The letter sent by HUD states that no policy changes have occurred under the administration. They state that FHA requirements for non-us citizens have not changed and lawful residency has always been a requirement… which is true.
What they fail to mention is that their interpretation of what constitutes lawful residency HAS changed. Lawful residency is not a term used by USCIS under DACA. USCIS uses the term lawfully present.
In the past, lawful presence was interpreted by HUD to confer the same meaning as lawful residency (Fannie Mae also uses this interpretation). The change in interpretation began only after the trump administration took over at HUD. The eligibility of a DACA borrower to qualify for an FHA loan was never in question under the Obama administration. Ben Carson publicly acknowledged this and went so far as to say that plenty of loans had been made to DACA recipients. “I asked around after I read that story,” Carson told members of Congress. “No one was aware of any changes that had been made to the policy whatsoever. I’m sure we have plenty of DACA recipients who have FHA-backed loans.”
For HUD to write a letter stating nothing has changed is purposefully misleading and disgraceful. Either Ben Carson lied to Congress or HUD is lying to the entire mortgage industry. My guess is that they both are lying.
It is important to remember that the policy announced today by HUD under the Trump Administration will be reversed the moment his administration is out of office.
If the Democrats win the presidency and/or take control of both the house and senate in 2020, DACA will be one of the first issues addressed.
There are two different paths that lead to restoring eligibility of DACA recipients. The first is simply for a new administration to instruct HUD to change its interpretation of FHA’s requirements for non-US citizens. The second is for Congress to finally pass legislation granting Dreamers citizenship.
Lenders who receive a deficiency letter from HUD, charging a defect related to a borrower’s DACA status should do everything possible to extend the process indefinitely. Use the full 30 to 45-day window when providing responses to mitigate the deficiency.
Typically, HUD will correspond back and forth with lenders multiple times before escalating the file for indemnification.
If enough lenders share their experiences publicly and come together to fight against the administration’s interpretation of lawful residency, we may be able to force them to reconsider…especially if the big players such as Wells Fargo (who has made hundreds of these loans) get involved.
HUD needs to answers questions such as:
- When and why did they change their interpretation of lawfully residency?
- Why does the letter from Wolfson contradict Ben Carson’s public testimony before Congress?
- Will this new policy interpretation be applied retroactively to loans that have already closed?
- How will FHA identify these loans? There is no identifying code for DACA borrowers. The only identifier in common is on the declarations section of the loan application where the borrower is identified as a non-us citizen and/or non-permanent resident alien.
- Will FHA go back and start QCing all loans made to Borrowers who are non-us citizens and require lenders to pay millions of dollars back to HUD?
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