Must deferred obligations be included in the borrower's liabilities?

Yes, the Mortgagee must include deferred obligations in the Borrower’s liabilities.

Deferred Obligations (excluding Student Loans)
Deferred obligations (excluding Student Loans) refer to liabilities that have been incurred but where payment is deferred or has not yet commenced, including accounts in forbearance.
 
The Mortgagee must obtain written documentation of the deferral of the liability from the creditor and evidence of the outstanding balance and terms of the deferred liability.  The Mortgagee must obtain evidence of the actual monthly payment obligation, if available.
 
The Mortgagee must use the actual monthly payment to be paid on a deferred liability, whenever available.  If the actual monthly payment is not available for installment debt, the Mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment.

Student Loans
The Mortgagee must include all Student Loans in the Borrower’s liabilities, regardless of the payment type or status of payments.
 
   Required Documentation
   If the payment used for the monthly obligation is:
  • less than 1 percent of the outstanding balance reported on the Borrower’s credit report, and
  • less than the monthly payment reported on the Borrower’s credit report;
   the Mortgagee must obtain written documentation of the actual monthly payment, the payment status,
   and evidence of the outstanding balance and terms from the creditor.

   Calculation of Monthly Obligation
   Regardless of the payment status, the Mortgagee must use either:
  • the greater of:
    • 1 percent of the outstanding balance on the loan; or
    • the monthly payment reported on the Borrower's credit report; or
  • the actual documented payment, provided the payment will fully amortize the loan over its term.

For additional information see Handbook  4000.1 II.A.4.b.iv(G) and (H) and II.A.5.a.iv(F) and (G) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
 

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-02210