§ 4001.110 - Underwriting.

A mortgage may be insured under the Program only if the following conditions are met:

(a) Loan-to-value and income thresholds. The loan-to-value (LTV), payment-to-income, and debt-to-income ratios of the Program mortgage do not exceed the thresholds set forth in either paragraph (a)(1) or (a)(2) of this section.

(1) Program mortgage with LTV ratio of 90 percent or less. (i) The initial principal balance of the Program mortgage as a percentage of the current appraised value of the property does not exceed 90 percent;

(ii) The total monthly mortgage payment of the mortgagor under the Program mortgage does not exceed 38 percent of the mortgagor's monthly gross income; and

(iii) The sum of the total monthly mortgage payment under the Program mortgage and all monthly recurring expenses of the mortgagor does not exceed 50 percent of the mortgagor's monthly gross income.

(2) Program mortgage with up to 96.5 percent LTV. (i) The initial principal balance of the Program mortgage as a percentage of the current appraised value of the property does not exceed 96.5 percent;

(ii) The total monthly mortgage payment of the mortgagor under the Program mortgage does not exceed 31 percent of the mortgagor's monthly gross income; and

(iii) The sum of the total monthly mortgage payment under the Program mortgage and all monthly recurring expenses of the mortgagor does not exceed 43 percent of the mortgagor's monthly gross income.

(b) Past credit performance. The mortgagor must have made at least six full payments on the existing senior mortgage being refinanced under the Program.

(c) The Program mortgage shall have a maturity of not less than 30 years and not more than 40 years from the date of origination.

(d) Non-occupant co-borrowers. A mortgage loan may be insured by the FHA under the Program, even if one of the mortgagors on the loan (i.e. , a co-signer) does not reside at the residence securing the loan, provided that the non-resident mortgagor relinquishes all interests in the property that is to be security for the mortgage before an application is submitted for FHA insurance under the Program.

(e) Amount of new mortgage payment. The mortgagor's total monthly payment on the mortgage to be insured under the Program must not be greater than the mortgagor's aggregate total monthly mortgage payment under the mortgagor's existing senior mortgage and all existing subordinate mortgages.

(f) Limit on origination fees. Mortgagees may charge and collect from mortgagors allowable closing costs.

[73 FR 58420, Oct. 6, 2008, as amended at 74 FR 621, Jan. 7, 2009]