FHA tightened sure approval standards for mortgage lenders

The Federal Housing Administration has added items to its list of “unacceptable assets” that cannot be included in the calculations used to determine eligibility for mortgage companies.

Items for offsetting future expenses such as deferred taxes or prepaid expenses are added to this capital-forming list. In addition, there were real estate and other buildings used as home offices, which were approved by the Ministry of Housing and Urban Development. In addition, the FHA now requires lists of “other assets” to be certified by an independent body in accordance with generally recognized auditing standards.

The FHA made the changes to the list in response to changes in the HUD Office of Inspector-General's examination guide, according to an information bulletin published on September 30th.

The changes will affect both ongoing adjusted net asset obligations, which are reported quarterly, and the annual recertification of financial data submissions. They come into force immediately with a mandatory compliance period on December 31st.

“It is not difficult to provide the desired schedule, the calculation itself is easy to adhere to. In terms of certain companies and their structure, most of us don't have high prepaid expenses, most of us don't have a lot of real estate, but some companies can, ”said Brenda Hedeen, chief financial officer at OnQ Financial in Tempe, Arizona.

The move suggests the FHA is taking steps to tighten some of its requirements after a pandemic, where the loans it insures are in relatively more distress than some other types of government-related mortgage products. Credit performance is generally improving, but how much stress the pandemic will ultimately bring may not be revealed until the government finishes withdrawing rescue funds and monetary policies to mitigate the effects of the coronavirus.

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