December 8, 2016
One of the benefits of FHA home loans is the ability to let another person assume the loan, with the participation of the lender. Most FHA loans today may be assumed by another person as long as the lender is involved in the process. Loan assumptions do have closing costs, including a processing fee.
The FHA official site has announced changes in the processing fee structure for FHA loan assumptions.
According to FHA Mortgagee Letter 2016-24, the agency’s maximum fee of $500 for processing an assumption where a credit check is required hasn’t been modified, “since it was established in the now superseded Handbook 4330.1 REV-5, Section 4-4A.2, dated September 29, 1994. As mortgagee expenses have risen since the maximum processing fee was established, it is appropriate to establish a new standard”.
That new standard includes a requirement that any increase in the processing fee be “reasonable and customary” and must not exceed $900. Furthermore, the mortgagee letter states, “The Mortgagee may charge the assuming Borrower other costs in accordance with Allowable Charges Separate from Assumption Processing Fees”.
What are those charges? The lender is permitted to “charge the assuming Borrower reasonable and customary fees not to exceed the actual costs for third party expenses incurred in connection with assumption processing:
-non-refundable fees for credit reports and verifications of employment;
-up to $45.00 for fees for the preparation and execution of release of liability forms (form HUD 92210.1, Approval of Purchaser and Release of Seller), where a Borrower requests an executed release of liability form as evidence that the Borrower was released during a previous creditworthiness review”.
The agency states that these changes are effective for all FHA loan assumption applications received on or after December 7, 2016. If you aren’t sure how this new policy affects your FHA loan assumption transaction, speak to your loan officer. FHA requirements in HUD 4000.1 will be updated to reflect this new policy.
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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