In recognition of the increasing number of student loan payment plan alternatives offered by the U.S. Department of Education, the FHA recently Mortgage letter 2021-13 (ML 2021-13) to announce changes to the calculation and documentation requirements for student loan debts.
ML 2021-13 revises the required documentation and calculation of the monthly student loan obligation of a borrower. “For student loan outstanding, regardless of payment status, the mortgagee must use: (i) the payment amount shown on the credit report or the actual documented payment if the payment amount is greater than zero; or (ii) 0.5% of the outstanding credit balance if the monthly payment shown on the borrower’s credit report is zero. “In addition,”[t]The mortgage debtor can exclude the payment amount from the monthly debt calculation if written documents from the student loan program, the lender or the student loan service provider show that the loan balance has been waived, canceled, settled or otherwise paid in full. “
ML 2021-13 applies to all case numbers assigned on or after August 16, 2021, but mortgage holders can start using the new calculations immediately. Interested parties can provide feedback to HUD for a period of 30 calendar days from the date of issue.