Covid Lapse in Employment no Longer an Issue for Financing
By September 5th, The Federal Housing Administration (FHA) has ordered lending institutions to update guidelines to make it easier and less complicated for both salaried workers and the self-employed to qualify for loans if they lost their job or suffered from not being able to work due to office closure or personal illness due to Covid.
On July 7th, The FHA issued a instructions to lenders FHA Letter for salaried and self-employed people who experienced financial losses due to Covid. The instructions hyperlinked above will offer these folks greater opportunities to purchase a home because the FHA will insure using FHA mortgage financing. The only requirement for the buyer is they have stable income.
FHA commissioner Julia Gordon said, “The pandemic affected the livelihoods of tens of millions of workers in this country, particularly workers of color and those at the lower end of the wage scale. Limiting these families’ homeownership opportunities because of the unavoidable impacts of an unprecedented global health crisis, when they are otherwise well-qualified for a mortgage, is unnecessary and contrary to the administration’s goals and [the] FHA’s mission.”
These latest instructions provide provisions for both salaried non-salaried wage earners. The needs of those who are employed both part and full time and those who work on a strictly commission basis or earn bonus or tip income. The letter is lengthy but contains specific mandates for all of the categories listed above.
Lenders may begin using the new guidelines immediately but must conform to them by September 5th.
In the FHA a defines a financial loss due to Covid: “As a temporary loss of employment, temporary reduction of income, or a temporary reduction of hours worked during the presidentially declared COV-19 Nationally Emergency.”
More specifically, the mortgage letter instructs lenders, “How to calculate effective income for borrowers who were affected by gaps in employment, which led to reductions or loss of income due to Covid-19 related economic events. This policy will allow industry partners additional opportunity to utilize flexible underwriting guidance to help borrowers qualify for homeownership.”
Interested parties can inquire and offer feedback for thirty days from the date of the letter’s issuance. Those with interest can reach the FHA Resource Center at answers@hud.gov The FHA became part of the Department of Housing and Urban Development, often referred to as HUD in 1965).
The Hud website states: “The provisions of this Mortgagee Letter apply to all FHA Title II Single Family forward mortgage programs.”