UPDATED FHA MORTGAGE UNDERWRITING CHANGES EFFECTIVE APRIL 1, 2012

Effective for case numbers ordered on or after April 1, 2012

P&L and Balance Sheets will be required if more than one calendar quarter has elapsed since the date of the most recent calendar or fiscal-year end tax return was filed by the borrower (no exceptions).

If income used to qualify the borrower exceeds the two year average of tax returns, an audited P&L or signed quarterly tax returns obtained from the IRS are required.

Annual earnings that are stable or increasing are acceptable, while businesses that show a significant decline in income are not acceptable, even if the current income and debt ratios meet FHA guidelines.

Disputed accounts will no longer need underwriter review provided that the following two criteria are met: the total outstanding balance of all disputed accounts or collections are less than $1000 AND are aged two years from the date of last activity as indicated on the most recent credit report.**

If borrower has disputed accounts or collections which alone or added together total $1000 or more, the accounts must be resolved (e.g. payment arrangements in place for last 3 months and paid as agreed) or paid in full prior to or at closing. Any payment arrangements will be included in the DTI. **

Examples of acceptable documentation to support the resolution of disputed accounts or the payoff of accounts would be a letter from the creditor outlining the terms of the payment arrangements or verifying payoff of debt through canceled checks or a supplement to the credit report verifying payoff or payment arrangements. On cash out transactions, collections and disputed accounts can be paid off at closing with the cash out proceeds with a current payoff provided prior to closing. Paying DOWN of balances is not acceptable.**

Disputed accounts or collections resulting from identity theft, credit card theft or unauthorized use, etc. will be excluded from the $1000 limit provided the appropriate documentation is provided.**

Collection accounts totaling less than $1000 are not required to be paid off **

** Does not apply to non-credit qualifying streamline refinances.