The Department of Housing and Urban Development has rescinded the ability for non-residents to qualify for a Federal Housing Administration-backed loan.
While the policy shift is effective immediately, full implementation will begin on May 25, according to an FHA mortgagee letter issued on March 26.
Apart from prospective homebuyers being impacted, this change will chip away at business for originators, stakeholders say.
In its announcement, the administration said it is committed to "safeguarding economic opportunities for U.S. citizens and lawful permanent residents" and the ever changing immigration laws "poses a challenge for FHA as the ability to fulfill long-term financial obligations depends on stable residency and employment."
This will impact those who are in the U.S. on work visas, have asylum status, and
Alex Naumovych, loan officer at First Alliance Home Mortgage, notes the change will cut almost a quarter of his yearly business.
"That's unfortunately a big chunk of business for me and it will impact loan volume," he said. "It will force many borrowers to continue renting because they cannot buy, unfortunately."
The Maryland-based originator expects Fannie Mae and Freddie Mac to soon follow suit, which will slice another 25% of his transactions.
"It will be very difficult because if Fannie and Freddie also rescind eligibility for some borrowers, half of my income will be gone," Naumovych added. "It will be hard in the next four years…and I will have to rebuild and make my base of consumers more broad. I know a lot of other originators who will also see a sharp decline in business because of these changes, some may even leave the business."
Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals, called the move "unfortunate," pointing out the FHA policy was put in place by former HUD Deputy Secretary Brian Montgomery and former HUD Secretary Dr. Ben Carson.
"The decision does not seem to have been made for risk or financial reasons, but rather for political ones," Acosta said in a written statement. "This new policy will impact transaction volumes by eliminating a pool of credit-worthy borrowers from mortgage pipelines across the industry."
Though some stakeholders in the mortgage industry say this rollback of the policy is as it should be. Randy Howell, owner of brokerage Mortgage Power, Inc., applauded the administration's actions.
"The FHA program is to help legal citizens and give green card holders an opportunity to obtain primary residence financing," said Howell. "When someone is not a legal primary resident, the government should not be ensuring coverage against default."
Despite the shrinking of financing options for non-residents,
"All of my non-QM programs allow for non-permanent residences," said Mike Pearson, senior vice president of business development at A&D Mortgage.
