Recent updates to credit requirements on loans insured by the Federal Housing Administration have been rescinded.
Mortgagee Letter 2012-3 issued in February by the Department of Housing and Urban Development relaxed guidelines in some cases on disputed accounts while increasing requirements on collection accounts.
Existing guidance requires that a direct endorsement underwriter must review files when a borrower’s credit report reveals that credit accounts or public records were in dispute.
But with Mortgagee Letter 2012-3, applications accepted by the automated underwriting system using the TOTAL Mortgage Scorecard would no longer need to be reviewed by a DE underwriter if the total amount of disputed accounts was less than $1,000 and the accounts were at least two years old. Identity theft disputes would be excluded from the $1,000 limitation.
Another change outlined in the February mortgagee letter was the requirement that outstanding collection accounts be resolved by closing if the aggregate balances were at least $1,000. Existing guidelines only require the resolution of court-ordered judgments.
The revisions were slated to go into effect on the first of next month.
But in Mortgagee Letter 2012-10 issued Friday, HUD rescinded the new requirements. The move was made to “provide clarification of policies concerning disputed accounts and collection accounts through future guidance.”
The rescission became immediately effective.
“Mortgagees who assigned case numbers between April 1, 2012, and April 8, 2012, will not be deemed to be in violation of HUD requirements, if the case numbers were processed in accordance with either the existing guidance or that announced in Mortgagee Letter 2012-3 regarding the affected topics in this Mortgagee Letter,” the latest letter stated.
