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Thursday, December 12, 2013

FHA Updates Manual Underwriting Standards

The FHA updated the guidelines lenders must use when manually underwriting loan applications for FHA-insured mortgages. The guidance is intended to offer lenders a set of objective standards and “compensating factors” lenders can use to qualify potential borrowers who don’t fit the FHA’s automated underwriting system.

The new standards include: how to handle borrowers situated between the FHA’s 31 percent housing-to-income ratio and the CFPB’s 43 percent debt-to-income ratio for Qualified Mortgages; factors and “stretch ratios” allowing borrowers to exceed the FHA’s standard ratios; a reduced credit score below which compensating factors may not be considered; and broader applicability of the underwriting policies to FHA refinance transactions.

Read more.
Read the revised standards.

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