How does a Mortgagee determine the monthly payment on a student loan?

The Mortgagee must include all Student Loans in the Borrower’s liabilities, regardless of the payment type or status of payments.
Student Loan refers to liabilities incurred for educational purposes.
 
Required Documentation

If the payment used for the monthly obligation is 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 or student loan servicer.

The Mortgagee may exclude the payment from the monthly debt calculation where written documentation from the student loan program, creditor or student loan servicer indicates that the loan balance has been forgiven, canceled, discharged, or otherwise paid in full.

Calculation of Monthly Obligation
For outstanding Student Loans, regardless of the payment status, the Mortgagee must use:
  • the payment amount reported on the credit report or the actual documented payment, when the payment amount is above zero; or
  • 0.5 percent of the outstanding loan balance, when the monthly payment reported on the Borrower’s credit report is zero. 

Exception: Where a student loan payment has been suspended in accordance with COVID-19 emergency relief, the Mortgagee may use the payment amount reported on the credit report or the actual documented payment prior to suspension, when that payment amount is above $0.

For additional information see: 

Handbook 4000.1 II.A.4.b.iv(H); II.A.5.a.iv(G): 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-02717