Housing News

FHA Now Backs Mortgages for Dreamers

The Federal Housing Administration is now officially backing mortgages for Deferred Action for Childhood Arrivals recipients, also called Dreamers.

Under DACA, people who illegally immigrated to the United States when they were young (the policy typically applies to people who were brought to the U.S. by their parents) were protected from deportation and eligible to work in the country.

For the last several years, there has been confusion about whether Dreamers were eligible for an FHA mortgage.

The confusion seemingly stemmed from differing interpretations of FHA lending policy over the last several years. But the confusion has now come to an end, as earlier this week, the FHA announced an official policy stating that DACA recipients can apply for an FHA loan.

"Earlier today and prior to 12:00 pm, Secretary (Ben) Carson and I posted a waiver and other documents to the HUD website that makes clear DACA status recipients are now eligible to apply for mortgages insured by the Federal Housing Administration," former HUD Deputy Secretary Brian Montgomery wrote on LinkedIn on January 20. "This notification marks the first time since DACA was established in 2012 that makes clear DACA status recipients are eligible to apply provided they meet other FHA requirements."

As Montgomery said, the FHA issued a bulletin outlining its new policies surrounding Dreamers.

"Effective January 19, 2021, the Federal Housing Administration (FHA) is permitting individuals classified under the ‘Deferred Action for Childhood Arrivals' program (DACA) with the U.S. Citizenship & Immigration Service (USCIS) and are legally permitted to work in the U.S. are eligible to apply for mortgages backed by the FHA," the FHA said in a bulletin published on January 20, 2021.

The issue at the core of the confusion, the FHA said, was a sentence in the FHA lending handbook, which stated "Non-US citizens without lawful residency in the U.S. are not eligible for FHA-insured mortgages."

According to the FHA bulletin, "The term ‘lawful residency' pre-dates DACA and thus did not anticipate a situation in which a borrower might not have entered the country legally, but be considered lawfully present."

That issue created confusion surrounding FHA mortgages for Dreamers, but now the FHA is moving to provide clarity on the matter, stating that it will remove that section entirely and back mortgages for Dreamers.

"To avoid confusion and provide needed clarity to HUD's lending partners, FHA is waiving the above referenced FHA Handbook subsection in its entirety," the FHA said in its bulletin. "In a subsequent update to the FHA Handbook, the language will be removed."

According to the FHA, other requirements remain in place for potential DACA borrowers, including:

• The property will be the borrower's principal residence
• The borrower has a valid Social Security Number (SSN), except for those employed by the World Bank, a foreign embassy, or equivalent employer identified by HUD
• The borrower is eligible to work in the U.S., as evidenced by the Employment Authorization Document issued by the USCIS
• The borrower satisfies the same requirements, terms, and conditions as those for U.S. citizens

The FHA stated in its bulletin that these changes take effect on January 19, 2021.