FHA Delaying Disputed Debt Rule Until July

The ""Federal Housing Administration"":http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/fhahistory (FHA) rule that would delay a potential borrower's ability with outstanding collections debt of $1,000 or more from getting an FHA-insured loan is on hold until July 1.

[IMAGE] [COLUMN_BREAK]

The rule proposes that if a borrower has collections debt of $1,000 or more, a borrower must go on a repayment plan for the debt for a minimum of 3 months to be eligible. This would cause a delay from receiving approval for a loan for 90 days or more.

According to the FHA, the hold is to allow ""[m]ortgagees additional time to adapt their procedures to implement portions of the new guidance.""

Before the effective date, FHA said it intends to seek additional input on the rule, which was created to lower default rates.

For lenders who assigned case numbers between April 1, 2012, and April 8, 2012, as long as the numbers were assigned according to either the old or new guidance, the actions will not be viewed as a violation of HUD requirements.

The new rule does include exceptions, such as debt disputed due to identity or credit card theft or if a hardship was faced such as death, divorce, or loss of employment.

FHA-insured loans accounted for 25 percent of the new market share in February, according to Ellie Mae's Origination Insight Report. Overall, FHA currently has 4.8 million insured single family mortgages, the agency stated on its website.