June 22, 2021

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HUD Revises FHA Loan Citizenship Rules

HUD Announces Changes To Exterior-Only Appraisal Guidelines For FHA Purchase Loans

The Department of Housing and Urban Development has issued a press release which announces important changes to the way participating FHA lenders process home loan applications completed by those who are in the United States but are not American citizens.

The policies changed are those that allow a lender to approve FHA home loans for those in the United States under the Deferred Action for Childhood Arrivals (DACA) program.

In 2012, the Department of Homeland Security issued a policy for those who entered the United States as minors, and who meet “certain additional guidelines” — these applicants are eligible to request “deferred action from prosecution for removal” from the United States for two years, subject to renewal.

This technically makes those eligible under DACA to work legally in the United States during the “period of deferred action”. Thanks to the actions of HUD in 2021, that is no longer just a technicality.

FHA loan guidelines in HUD 4000.1 have rules addressing FHA loan approval for “non-resident permanent  aliens” and other non-U.S. citizens in the country legally.

HUD’s amended its rules now include those who are in the country under DACA for consideration for loan approval under the FHA Single Family home loan program. 

Under the new guidelines, any person in the U.S. under the auspicies of DACA may apply for an FHA home loan and be recognized as someone living and working legally in the U.S. with loan approval possible if they meet the usual applicable FHA and HUD requirements.

Those in the country as refugees or who seek asylum must, in the course of applying for an FHA mortgage, not provide the following documentation:

  • Employment Authorization Document (USCIS Form I-766) OR; 
  • USCIS Form I-94 indicating refugee or asylum status, OR;
  • USCIS Form I-797 notice indicating approval of a USCIS Form I-589, Application for Asylum or Withholding of Removal substantiating the refugee or asylee status.

In certain cases, an Employment Authorization Document or evidence of H-1B status may be set to expire within one year at the time of lender review.

When “a prior history of residency status renewals exists”, the new rules say a participating lender can proceed under the assumption that another continuation will be approved. “If there are no prior renewals, the Mortgagee must determine the likelihood of renewal based on information from the employer or the USCIS”.

All typical FHA loan rules for loan approval (financial considerations) apply for these mortgages. Homes purchased with FHA mortgages must be primary residences and all required identification typically required for application must be provided.

The FHA loan rulebook, HUD 4000.1, is scheduled to be revised to include two basic types of categories of those who are allowed consideration for an FHA mortgage — ”Permanent Residents” and “Non-Permanent Residents”.

The new rules are slated for use no later than July 26, 2021; participating lenders may begin using the new rules immediately upon publication if they so choose.

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