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FHA mortgagee letter announces temporary guidance on self-employment and rental income and flexibility on disbursement of 203(k) rehabilitation escrow account funds

Federal Issues Covid-19 FHA Mortgages

Federal Issues

On July 28, FHA issued Mortgagee Letter 2020-23, which provides temporary guidance for self-employment income verification, rental income requirements, and approval of extension requests under the 203(k) rehabilitation mortgage insurance program. With respect to income verification, the guidance: (i) requires mortgagees relying on self-employment income to verify that the borrower’s business is open and operating within 10 calendars prior to the date of the note with one of the enumerated forms of evidence, and (ii) modifies the requirements for mortgagees to calculate and verify rental income. These changes are in effect for cases with note dates from July 28 through November. 30. The guidance also provides for temporary flexibility to allow 203(k) rehabilitation projects to continue where a borrower receives a Covid-19 forbearance under certain circumstances, effective immediately through November 30.

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