Housing and Urban Development (HUD) Secretary Marcia Fudge characterized student loan debt as a limitation for people of color in purchasing homes.
What We Know:
- The Federal Housing Administration (FHA) announced steps to improve affordable housing access, specifically FHA-insured mortgage financing, to people with student loan debt. Under the new policy, FHA student loan debt calculations align similarly with other housing agencies. Hence, the process for creditworthy individuals with student loan debt to borrow is simplified.
- According to HUD Secretary Marcia Fudge, people of color face disproportionately prominent barriers when obtaining affordable housing. Fudge considers homeownership a cornerstone of the American Dream and building generational wealth. “I am proud that FHA is taking action to make it easier for borrowers with student loan debt to qualify for a federally insured mortgage. This new policy will make a big difference for individuals throughout our nation and is another step in our mandate to promote equity and opportunity for homeownership.”
- The current policy in revision requires lenders to calculate a borrower’s monthly student loan payment obliging 1 percent of the total remaining student loan debt to be paid. The new policy bases monthly student loan payment on the actual student loan payment. Accordingly, this helps homebuyers meet minimum qualifications for an FHA-insured mortgage in spite of student loans.
- By allowing people of color to obtain affordable mortgages, own homes, and build generational wealth, HUD expresses hopes of closing racially skewed disparities in the housing market. The demographic benefitting greatly from the updated policy is first-time homebuyers. More than 80 percent of FHA-insured mortgages are issued to first-time homebuyers.
- Constraints lifted for otherwise creditworthy borrowers help the FHA enforce core objectives of serving underserved communities and first-time homebuyers. Additionally, Fudge reinstates the importance of the Fair Housing Act concerning declining black homeownership rates.
The changes must be issued into effect by August 16, 2021.
