TIP OF THE DAY- FHA STABILITY OF INCOME
TIP OF THE DAY- FHA ANALYSIS OF STABILITY OF INCOME
(A) Frequent Changes in Employment If the Borrower has changed employers more than three times in the previous 12-month period, or has changed lines of work, the Mortgagee must take additional steps to verify and document the stability of the Borrower’s Employment Income. Additional analysis is not required for fields of employment that regularly require a Borrower to work for various employers (such as Temp Companies or Union Trades). The Mortgagee must obtain:
· transcripts of training and education demonstrating qualification for a new position; or
· employment documentation evidencing continual increases in income and/or benefits.
(B) Addressing Gaps in Employment For Borrowers with gaps in employment of six months or more (an extended absence), the Mortgagee may consider the Borrower’s current income as Effective Income if it can verify and document that:
· the Borrower has been employed in the current job for at least six months at the time of case number assignment; and
· a two year work history prior to the absence from employment using standard or alternative employment verification.
(C) Addressing Temporary Reduction in Income For Borrowers with a temporary reduction of income due to a short-term disability or similar temporary leave, the Mortgagee may consider the Borrower’s current income as Effective Income, if it can verify and document that:
· the Borrower intends to return to work;
· the Borrower has the right to return to work; and
· the Borrower qualifies for the Mortgage taking into account any reduction of income due to the circumstance.
For Borrowers returning to work before or at the time of the first Mortgage Payment due date, the Mortgagee may use the Borrower’s pre-leave income.
For Borrowers returning to work after the first Mortgage Payment due date, the Mortgagee may use the Borrower’s current income plus available surplus liquid asset Reserves, above and beyond any required Reserves, as an income supplement up to the amount of the Borrower’s pre-leave income. The amount of the monthly income supplement is the total amount of surplus Reserves divided by the number of months between the first payment due date and the Borrower’s intended date of return to work.
The Mortgagee must provide the following documentation for Borrowers on temporary leave:
· a written statement from the Borrower confirming the Borrower’s intent to return to work, and the intended date of return;
· documentation generated by current employer confirming the Borrower’s eligibility to return to current employer after temporary leave; and
· documentation of sufficient liquid assets, in accordance with Sources of Funds, used to supplement the Borrower’s income through intended date of return to work with current employer