| a. | Application Format. Lenders must submit a Uniform Residential Loan Application (URLA) form for all borrowers. |
| 1. | Some URLA information may not be available at the time of the initial application. For example, for new construction projects a site may not yet be identified and applicants may not have complete information regarding project costs. |
| 2. | Application forms must be signed and dated by all borrowers intending to assume responsibility for the mortgage debt. The application must be signed by the borrower before underwriting, and the lender’s certification on the HUD Addendum A must not pre-date that of the borrower. |
| b. | Criteria for Review of Application. In essence, the firm commitment process determines the borrower’s ability and willingness to repay the mortgage debt, and thus limits the probability of default or collection difficulties. |
| 1. | The borrower’s willingness to repay the mortgage debt is assessed by considering the borrower’s payment history including payments 30 or more days late as well as judgments, collections, bankruptcies, and foreclosures. |
| 2. | The borrower’s ability to repay the debt is assessed by considering: |
| § | Income history and stability. |
| § | Cash reserves following loan closing. |
| § | The extent of other non-mortgage obligations. |
| § | Timing. Credit and income verification information may be up to 120 days old (180 days for new construction) at the time a Section 184 loan closes. HUD’s loan approvals are conditioned by this requirement. This means that lenders may have to update credit and income information periodically during loan processing and, if the borrower’s circumstances change significantly, resubmit the loan application to HUD for reconsideration. Verification forms must pass directly between the lender and creditor, depository or employer. |
| § | Forms. Rather than requiring borrowers to sign multiple verification forms, the lender may have the borrower sign a general authorization form that gives the lender blanket authority to verify the information needed to process the mortgage loan application. When used, lenders must attach a copy of the authorization to each verification it requests. |
Verification authorizations may be transmitted by facsimile machine. However, the lender’s file must contain an original verification authorization form with the borrower’s signature.
| 4. | Co-Borrowers and Co-Signers. HUD will permit non-occupying co-borrowers under the Section 184 Program if this co-borrower takes title to the property and obligates him or herself on the mortgage note. Similarly, HUD will also permit a co-signer with no ownership interest in the property (does not take title) to execute the loan application and mortgage note and thus, become liable for repayment of the obligation. The co-signer’s income, assets, liabilities, and credit history are included in the determination of credit worthiness. |
| § | Neither the co-borrower nor the co-signer may be a party that has an interest in the transaction, such as the seller, builder, real estate agent, etc. Exceptions may be granted if the seller and the co-borrower/co-signer is a family member of the owner occupant or is the IHA/TDHE or Tribe. |
| § | An individual signing the loan application must not otherwise be ineligible for participation in the Section 184 Program (see paragraph 5.5). The occupying borrower must sign the security instrument and the mortgage note. |
| § | Unless otherwise exempted, any non-occupying co-borrower or co-signer must have a principal residence in the United States. |
Except for the distinctions described above, all references to co-borrowers, including the 75 percent loan to value limits (see paragraph 5.22b) apply equally to co-signers.
