Disabled Buyers Should Have Special Consideration, HUD Reminds Lenders by Lew Sichelman As part of the Clinton Administration's undying efforts to boost home ownership, the Department of Housing and Urban Development has reminded lenders originating government-insured FHA mortgages that disabled buyers may be eligible for special consideration. Encouraging lenders to exercise "flexible, yet sound underwriting that fully captures disabled persons' ability to own a home," HUD Assistant Secretary and Federal Housing Commissioner William Apgar says he's "concerned that too many" people with disabilities are rejected because they have limited financial resources or require special housing needs. Under the FHA's underwriting guidelines, if the sources of a borrower's regular income are not subject to federal taxes, the amount of the continuing savings may be added to the borrower's gross income. Certain types of disability and public assistance payments, military disability pay and disability social security are not taxable. According to the rules, though, the percentage of income that may be "grossed up" must be in conformance with the appropriate tax rate, and additional allowances for dependents are not acceptable. When analyzing a disabled loan applicant's credit history, the guidelines also allow lenders to give greater weight to the overall pattern of behavior than to isolated occurrences of slow or missing payments. "A period of financial difficulty in the past, especially if related to the disabling conditions, does not necessarily make the credit risk unacceptable if a good payment record has been maintained since," Apgar advised lenders in a recent memo. When a credit record reveals delinquencies, lenders must determine whether the would-be borrower was late because he simply didn't care or couldn't manage his finances, or because of factors beyond his control. HUD also is urging lenders to "encourage" handicapped borrowers to consider one of the two FHA home improvement loan programs Title I and 203(k) that can be used to pay for modifications to the home, including exterior ramps or interior reconstruction to permit wheel chair accessibility. In addition, Apgar has reminded lenders that disabled borrowers are just as eligible for higher than normal qualifying income-to-expense ratios and down payment assistance as any other customer. Lenders always have the option of giving weight to what's known as "compensating factors" when determining the eligibility of borrowers who do not meet the standard ratios, he pointed out in his memo. And all borrowers can use gifted funds to cover their downpayments. "The Department," the FHA Commissioner said, "wishes to expand the availability of FHA mortgage insurance to persons with disabilities with sound underwriting practices." | 
