April 18, 2014
When you fill out an FHA loan application, sometimes the hardest part of that entire process is waiting to get word on FHA loan approval or rejection. FHA loan rules in HUD 4155.1 instruct the lender on exactly what should happen once the loan is approved or denied. In HUD 4155.1 Chapter One, Section A, we find the following:
“The lender is responsible for notifying the borrower of the approval, either in writing or verbally, immediately after receipt of the underwriter’s decision.” What happens when the loan is disapproved? Chapter One says:
“When a loan is rejected, the lender must immediately complete
• a rejection notice consistent with the requirements of Regulation B and,
• when required, an Equal Credit Opportunity Act (ECOA) notice, forwarded to the borrower.
At least one credit aspect must be rejected before the lender can issue an overall rejection. The rejection notice must provide specific reasons for the rejection. Delinquent credit accounts need not be listed. The rejection notice must contain all the reasons for denial/ineligibility and any counter proposals to effectuate loan approval, such as reduced mortgage amount.”
If a borrower’s FHA loan application is rejected on the basis of negative credit report details, Chapter One instructs the lender specifically on how to proceed:
“When a borrower is rejected for unacceptable credit characteristics on the basis of information contained in his/her credit report, he/she must be notified and given the name, address, and where available, the telephone number of the credit reporting agency. Note: This is a requirement of the Fair Credit Reporting Act (FCRA).”
Doing so helps the borrower understand the reasons for the rejection and may give the borrower something to work on in order to qualify for a future FHA loan application where applicable.
You can learn more about what to do in the wake of an FHA loan rejection by contacting the FHA directly and requesting a referral to a HUD approved housing counselor in your area. Call the FHA at 1-800 CALL FHA.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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