FHA Mortgagee Letter 2020-30 announced underwriting guidance for borrowers with a previous mortgage payment forbearance for purchase and refinance transactions. NewRez Announcement 2020-121 provided guidance for refinance transactions only. The following guideline addresses how previous mortgage payment forbearances will impact underwriting eligibility on FHA Purchase transactions.
Effective for all applications with FHA Case Number assignments dated on or after November 9, 2020, borrowers who have made less than three (3) consecutive payments since completion of a mortgage forbearance on their previous home mortgage are not eligible.
The FHA Product Profile has been revised as follows below to reflect FHA’s new requirement for initiating a manual downgrade of a TOTAL Mortgage Scorecard Approve/Accept finding that will apply to purchase transactions:
Regardless of AUS decision, a manual downgrade is required, if any mortgage trade line (including mortgage line of credit payments) during the most recent 12 months reflect:
- Three (3) or more late payments of greater than 30 days,
- One (1) or more late payments of 60 days plus one or more 30-day late payment, or
- One (1) payment greater than 90 days late, or
- That the borrower has made less than three (3) consecutive payments since completion of a mortgage forbearance plan
As a reminder, NewRez does not permit manual underwriting or manual downgrades; therefore, a loan with a manual downgrade resulting from a borrower with less than 3 mortgage payments made since completing a mortgage forbearance on their previous home would be ineligible under current NewRez policy.
Also, borrowers who were granted a forbearance and continued to make payments, as agreed under the terms of the original note, will not be considered delinquent or late and will be treated as if they were never in a forbearance plan for underwriting purposes.
Refer to the Product Profiles and NewRez Lending Library for details