The Federal Housing Administration is back-pedaling on its new underwriting requirements for borrowers with on-going credit disputes and the agency has delayed the effective date until July.
Prior to July 1, "FHA intends to seek additional input…and work to clarify" the guidance in Mortgagee Letter 2012-03, FHA said Monday morning.
Under ML 2012-03, borrowers with credit disputes equal or greater than $1,000 must pay them off or start a repayment plan to be considered for a FHA single-family loan.
But lenders have raised a clamor that the new hurdle will block many creditworthy borrowers from qualifying for a FHA-insured loan.
They prefer giving FHA delegated underwriters the discretion to approve borrowers with credit disputes.
The controversial change technically went into effect April 1. But FHA has rescinded it for now.
"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 old or new guidance in the notice," according to a FHA Notice to Lenders.
