Introduction

This topic contains information on determining eligibility for Federally related credit, including

Change Date

May 10, 2009

4155.1 4.A.7.a Definition: Federal Debt

For a definition of the term Federal debt, see HUD 4155.1 9.

4155.1 4.A.7.b Basis for Rejecting a Borrower for Federally Related Credit

A borrower is not eligible to participate in FHA-insured mortgage transactions if he/she is suspended, debarred, or otherwise excluded from participating in the HUD programs.

A lender must reject a borrower from participation if he/she is on the

Note: A borrower must also be rejected if he/she is presently delinquent on any Federal debt or has a lien placed against his/her property for a debt owed to the United States Government.

Reference: For information on

4155.1 4.A.7.c Ineligible Mortgage Transactions

A mortgage loan application is not eligible for FHA mortgage insurance if the name of any of the following parties to the mortgage transaction is found on the HUD LDP list or the GSA List of Parties Excluded from Federal Procurement or Non-procurement Programs:

Exception: A seller on the GSA list is exempt if the property being sold is the seller's principal residence.

4155.1 4.A.7.d Lender Responsibility for Verifying Borrower Eligibility

To determine whether a borrower is eligible to participate in an FHA mortgage loan transaction or must be rejected, the lender must

4155.1 4.A.7.e Location of the LDP and GSA Lists

The HUD LDP list can be found on the HUD website or on the FHA Connection.

The GSA List of Parties Excluded from Federal Procurement and Non-Procurement Programs can be found at http://epls.arnet.gov or on the FHA Connection.

4155.1 4.A.7.f Delinquent Federal Debts

If, after checking public records, credit information, or CAIVRS, a borrower is found to be presently delinquent on any Federal debt or has a lien (including taxes) placed against his/her property for a debt owed to the Federal government, he/she is not eligible for an FHA mortgage until

Tax liens may remain unpaid provided the lien holder subordinates the tax lien to the FHA-insured mortgage.

4155.1 4.A.7.g Waiting Period for Borrowers With Past Delinquencies and Defaults

FHA has a three-year waiting period to regain eligibility for another FHAinsured mortgage when the borrower has had past delinquencies or has defaulted on an FHA-insured loan.

The three-year waiting period begins when FHA pays the initial claim to the lender. This includes deed-in-lieu of foreclosure, as well as judicial and other forms of foreclosures.

Lenders should contact the HOC having jurisdiction over the area where the property subject to default is located for information such as the

4155.1 4.A.7.h Tax Liens Affecting Eligibility for Federally Related Credit

The Internal Revenue Service (IRS) routinely takes a second lien position without the need for independent documentation. For this reason, eligibility for FHA mortgage insurance is not jeopardized by outstanding IRS tax liens remaining on the property, unless the lender has information that the IRS has demanded a first-lien position.

Tax liens may remain unpaid if the lien holder subordinates the tax lien to the FHA-insured mortgage.

Note: If any regular payments are to be made, they must be included in the qualifying ratios.

4155.1 4.A.7.i Consideration of a Borrower's Past Payment History on Federally Related Debt

Although a borrower's eligibility for an FHA-insured mortgage may be established by performing the actions described previously in this topic, the overall analysis of the borrower's creditworthiness must