This Bulletin has been updated; refer to highlight below
FHA released Mortgage Letter 2021-16 dated June 29, 2021 to provide temporary guidance for rental income and self-employed business verification due to COVID-19.
The temporary policies apply to case numbers assigned on or after August 12, 2020 through September 30, 2021
Verification of Self-Employed Borrower Business
Homebridge will require one of the following within the 10 calendar days prior to the Note date to confirm the business is currently open and operating. Homebridge prefers one of the first three options be used
- Evidence of current work documented with executed contracts or signed invoices, dated within the 10 calendar days prior to the Note date, OR
- Evidence of current business receipts documenting payment for services (e.g. business bank statements or personal bank statements if borrower does not have a business bank account, showing deposits within the 10 calendar days prior to the Note date), OR
- Verification that timely appointments for estimates or service can be scheduled using the business website. The use of this option requires Homebridge management review and approval. Details of how it was determined the business was operational and the website full URL is required, OR
- Confirmation via a phone call or other similar means that the business is open and operating. If this option is used Homebridge management will complete a certification that provides details of how and who confirmed the business is operational and include the certification in the loan file
There is no change to existing requirements for self-employed borrowers and FHA has not provided any allowances for COVID-19 related income loss.
Rental Income
Rental income used for qualifying will require one of the following:
- The rental income will be reduced by 25% (this is in addition to standard calculations), OR
- Verification the borrower has 6 months PITI acceptable reserves in addition to standard reserve requirements, if applicable,
Reminder: FHA does not allow cash-back from the transaction, equity in the property/other REO, borrowed funds or, if manual underwrite, gift funds to satisfy reserve requirements, OR
- Verification the borrower has received the most recent 2 months rental income payments documented with 2 months most recent bank statements showing the deposits (applicable only for borrowers with a history of receiving rental income form the property)
The FHA COVID-19 Temporary Policy topics have been updated and posted on the Homebridge website at www.HomebridgeWholesale.com
If you have any questions, please contact your Account Executive
