1. FHA 203(h) Presidentially-Declared Major Disaster Area
October 2017

2. 203(h) Program
This HUD program is designed to assist victims of a Presidentially-Declared Major Disaster Area (PDMDA) to finance the purchase of a home by making it easier for them to get mortgage and become homeowners or re-establish themselves as homeowners. Borrowers are not required to make the Minimum Required Investment allowing up to 100% financing. Loans are processed and underwritten in accordance with the regulations and requirements applicable to 203(b) program. The program differences are addressed in the next few pages. As of October 2, 2017, loans must be manually locked under the FHA 203(h) program. Please contact your SSR for loan lock assistance.

3. Product
Fixed rate 15, 20, 25 and 30 year, fully amortized loan, or 3/1 and 5/1 ARMs
Purchase
100% LTV
The Borrower is not required to make a Minimum Required Investment (MRI)
Reconstruction
Refinance transactions used to reconstruct or repair a damaged residence must be underwritten under the FHA 203(k) program. FHA 203(h) credit and documentation flexibility may be applied to the FHA 203(k) transaction. The residence only needs to have been completed and ready for occupancy at the time of the disaster. The 203(k) LTV applies.

4. Eligibility Requirements
Borrower Eligibility
The FHA Case File ID Number must be assigned within one year of the date of the PDMDA
The mortgage must be for the Borrower’s principal residence
The Borrower must have a minimum credit risk score of 500
Property Eligibility – the previous residence, either owned or rented, must have been located in a PDMDA and destroyed or damaged to such an extent that reconstruction or replacement is necessary.
The purchased or reconstructed Property must be a Single Family Property or a unit in an FHA-approved Condominium Project.

5. Considerations - Underwriting
The Seller should be as flexible as prudent underwriting decision making permits. The Seller is required to make every effort to obtain traditional documentation regarding employment, assets and credit and must document their attempts.
Where traditional documentation is unavailable, the underwriter may use alternative documentation. Where specific requirements are not provided, the Seller may use alternative documentation that is reasonable and prudent to rely upon in underwriting a mortgage. Seller should be as flexible as prudent decision making permits.
CREDIT – Sellers may consider Borrowers with derogatory credit a satisfactory credit risk if the credit report indicates satisfactory credit prior to a disaster, and any derogatory credit subsequent to the date of the disaster is related to the effects of the disaster.

6. Considerations – Underwriting continued
INCOME – If prior employment cannot be verified because records were destroyed by the disaster, and the Borrower is in the same/similar field, than it is acceptable to obtain W-2s and tax returns from the Internal Revenue Service (IRS) to confirm prior employment and income.
LIABILITIES – For purchase transactions, the Seller may exclude the Mortgage Payment on the destroyed residence located in a PDMDA from liabilities. To exclude the Mortgage Payment, the Seller must:
Document the Borrower is working with the servicing Mortgagee to appropriately address their mortgage obligation; and
Apply any property insurance proceeds to the Mortgage of the damaged house.

7. Considerations – Underwriting continued
Assets – If traditional asset documentation is not available, the Seller may use statements downloaded from the Borrower’s financial institution website to confirm the Borrower has sufficient assets to close the Mortgage.
Housing Payment History – the Seller may disregard any late payments on a previous obligation on a Property that was destroyed or damaged in the disaster when the late payments were a result of the disaster and the Borrower was not three or more months delinquent on their Mortgage at the time of the disaster. The Seller may justify approval if the Borrower was three or more months delinquent if extenuating circumstances are documented.

8. PDMDA Documentation Requirements
The Seller must document and verify that the Borrower’s previous residence was in the PDMDA, and was destroyed or damaged to such an extent that reconstruction or replacement is necessary. Documentation attesting to the damage of the previous house must be included in the loan file. If purchasing a new home, the property need not be located in the same area where the previous home was located.
Refinancing is permitted in conjunction with rehabilitation.
Damaged residences located in a PDMDA are eligible for Section 203(k) mortgage insurance regardless of the age of the Property. The residence only needs to have been completed and ready for occupancy for eligibility under Section 203(k). All other Section 203(k) policy must be followed.

9. Reference For complete details refer to: PHL Seller Guide, and
FHA Guidelines Section II.A.8.b.