U.S. Sen. Sherrod Brown (D-OH) commended the Federal Housing Administration (FHA) for providing more access to affordable single-family FHA-insured mortgage financing for individuals with student loan debt.
The updated policy removes the current requirement that lenders calculate a borrower’s student loan monthly payment of one percent of the outstanding student loan balance for student loans that are not fully amortizing. The new policy bases the monthly payment on the actual student loan payment, which is often lower, and helps homebuyers with student debt meet minimum eligibility requirements for an FHA-insured mortgage.
“Today, as we prepare to celebrate Juneteenth and recognize June as Homeownership Awareness Month, it is critical that we reflect on all of the ways that racial discrimination is woven into our society, especially in our housing system. Too many generations of Black families are locked out of the opportunity to get an affordable mortgage, own their own home, and build wealth to pass on to their children and grandchildren,” said Brown. “I commend HUD and Secretary Fudge for taking this first step to address inequities in our housing system and look forward to continuing to work together to increase access to homeownership and address disparities,” Brown, chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, said.
This policy change enhances the FHA’s ability to serve one of its core demographics—first-time homebuyers. Over 80 percent of FHA-insured mortgages are for first-time homebuyers on average each year. Further, more than 45 percent of these borrowers also have student loan debt, with much of this debt impacting people of color.
“As our country comes together to remember Juneteenth and acknowledge National Homeownership Month, we are reminded of a basic truth: that, too often in our history, the march toward freedom has been a long, halting, and uneven journey,” HUD Secretary Marcia Fudge said. “Homeownership is the cornerstone of the American Dream and the best way to build generational wealth. I am proud that FHA is taking action to make it easier for borrowers with student loan debt to qualify for a federally insured mortgage. This new policy will make a big difference for individuals throughout our nation and is another step in our mandate to promote equity and opportunity for homeownership.”
Lenders may implement the changes immediately, but they must be implemented on or after Aug. 16.