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MortgagePoint ยป Your Trusted Source for Mortgage Banking and Servicing News 56 February 2025 J O U R N A L HUD & FHA TO ENHANCE HOMEOWNERSHIP AFFORDABILITY T he U.S. Department of Housing & Urban Development (HUD) and the Federal Housing Administration (FHA) have announced two actions that increase homeowner- ship affordability and enhance clarity and transparency for mortgage ser- vicers in its Single-Family program. First, FHA is providing greater underwriting f lexibility for borrowers who rent space inside their homes to qualify for affordable FHA-insured mortgage financing. Second, FHA recently completed its Single-Family Defect Taxonomy used for Title II mortgage program servicing loan reviews. The Servicing Defect Taxonomy provides greater transparen- cy regarding the servicing loan review process, especially around FHA's assessment of the severity of errors or noncompliance with its mortgage servicing policies and the actions FHA may take in instances of servicer error or noncompliance. "The actions we're announcing today complement our work over the last four years to increase access to affordable homeownership and to increase transparency in our policy and operational processes," Federal Housing Commissioner Julia Gordon said. "Both actions are the direct result of ongoing consultation and dialogue with industry participants, consumer advocacy groups, and others as we worked to develop pol- icies that work for homebuyers, lenders, servicers, and FHA." Rental income from roommates or long-term lodgers is a stable and viable source of income that increases housing affordability and allows many borrowers to manage housing costs. Specifically, FHA's newly revised un- derwriting guidance will allow rental income from individuals renting space inside a borrower's home to be included as part of FHA qualification when the borrower has 12 months of history of receiving this income. In addition, FHA is expanding the types of acceptable income verification documentation. "Supporting growth in affordable homeownership and collaborating with private partners such as mortgage servicers are both crucial components of HUD's vital mission," HUD Agency Head Adrianne Todman said. "The increased f lexibilities announced today for FHA-insured mortgages will help more people gain and maintain homeownership. And the increased mortgage servicing transparency will allow our partners to more effectively use our programs to expand sustain- able homeownership nationwide." Issuing the Servicing Defect Taxon- omy follows the implementation in 2017 of the Origination Defect Taxonomy, which has proven to be a crucial resource for FHA and lenders. The Servicing Defect Taxonomy provides a framework for consistent FHA policy enforcement while allowing some flexibility for nuanced loan-level scenarios. Remedies for certain violations illustrated in the taxonomy can include corrective actions by the servicer or, if corrective actions are not possible, one- or five-year indemnifi- cation rather than life-of-loan indemni- fication. Because it would be impossible for Taxonomy to include a definitive list of all possible servicing violations, it was constructed to allow flexibility that can also cover unanticipated scenarios. FHA will continue to use loan review data to identify patterns of noncompliance for various quality assurance and risk management processes. "Today, we've made it easier for more borrowers to qualify for an FHA-insured mortgage, and for mortgage servicers to understand our mortgage servicing loan review process and error severity assessments," HUD Deputy Assistant Secretary for Single-Family Housing Sarah Edelman said. "These changes are emblematic of the holistic approach we've taken under this Administration to enhance the FHA program from mort- gage origination to mortgage servicing and loss mitigation." HUD HANDS OUT MILLIONS IN GRANTS TO SUP- PORT SENIORS, EXPAND AFFORD- ABILITY T he Office of Multifamily Housing Programs of the U.S. Department of Housing and Urban Development (HUD) announced that it has given $97 million in grants to nonprofit groups to fund the con- struction or renovation of affordable multifamily housing and senior rental assistance. HUD has also given out $40 million in grants to expand the number of service coordinators who link the elderly and disabled to vital services. "The Biden-Harris administration is committed to ensuring that our seniors have access to homes they can afford," HUD Agency Head Adrianne Todman said. "Too many seniors are facing housing instability and home- lessness. As a country, we must do more to ensure that we are caring for those who came before us. It is the right thing to do." Section 202 Supportive Housing for the Elderly Program Awards Nearly $97 million in funding, made available through HUD's Section 202 Supportive Housing for the Elderly program, will support 732 Project Rental Assistance Contracts (PRAC) to support the construction and operation of 818 new rent-assisted homes for se- niors 62 years of age or older who have low and very low incomes. Additionally, 109 intergenerational homes will be built using some of these monies to address the special housing requirements of elderly people with young children. Additionally, the prizes give seniors access to supported ser- vices for their health, education, trans- portation, and dietary requirements. "As rents continue to climb and