Are reserves required for borrowers with manually underwritten loans?

Yes, the Mortgagee must verify and document Reserves equivalent to one month’s Principal, Interest, Taxes, and Insurance (PITI) after closing for one- to two-unit Properties.  The Mortgagee must verify and document Reserves equivalent to three months’ PITI after closing for three- to four-unit properties. 

For more information see Handbook 4000.1 II.A.5.c.i(C) 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-04167