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FHA Delaying Disputed Debt Rule Until July

April 17, 2012

FHA Delaying Disputed Debt Rule Until July

04/09/2012 By: Esther Cho

The Federal Housing Administration (FHA) rule preventing potential borrowers with outstanding collections debt of $1,000 or more from getting an FHA-insured loan is on hold until July 1.

The rule, which many in the industry warn would prevent even more consumers from taking out a loan during a time when lending has tightened, took effect April 1, but will be delayed now until July 1, 2012, according to a notice issued by the FHA.

According to the FHA, the delay is to allow “[m]ortgagees additional time to adapt their procedures to implement portions of the new guidance.”

Before the effective date, FHA said it intends to seek additional input on the rule, which was created to lower default rates.

For lenders who assigned case numbers between April 1, 2012, and April 8, 2012, as long as the numbers were assigned according to either the old or new guidance, the actions will not be viewed as a violation of HUD requirements.

The new rule does include exceptions, such as debt disputed due to identity or credit card theft or if a hardship was faced such as death, divorce, or loss of employment.

FHA-insured loans accounted for 25 percent of the new market share in February, according to Ellie Mae’s Origination Insight Report. Overall, FHA currently has 4.8 million insured single family mortgages, the agency stated on its website.

From: http://ping.fm/iEwLi

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