St Casimirs Mortgage Minute

FHA Closes Loophole for Student Debt in Revamped Lender Handbook

An overhaul of the Federal Housing Administration's Single Family Housing Policy Handbook offers clarity to lenders on acceptable underwriting practices, but closing the loophole for student debt reduces their flexibility to get loans qualified. One change that went into effect on Sept. 14 requires lenders to consider deferred loan payments -- such as student loans not yet in repayment -- when calculating a borrower's debt to income ratio. Such debt previously could be excluded with proper documentation. "Given the rise in student loan debt in the population, that will shut out many young professionals," says Pro Mortgage Branching Solutions President Daniel Jacobs. However, Brian Sullivan, a spokesperson for the U.S. Department of Housing and Urban Development, says, "Deferred student debt is debt all the same and really must be considered when determining a borrower's ability to sustain both student debt payments and a mortgage long term. Our primary interest is to make certain that a first-time homebuyer is put on a path of sustainable homeownership rather than being placed into a financial situation they can no longer tolerate once their student debt deferment expires."

From "FHA Closes Loophole for Student Debt in Revamped Lender Handbook"
National Mortgage News (11/10/15) Sinnock, Bonnie