The Federal Housing Administration has rescinded its controversial underwriting requirements for borrowers with ongoing credit disputes slated to go into effect July 1.
“The recession clears the way for new guidance that will be issued very soon,” said HUD spokesman Brian Sullivan.
In February, FHA officials issued a mortgagee letter that placed stiff requirements on applicants with credit disputes equal to or greater than $1,000.
To qualify for a FHA loan, the borrower would have to pay off the disputed amount or start a repayment plan. However, the loan could not be closed until the borrower completed three monthly payments under the plan.
The new requirements prompted an immediate backlash from lenders who claimed it would block many creditworthy borrowers from qualifying for a FHA-insured loan.
FHA officials agreed to reconsider the mortgagee letter and issue new guidance.
Now they have formally rescinded mortgagee letter 2012-3 with the promise that new guidance will be issued soon.
