FHA HOPE for Homeowners H4H           

 Underwriting the Mortgage and Qualifying the Borrower 

For analytical purposes, FHA requires all approved lenders to use the automated FHA’s TOTAL Mortgage Scorecard (TOTAL).  Regardless of the risk classification obtained from TOTAL for each mortgage originated under the H4H Program, the underwriter must: 

1.      Determine that the borrower’s total monthly mortgage payment on the new H4H loan is less than the borrower’s aggregate total monthly mortgage payment on his or her existing (non-H4H) mortgage(s), including any subordinate mortgage liens, based on a fully-indexed, fully-amortizing PITI payment.   

2.      Determine that the payment-to-income and debt-to-income ratios are at, or below, 31 percent and 43 percent, respectively, which may not exceed 38 percent and 50 percent, respectively, provided there is a minimum three consecutive month ‘trial modification’ period prior to loan application for the new H4H mortgage.  Through the ‘trial modification’ period borrowers have the opportunity to demonstrate their capacity and willingness to make a mortgage payment at the estimated H4H monthly payment amount (including PITI) that does not exceed the 38/50 cap.   Non-occupant co-signers (i.e., borrowers who do not hold ownership interest in the property) may be added in order to meet these underwriting guidelines for the new H4H mortgage. 

When using a trial modification, the lender must include documentation in the file that demonstrates the borrower, using his or her existing gross income, made full and timely mortgage payments on the existing senior mortgage pursuant to the terms of the trial modification for the three consecutive months preceding application for the H4H loan, and in an amount that is at least 90 percent of the estimated total monthly mortgage payment on the new H4H mortgage payment. 

3.      In addition to standard FHA policies regarding documentation and verification of employment and income, the underwriter must also review income as reported on the transcript of the borrower’s income tax returns or a copy of the borrower’s income tax returns obtained directly from the IRS for the previous two years. 

Consistent with the requirements above, for those borrowers current on their mortgage, underwriters should not automatically reject them for making their mortgage payment their first priority at the expense of meeting other recurring obligations in a timely manner.  If the borrower was offered partial forbearance, the underwriter must determine that he or she has made payments under the forbearance agreement in a timely manner. 

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