As we detailed in our prior Legal Update, on January 19, 2021, the FHA expanded eligibility to apply for FHA-insured mortgages to individuals residing in the United States under the DACA program by waiving certain FHA Handbook requirements.[1] On May 28, 2021, the FHA published Mortgagee Letter 2021-12, which clarifies FHA’s existing eligibility requirements for DACA participants and other non-permanent residents who apply for FHA loans and implements the eligibility requirements instituted by the prior waiver into the HUD Handbook.[2]
Specifically, non-permanent residents, including DACA participants, individuals with refugee or asylee status, citizens of the Freely Associated States (“FAS”)[3] and individuals with an H-1B visa, must meet the following requirements:
- the property will be the borrower’s principal residence;
- the borrower must have a valid SSN, except for those employed by the World Bank, a foreign embassy, or equivalent employer identified by HUD;
- the borrower must be eligible to work in the United States, as evidenced by:
- an Employment Authorization Document (“EAD”) (USCIS Form I-766) showing that work authorization status is current;
- a USCIS Form I-94 evidencing H-1B status, and evidence of employment by the authorized H-1B employer for a minimum of one year;
- evidence of being granted refugee or asylee status by the USCIS (e.g., USCIS Form I-94 or Form I-797); or
- evidence of citizenship of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau; and
- the borrower must meet the same requirements, terms and conditions as those for US citizens.
Previously, under the January 19 waiver, FHA mortgage applicants with non-permanent residency status were required to submit an EAD, issued by the USCIS, to demonstrate eligibility to work in the United States. The updates now allow applicants to alternatively provide documentation evidencing refugee or asylee status.
The Handbook update also eliminates the requirement for FAS citizens and certain individuals with an H-1B visa to obtain an EAD. Individuals with an H-1B visa can now alternatively provide USCIS Form I-94, evidencing H-1B status, and evidence of employment by the authorized H-1B employer for a minimum of one year. FAS citizens only need to provide evidence of citizenship.
In addition, the new FHA guidance allows lenders to assume that a continuation will be granted if an EAD or evidence of H-1B status will expire within one year and the applicant has a prior history of residency status renewal. If the EAD or H-1B has not previously been renewed, the lender must determine the likelihood of renewal based on information from USCIS or the applicant’s employer.
[1] FHA, FHA Info #21-04, FHA to Permit DACA Status Recipients to Apply for FHA Insured Mortgages (Jan. 20, 2021), https://www.hud.gov/sites/dfiles/SFH/documents/SFH_FHA_INFO_21-04.pdf.
[2] Handbook 4000.1 Section II.A.1.b.ii(A)(9).
[3] The Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau.