Is a borrower eligible for an FHA purchase mortgage if they sold their property, or will sell their property, that secured a mortgage that was in forbearance due to COVID-19?

A borrower who was granted forbearance due to COVID-19 may be eligible for a new FHA insured mortgage provided the borrower has completed the Forbearance Plan, prior to the sale or with the payoff at the consummation of sale.  If the borrower has made less than 3 consecutive monthly housing payments post forbearance, the new FHA- insured loan must be downgraded to a Refer and manually underwritten following Manual Guidelines in Handbook 4000.1 Section II.A.5.
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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-05607