What Are the FHA Guidelines for Enforcement Fees on Late Payments?
- Paying late can mean some difficulties for consumers who have FHA loans.payment image by Valentin Mosichev from Fotolia.com
FHA loans, backed by the federal Department of Housing and Urban Development, are designed to help lenders offset their losses if the borrower defaults on the mortgage. When a lender underwrites an FHA loan, certain criteria regarding late payments are established. These guidelines apply more to new loans and underwriting than to current mortgages. - The FHA does not regulate or recommend fees for current mortgage holders. Late fees are established by the mortgage servicer handling the account. Though late fees don't have a direct bearing on FHA loans for servicing purposes, they do affect enforcement of underwriting criteria.
When a lender reviews a borrower seeking an FHA loan, much of the approval rests on the borrower's established creditworthiness and credit history. Borrowers with poor credit histories, resulting from late payments or collection accounts, often are required to pay off delinquent accounts before being approved for an FHA loan. - When a borrower is applying for a new FHA loan with a lender, the underwriter must validate the borrower's payment history. If a borrower has been 30 or more days late on a mortgage payment in the past 12 months, he will not be able to obtain approval for a new FHA loan.
Though guidelines for underwriting can be a bit more relaxed in reference to late payments of unsecured loans, borrowers with any late mortgage payments will have a much more difficult time in the approval process. This applies to both new mortgages and refinances. - The mortgage industry is constantly changing and updating its guidelines. The guidelines for underwriting are normally set by FHA investors, and they relate to the number of foreclosures currently on the market. The higher the rate of loan default, the more strict underwriting requirements become. Conversely, the fewer loan defaults on the market, the more lax the underwriting requirements become.
Lenders and mortgage servicers establish their own payment policies. The FHA's role is to provide an insurance policy to lenders. This helps consumers secure a loan with lower down payment requirements and less stringent credit guidelines than conventional loans require.
