Showing posts with label Fannie Mae's policy on student loans and retirement accounts. Show all posts
Showing posts with label Fannie Mae's policy on student loans and retirement accounts. Show all posts

Student-Loan Freeze Led to Big Credit-Score Gains

 

Student-Loan Freeze Led to Big Credit-Score Gains, N.Y. Fed Says

  • Some 30 million student borrowers saw scores rise, study says
  • Freeze is set to expire on Aug. 31 but Biden may extend it

Share of Borrowers by Credit Score

Credit scores for student loan borrowers increased dramatically

Here are some key takeaways from the New York Fed report.

Better Credit Scores

The share of student-loan balances held by subprime borrowers fell to 26% in 2021, from 36% in 2019. That’s primarily because loans owed to the federal government that were delinquent before the pandemic were marked as current under the forbearance policy, putting millions of households on a sounder financial footing. 

“The end of forbearance will have impacts on credit scores, borrowing, and household cash flow over the coming year for the 38 million federal borrowers that have benefited from the pause,” the New York Fed researchers wrote. “Some borrowers will enter delinquency or default.”

Growing Balances

With repayments on hold, about two-thirds of student-debt holders had balances that were growing or flat at the end of 2021, compared with just 48% in 2019. That’s an increase of roughly 3.2 million borrowers.  

There was also a shift in the typical size of debts, with larger loans accounting for a bigger share of the total. At the same time, 5.4 million people who were recorded as having student debt outstanding at the end of 2019 no longer owed anything by the end of 2021.

Loan Shifts

Since the pandemic, larger debts have increased as a share of total loans

Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax

DC Debt Leader

On average, student borrowers in and around the nation’s capital owed the most at the end of 2021. Washington DC topped the list, with an average debt of $53,769, while Maryland ranked second and Virginia fifth. 

Student Loans by State

Average balances vary widely across states

Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax

Note: As of Q4 2021, average balance

“Of the ten states (not including D.C.) with the largest median balance, seven belong to the Southern Census region (Georgia, Maryland, Virginia, North Carolina, South Carolina, Alabama, and Tennessee),” the report found.

Top 10 Student Loan Debt

Seven of top-10 largest belong to the Southern Census region

Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax

Note: Ranked by median loan amount

Once the forebearence period ends, loan amounts are anticipated to rise and delinquency rates across states in the South are expected to have worse outcomes.

 

 

https://www.bloomberg.com/news/articles/2022-08-09/student-loan-freeze-raised-credit-scores-dramatically-ny-fed

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Student Loan Guidelines For Qualifying for a Mortgage Loan in Kentucky.


Loan type
Student Loan Payment Requirement
FHA
Must be included in the borrower’s liabilities regardless of the payment type or
status. The payment amount must be either:
▪ The greater of:
·        ..5% of the outstanding balance on the loan or
·        Monthly payment reported on the borrower’s credit report, or
▪ The servicer’s documented payment provided the payment will fully amortize
the loan over the repayment term period
VA
Deferred
A payment does not need to be included if written evidence supports that the
student loan debt will be deferred beyond 12 months of closing.
In Repayment
Include loans with payments starting within 12 months. Calculate threshold
payment as a rate of 5% of outstanding balance divided by 12 months. If credit
report payment is higher, use credit report payment. If current documentation
from student loan servicer reflects actual terms and payment for each loan,
the verified payments may be used even if less than the threshold payment
calculation.
USDA
Fixed Payment
A permanent amortized, fixed payment is used when documentation supports fixed payment, interest and term.
Non-Fixed payment
Use .5% of the loan balance reflected on the credit report. Payment arrangements
that are deferred or non-fixed (Income Based Repayment (IBR), graduated, adjustable, interest only, etc.) may not be used.
Fannie
Loans in Repayment Period
▪ If provided, use the credit report payment
▪ If credit report is incorrect, obtain student loan documentation from the servicer
to verify the payment used for qualification
Income Driven
Repayment Plan
Use the student loan documentation to verify the actual monthly payment. Borrower
may be qualified with a $0 payment if the documentation supports it.
Loans in Deferment or
Forbearance
▪ A payment equal to 1% of the outstanding student loan balance (even if this
amount is lower than the actual fully amortizing payment) or
▪ A fully amortizing payment using the documented loan repayment terms
Freddie
Loans in Repayment
Period
Use the greater of payment reported on credit report or .5% of the higher of original
or outstanding loan balance as shown on credit report.
Loans in Deferment or
Forbearance
Use greater of payment reported on credit report or .5% of the higher of original or
current outstanding loan balance as shown on the credit report.
Loan Forgiveness
Cancelation
Discharge
Employment Contingent
Repayment
Programs
Payment may be excluded if file contains documentation that indicates:
▪ Monthly payment is deferred and/or in forbearance and full balance of the loan will be forgiven, canceled, discharged or will be paid if qualified for an employment-contingent repayment program and
▪ Borrower currently meets requirements for the student loan forgiveness/cancelation program
Obtain documentation from the student loan servicer to show the loan will be forgiven, canceled, discharged or that the borrower qualifies and is approved under an employment contingent repayment program that will extinguish the debt.

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Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916

American Mortgage Solutions, Inc.

Text/call:      502-905-3708
fax:            502-327-9119
email:          kentuckyloan@gmail.com







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How to qualify for a Kentucky FHA, VA, USDA and Fannie Mae Mortgage loan with Student Loans




Guidelines for KY FHA, VA, USDA and VA Mortgage loans with Student Loans on A Credit Report:
Kentucky Fannie Mae or Conventional Guidelines for Student Loans:

  • If a monthly payment is on the credit report, the lender may use that amount for qualifying purposes. 
  • If a monthly payment is on the credit report is incorrect, the lender may use the monthly payment on the most recent student loan statement
  • If the monthly payment on the credit report is zero, the lender must use one of the following options to calculate the payment for qualifying purposes
  1. Document the borrower is on an income driven payment plan and the actual monthly payment is zero
  2.  Use 1% of the outstanding student loan balance as the monthly payment
  3. Calculate a fully amortized payment using documented loan repayment terms

Kentucky FHA Mortgage Loans Guidelines:

Regardless of the payment status (currently in payment or deferred), the lender must use either:
  • The greater of:
  1. .5 % of the outstanding balance; or
  2. The monthly payment reported on the credit; or
  •  Calculate a fully amortized payment using documented loan repayment terms




Kentucky USDA or Rural Housing Guidelines:


Regardless of the payment amount reporting on the credit, the lender must include the payment as follows:
  • A permanent amortized, fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed.
  • Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation. .5% of the loan balance reflected on the credit report must be used as the monthly payment. No additional documentation is required.

Kentucky  VA Mortgage Guidelines for Student Loan:
  • If the borrower can document the student loan will be deferred 12 months from the closing date, the monthly payment does not need to be considered
  • If a student loan is in repayment or scheduled to begin repayment within 12 months from the closing date, the threshold payment amount must be calculated by  using 5% of the loan balance divided by 12 months
  • If the payment reporting on the credit report is greater than the threshold payment calculation amount, then the credit report payment must be used for ratios.
  • If the payment reporting on the credit report is less than the threshold payment calculation and the lender is using the lower payment to qualify the borrower then:
  1. A statement from the student loan servicer reflecting the actual loan terms and payment information must be included in the file. 
  2. The statement must be dated within 60 days of closing
  3. It is the underwriter’s discretion to use the lower payment


As you can see, Fannie Mae or Conventional loans is the most lenient when it comes to qualifying for a mortgage loan with someone that has a lot of student loans on their credit report.

 
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
 

Text/call 502-905-3708
kentuckyloan@gmail.com
http://www.nmlsconsumeraccess.org/
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant  Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/
-- Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.
Louisville Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Zero Down Payment Home Loans | October 17, 2018 at 3:54 pm | Tags: fha gift funds, fha loan kentucky, FHA Loans Kentucky Housing First time home buyer, fha mortgage, fha mortgage loan, gift funds for fha mortgage, kentucky fha loans







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