If a borrower has a contingent liability that is in forbearance due to COVID-19, does that liability need to be included in the borrower’s DTI?

The Mortgagee must include monthly payments on contingent liabilities in the calculation of the Borrower’s monthly obligations unless the Mortgagee verifies and documents that there is no possibility that the debt holder will pursue debt collection against the Borrower should the other party default or the other legally obligated party has made 12 months of timely payments.  If a loan is in Forbearance, the payments may be considered timely if paid in accordance with the forbearance agreement.
 
For additional information, see:

Handbook 4000.1, II.A.4.b.iv(L) and II.A.5.a.iv(N) available at:  https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

HUD Policy Determination

 

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-05616