Tuesday, June 26, 2012
NAHB: FHA Rescinds “Credit Disputes” Rule – For Now
In good news for home buyers this week, NAHB and other housing and banking industry groups have helped convince the Federal Housing Administration (FHA) to withdraw a controversial rule slated to go into effect on July 1 that would have prohibited borrowers with any credit disputes of more than $1,000 from obtaining FHA financing.
Earlier this year, FHA issued a mortgagee letter stating that buyers either had to pay off ongoing credit disputes of more than $1,000 that appeared on their credit reports or show proof that they have entered into a repayment plan with their creditors before they could qualify for an FHA loan. NAHB and others in the housing finance community opposed this action citing concerns that it would further restrain the flow of mortgage credit and prevent creditworthy borrowers from qualifying for an FHA-insured loan.
Thankfully, on June 15, the FHA issued an updated mortgagee letter formally rescinding its earlier ruling on this matter. However, the agency is expected to issue new guidance on this topic in the near future.