if applicable):
- New Construction
- New construction financing guidance implemented per ML 2020-36 has been incorporated into the Handbook. No guideline changes are being made.
- Appraisal – Changing Markets
- Guidance was added providing alternatives for appraisers in the absence of two credible comparables.
- Valuation of Leasehold Interest
- The calculation of leasehold interest guidance has been removed in consideration of factors that offer advantages and disadvantages affecting value.
Ginnie Mae Clarifies Seasoning Requirements for Modified VA Loans
Ginnie Mae published a clarification on 10/29/2021 to advise that when a new VA refinance is paying off a previously modified non-VA loan that the modified loan is still subject to all current Ginnie Mae seasoning requirements in order to be eligible for a new VA Type I or II refinance.
