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.
 
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.
 
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. 
Additional information is available in Handbook 4000.1 II.A.4.b.iv.(H); II.A.5.a.iv.(G) 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-02717