In Mortgagee Letter 2020-30 dated September 10, 2020, the U.S. Department of Housing and Urban Development (HUD) provides guidance on the underwriting of applicants for FHA insured mortgage loans who were granted a previous mortgage forbearance on the subject property or another residence due to COVID-19 or a presidentially declared major disaster. The guidance applies to FHA Title II single-family forward mortgage loan programs. FHA lenders may implement the guidance immediately and must implement the guidance for loans with case numbers assigned on or after November 9, 2020.
Generally, a borrower who was granted a mortgage forbearance is eligible for a new FHA insured mortgage loan provided
- for a borrower granted a forbearance who continued to make regularly scheduled payments, the forbearance plan is terminated; or
- for cash-out refinance loans, the borrower has completed the forbearance plan and made at least 12 consecutive monthly payments post forbearance; or
- for purchase money loans and no cash-out refinance loans, the borrower has completed the forbearance plan and made at least three consecutive monthly payments post forbearance; or
- for credit qualifying streamline refinance loans, in addition to the conditions noted below, the borrower either is still in forbearance or has completed the forbearance plan and made less than three consecutive monthly payments post forbearance; and
- for all streamline refinance transactions, the borrower has made at least six payments on the FHA-insured mortgage being refinanced (when the FHA insured mortgage has been modified after forbearance, the borrower must have made at least six payments under the modification).
The guidance addresses the underwriting of loans using the Technology Open To Approved Lenders (TOTAL) mortgage scorecard and manual underwriting. The guidance also provides details for the situations noted above, including the general standards that apply, payment history requirements, and documentation requirements.