FHA to Permit DACA-Status Recipients to Apply for FHA-Insured Mortgages

HUD said this morning it will permit individuals classified under the “Deferred Action for Childhood Arrivals” program (DACA) with the U.S. Citizenship & Immigration Service and are legally permitted to work in the U.S. to apply for mortgages backed by FHA.

The announcement (https://www.hud.gov/sites/dfiles/SFH/documents/SFH_FHA_INFO_21-04.pdf), effective Jan. 19, waives language in FHA Handbook 4000.1 Section II.A.1.b.ii(A)(9)(c), stating “Non-U.S. citizens without lawful residency in the U.S. are not eligible for FHA-insured mortgages.”

“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 nevertheless be considered lawfully present,” HUD said. “To avoid confusion and provide needed clarity to HUD’s lending partners, FHA is waiving the above referenced FHA Handbook subsection in its entirety. In a subsequent update to the FHA Handbook the language will be removed.”

Other FHA requirements remain in effect for all potential borrowers including DACA status recipients:

• 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; and   
• the borrower satisfies the same requirements, terms, and conditions as those for U.S. citizens.

The Mortgage Bankers Association has long-asked for clarity regarding DACA, noting the uncertainty had make lenders particularly hesitant to offer mortgages to individuals with deferred status and expired or delayed renewals.

In a 2018 letter to FHA, MBA pointed out the Handbook contains three categorizations of non-U.S. citizen residency status: lawful permanent resident aliens, non-permanent resident aliens, and non-U.S. citizens without lawful residency. MBA recommended HUD provide clear guidance as to which category DACA participants should fall under or, alternatively, that HUD create a fourth category for these individuals. MBA also asked HUD provide further clarity related to the DACA program in the Handbook in order to ensure lenders understand the program requirements.

While the waiver does not have a termination date, it is expected the Biden Administration will make the policy permanent at some point in the future.