7.2 Creditworthiness Review

Introduction

This topic contains information on the creditworthiness review for assumptions, including

•	who determines if an assumptor is creditworthy

•	contracts between servicing lenders and DE lenders, and

•	additional requirements for creditworthiness review.

Change Date

May 10, 2009

4155.1 7.2.a Who Determines if an Assumptor Is Creditworthy

The lender who is the holder or servicer of the mortgage determines the creditworthiness of the assumptor in accordance with standard mortgage credit analysis requirements.

The Direct Endorsement (DE) lender may also use an approved authorized agent to process assumptions.

Assumption creditworthiness review processing must be completed within 45 days from the date the lender receives all necessary documents.

Reference: For information on the allowable fees for assumption processing, see HUD 4330.1 Rev-5, Administration of Insured Home Mortgages.

4155.1 7.2.b Contracts Between Servicing Lenders and DE Lenders

There are a number of servicing lenders that

•	do not originate mortgages, or

•	are not approved under the DE program.

In these situations, if the servicer is a supervised or non supervised financial institution, the servicer may contract with a DE approved lender to underwrite its credit qualifying assumptions. The DE underwriter must indicate his/her Computerized Homes Underwriting Management System (CHUMS) identification number of the mortgage credit analysis worksheet. The fee is negotiated between the servicer and DE lender.

Supervised lenders with a HUD approved authorized agent relationship may have the agent underwrite its credit qualifying assumptions.

4155.1 7.2.c Additional Credit Review Requirements

The table below lists additional creditworthiness review requirements for assumptors.

Requirement	Description
Credit Review	The lender reviews the assumptor's credit, if the mortgage being assumed is held or serviced by a DE approved lender.
Secondary Financing	Secondary financing or other borrowed funds may be used by the assuming borrowers, provided the repayment terms are
	•	clearly defined, and
	•	included in the underwriting analysis.
Seller Contributions	Cash contributions from the seller in order to facilitate an assumption are not acceptable. The existing mortgage balance must be reduced by the amount of the contribution. However, the seller may pay the assumptor's normal closing costs, including processing fees and credit report fees, with no reduction to the mortgage.
Documentation Requirements	For information on the documentation requirements for the creditworthiness review of assumptions, see HUD 4155.2 3.C.
Assumptions by Other Legal Entities	If a creditworthiness review is required, an assumption solely in the name of a corporation, partnership, sole proprietorship, and trust, is not acceptable.