Monday, October 14, 2013

The FHA is moving more to Manual Underwriting

The FHA is moving more to Manual Underwriting


Loan files whereby the Automated Underwriting System and TOTAL Scorecard was with a finding of “Refer”. Any loan file regardless of the transaction type, loan amount that receives “Refer” or a “Caution” must be manually underwritten by the direct endorsed underwriter.
Credit Analysis of Collections and Judgments (Mortgagee Letter 2013 – 24) beginning with case numbers assigned on or after October 15, 2013. If a loan file has collection accounts and judgments other than medical and charge offs and the Automated Underwriting System with TOTAL Scorecard generates a “Refer” the file must be manually underwritten by the direct endorsed underwriter. If the borrower has $2,00.00 or more of collection items other than medical or charge offs the direct endorsed underwriter must perform a “capacity analysis” by using 5% of unpaid balance in the debt to income calculation. Court ordered judgments no longer must be paid off at or before the closing providing the judgment has been in a payment plan for at least three months and include the payment in the debt to income ratio. Borrowers with disputed accounts must analyze to reflect the risk associated with the disputed account.
Disputed items for $1,000.00 or more must be manually underwritten by the direct endorsed underwriter.
Collections and Disputed Accounts with balances of $2,000.00 or more must be manually underwritten by the endorsed underwriter and include the monthly payments in the debt to income calculation. Medical and charge offs are not to be considered for cases assigned October 15, 2013 or after. All disputed accounts totaling $1,000.00 or more must be manually underwritten by the direct endorsed underwriter. See Mortgagee Letter 2013 – 25.

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