Federal Housing Administration Expands Mortgage Eligibility for Borrowers Previously Affected by COVID-19
Updated guidance issued today provides new flexibility for lenders when calculating "effective income" for borrowers with previous employment gaps or loss of income due to a COVID-19 economic event.

WASHINGTON, D.C. - The Federal Housing Administration (FHA) announced on Thursday new flexibility for lenders when qualifying borrowers who experienced previous employment gaps or loss of income due to the COVID-19 pandemic. Through updates contained in Mortgagee Letter 2022-09, salaried and hourly wage-earners, as well as self-employed individuals affected by COVID-19, who now have stable income will have a greater opportunity to purchase a home using affordable FHA-insured mortgage financing.

"The changes we are announcing today further our efforts to facilitate recovery from COVID-19 and support access to homeownership, particularly for populations most deeply impacted by the pandemic," said Federal Housing Commissioner Julia Gordon. "The pandemic affected the livelihoods of tens of millions of workers in this country, particularly workers of color and those at the lower end of the wage scale. Limiting these families' homeownership opportunities because of the unavoidable impacts of an unprecedented global health crisis, when they are otherwise well-qualified for a mortgage, is unnecessary and contrary to this Administration's goals and FHA's mission."

FHA defines a COVID-19 related economic event as a temporary loss of employment, temporary reduction of income, or temporary reduction of hours worked during the Presidentially Declared COVID-19 National Emergency. The guidance announced today includes provisions for salaried and non-salaried wage earners and addresses the needs of those who are employed full-time, self-employed, employed part-time, earn bonus or tip income, and/or earn commission income. Lenders may begin using the new policies immediately but must implement the new policies for FHA case numbers assigned on or after September 5, 2022.

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