April 18, 2016
KENTUCKY MORTGAGE FHA STUDENT LOAN POLICY UPDATES
On April 12, 2016, HUD announced a policy change to provide guidance on calculating student loan payments for a FHA Mortgage loan approval. Per ML 2016-08, this policy is effective for all loans with case numbers assigned on or after June 30, 2016, however, the policy can be applied immediately to all FHA loans.
Regardless of the payment status, the Mortgagee must use:
- The GREATER of:
o 1% of the outstanding balance on the loan; or
o The monthly payment reported on the credit report; or
- The actual documented payment, provided the payment will fully amortize the loan over its term
For example:
Student loan reporting on credit with a balance of $20,000.00 and a payment of $50.00. 1% of the balance is greater than the payment reporting, so you would use 1%.
If there is documentation showing a fully amortized payment of $50.00, you could use that payment instead of the 1%.
Kentucky First-Time Home Buyer Programs | USDA, FHA, VA & KHC Loans 
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Student Loan Repayment
FHA:
A new section labeled Student Loans has been added to both TOTAL Scorecard & Manual sections.
Student Loans: Calculation of Monthly Obligation Regardless of the payment status(including Deferred), the Mortgagee must use either the greater of:
1 percent of the outstanding balance on the loan; or
the monthly payment reported on the Borrower’s credit report; or
The actual documented payment, provided the payment will fully amortize the loan over its term.
FNMA:
For all student loans, regardless of the payment status (including Deferred), the lender must include a monthly payment in the borrower’s recurring monthly debt obligation when qualifying the borrower.
1% of the outstanding balance; or
The Actual Payment that will fully amortize the loan(s) as documented in the credit report, by the student loan lender, or in documentation supplied by the borrower;
Exception: if the actual documented payment is <1% of the outstanding balance, and it will fully amortize the loan with no payment adjustments, the lender may use the lower, fully amortizing monthly payment to qualify the borrower.
FHLMC:
For all student loans, regardless of the payment status (including Deferred), the lender must include a monthly payment in the borrower’s recurring monthly debt obligation when qualifying the borrower.
1% of the outstanding balance; or
The Actual Payment that will fully amortize the loan(s) as documented in the credit report, by the student loan lender, or in documentation supplied by the borrower;
VA: Student Loans (Chapter 4.5g):
If student loan repayments are scheduled to begin within 12 months of the date of VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis.
If the borrower is able to provide evidence that the debt may be deferred for a period outside that timeframe, the debt does not need to be considered in the analysis.
Policy for Income Based Repayment Plans (Student Loans)
Lender may use the Income Based Repayment (IBR) payment if it is verified (including $0.00) when the payment is fixed for a minimum of 12 months post-closing date
When fixed for less than 12 months post-closing the lender must use the regularly calculated payment that will be due once the IBR ends
When no payment is reported or available, the lender must use a payment calculation using 5% of the current report balance as the monthly payment
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