The


Federal
Housing
Administration
(FHA)
on
Wednesday
posted
a
proposed
Mortgagee
Letter
(ML)
that
would
add
flexibility
for
people
receiving

rental
income
from
“boarders”
who
pay
for
space
in
an
existing
dwelling
when
considering
them
for
an
FHA-insured
mortgage.

Borrowers
receiving
rental
income
from
“boarders,”
a
term
referring
to
“individuals
who
rent
space
in
borrowers’
homes”
according
to
the
Single
Family
Housing
4000.1
Handbook,
would
have
less
stringent

underwriting
requirements
for
documenting
and
calculating
this
form
of
income
when
seeking
a
new
FHA-insured
loan,
according
to
the
proposal.

“FHA
remains
committed
to
extending

affordable
housing
opportunities
to
its
core
constituency
of
first-time
and
low-
to
moderate-income
homebuyers,
including
those
in
underserved
communities,”
the
agency
said
in
its
announcement
of
the
proposal.
“In
doing
so,
it
recognizes
that
rental
income
received
from
individuals
renting
space
in
borrowers’
homes
is
a
stable
and
viable
source
of
income
that
increases
housing
affordability
and
allows
borrowers
to
better
manage
housing
costs.”

The
first
two
elements
of
the
proposal
include
a
reduction
in
the
“acceptable
rental
income
history”
from
24
to
12
months
for
income
earned
from
boarders;
and
an
allowance
for
borrowers
with
a
12-month
rental
history
to
qualify
for
an
FHA-insured
mortgage,
“provided
the
income
has
been
received
for
at
least
nine
of
the
most
recent
12
months,
is
currently
being
received,
and
is
averaged
over
a
12-month
period.”

The
proposal
would
also
establish
that
rental
income
from
boarders
used
in
a
qualifying
decision
“cannot
exceed
30%
of
their
total
monthly
effective
income;”
and
the
ML
would
also
expand
acceptable
income
verification
documentation
for
boarders
to
“include
bank
statements,
canceled
checks,
and/or
deposit
slips
showing
rental
payments
received.”

The
proposed
ML
is
now
available
to
review
on
the

Single
Family
Drafting
Table,
an
online
portal
where
proposed


U.S.
Department
of
Housing
and
Urban
Development
(HUD)
single-family
policies
can
be
reviewed
prior
to
going
into
full
effect.

The
agency
encourages
all
stakeholders
to
thoroughly
review
the
proposed
document
and
to
provide
feedback
on
it,
which
can
be
done
through
Dec.
10.

Depending
on
the
amount
of
feedback
received,
HUD
will
have
limited
time
to
implement
the
proposal
if
current
Biden
administration
leaders
plan
to
see
it
through.
The
incumbent
president’s
term
expires
at
noon
EST
on
Jan.
20th,
at
which
point
President-elect

Donald
Trump
will
be
administered
the
Oath
of
Office
by
Chief
Justice
John
Roberts.

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