Were you aware that in addition to all of the other rules regulating FHA home loans, there are regulations that govern what’s supposed to happen once your FHA loan is approved or denied? Those regulations are found in the FHA loan rules as published in HUD 4155.1.
Section A instructs the lender to act as follows when your FHA loan application is approved, Chapter One:
“When a debtor is authorized, the Direct Endorsement (DE) underwriter
records the outcome of the credit analysis on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary
enters any modification of the mortgage number or approval states under “Underwriter Comments” about the form, and
Moreover, the financial institution is required to inform the borrower once the choice has been made. “The lender accounts for notifying the borrower of the acceptance, either in writing or verbally, instantly after receipt of the underwriter’s selection. Underwriter’s approval of the person borrowing or the term of the firm dedication, on page three of form HUD-92900A, HUD/VA Addendum is the rest of the life or 90 days or whichever is greater
underwriter’s acceptance of the property, as appropriate.”
That covers what will be to occur after the FHA loan is approved. However, what about in cases where the borrower was turned down for the FHA home loan? FHA loan rules don’t allow the lender to delay creating the appropriate paperwork and taking steps to inform the borrower of both the decision to reject the application AND the reasons why.
“When a loan is rejected, the lender must immediately finish
A rejection notice consistent with Regulation B’s demands and,
The rules add that “At least one credit facet” must be rejected before the lending company can issue an overall rejection. According to Chapter One of the FHA loan rules in 4155.1, “The rejection notice must supply specific reasons for the rejection. Delinquent credit accounts do not need to be recorded. The rejection notice must contain all the reasons for refusal/ineligibility and any counter proposals to effectuate loan approval, like decreased mortgage sum.” It is essential to note the rules do require the financial institution to inform the borrower regarding the motives for the rejection–borrowers who feel their loan has not been handled properly should discuss the specific situation with all the FHA to master if there’s any additional steps which may have to be taken.
To find out more on those procedures or how they work, contact the FHA -800 CALL FHA.