What are the creditworthiness requirements for Nonsupervised or Investing Mortgagees?

A Nonsupervised or Investing Mortgagee must demonstrate that it is a creditworthy institution, and its Principal Owners and Corporate Officers are creditworthy individuals.  A Creditworthy Institution is a Mortgagee with a credit background for the seven-year period preceding the FHA Mortgagee approval application or the lifespan of the institution if less than seven years that:
  • reflects no delinquent accounts or collections and no legal actions; or
  • reflects legal actions that have been adequately resolved, and/or delinquent accounts or collections that have been adequately resolved or that have an acceptable explanation. 
A Creditworthy Individual is a person whose credit background for the seven-year period preceding the FHA Mortgagee approval application or for the length of the individual’s credit history if less than seven years:
  • reflects no delinquent accounts or collections, and reflects no legal actions that would impair the individual’s credit, such as a foreclosure action, judgment, lien, or bankruptcy; or
  • reflects legal actions that have been adequately resolved, and/or delinquent accounts or collections that have been adequately resolved or that have an acceptable explanation.  
A Nonsupervised or Investing Mortgagee must submit:
  • A commercial credit report not more than 90 days old with its application and a written explanation for all negative items disclosed on the credit report.
  • A personal credit report for each of its Principal Owners and Corporate Officers with its application. The personal credit report must be a Residential Mortgage Credit Report (RMCR) or a Tri-Merged Credit Report (TRMCR) not more than 90 days old.  A written explanation must be provided from the relevant Principal Owner or Corporate Officer for any negative item disclosed on the credit report. 
     
For additional information see Handbook 4000.1 I.A.3.c.v. available 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-02649