What is FHA’s policy when manually underwriting a mortgage where a borrower has been granted a Forbearance?

Payment History on Housing Obligations (Manual)

Housing Obligation/Mortgage Payment refers to the monthly payment due for rental or Properties owned.

 
A Mortgage Payment is considered delinquent if not paid within the month due.
 
When manually underwriting a Borrower who was granted a Mortgage Payment Forbearance and continues to make payments as agreed under the terms of the original Note is not considered delinquent or late and shall be treated as if not in forbearance provided the forbearance is terminated at, or prior to, closing.
 
The Mortgagee must determine the Borrower’s Housing Obligation payment history through:  

  • the credit report;
  • verification of rent received directly from the landlord (for landlords with no Identity of Interest with the Borrower);
  • verification of Mortgage received directly from the Servicer; or
  • a review of canceled checks that cover the most recent 12-month period.
The Mortgagee must verify and document the previous 12 months’ housing history. For Borrowers who indicate they are living rent-free, the Mortgagee must obtain verification from the property owner where they are residing that the Borrower has been living rent-free and the amount of time the Borrower has been living rent-free.
 
For both Purchase and No Cash-Out Refinance Transactions, a Mortgage that has been modified must utilize the payment history in accordance with the Modification Agreement for the time period of the modification in determining late housing payments.  In addition, where a Mortgage has been modified, the Borrower must have made at least six payments under the Modification Agreement to be eligible for a No-Cash Out Refinance.
 
A Mortgage that was subject to Mortgage Payment Forbearance must utilize the Mortgage Payment History in accordance with the Forbearance Plan for the time period of the forbearance in determining late housing payments.

Any Borrower who is granted a forbearance and is otherwise performing under the terms of the Forbearance Plan is not considered to be delinquent for the purposes of credit underwriting. 

 
Required Documentation
Where a mortgage reflects payments under a Modification or Forbearance Plan within the 12 months prior to case number assignment, the Mortgagee must obtain:
  • a copy of the Modification or Forbearance Plan; and
  • evidence of the payment amount and date of payments during the agreement term.
A Forbearance Plan is not required if the forbearance was due to the impacts of the COVID-19 pandemic.

For additional see: 

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-05579