FHA Announces New Calculation Requirements for Student Loan Debt

In recognition of the expanding student loan payment plan alternatives offered by the U.S. Department of Education, FHA recently issued Mortgagee Letter 2021-13 (ML 2021-13) to announce changes to the calculation and documentation requirements for student loan debt.

ML 2021-13 revises the required documentation and calculation of a borrower’s monthly student loan obligation.  “For outstanding student loans, regardless of payment status, the Mortgagee must use: (i) the payment amount reported on the credit report or the actual documented payment, when the payment amount is above zero; or (ii) 0.5% of the outstanding loan balance, when the monthly payment reported on the borrower’s credit report is zero.”  In addition, “[t]he Mortgagee may exclude the payment amount from the monthly debt calculation where written documentation from the student loan program, creditor, or student loan servicer indicates that the loan balance has been forgiven, canceled, discharged, or otherwise paid in full.”

ML 2021-13 is effective for all case numbers assigned on or after August 16, 2021, but Mortgagees may begin using the new calculations immediately.  Interested parties may submit feedback to HUD for a period of 30 calendar days from the date of issuance.