The Federal Housing Administration (FHA) issued a request for feedback on its drafted mortgagee letter on increasing access to affordable financing, specifically for properties with accessory dwelling units (ADUs).
ADUs are small units built inside, attached to, or on the same property as a primary residence. While FHA programs allow for the purchase of properties that include ADUs, as well as rehabilitation and refinance, it does not allow the inclusion of rental income from the ADU when analyzing the borrower’s qualifying income.
“FHA is at the forefront of the administration’s efforts to increase housing supply and affordability,” Federal Housing Commissioner Julia Gordon said. “At a time when housing supply is constrained and ADUs are gaining popularity nationwide, an updated policy has the potential to expand opportunities for low- and moderate-income homeowners to benefit from the wealth-building potential of ADUs while supporting the affordable housing needs of their communities.”
The drafted mortgagee letter proposes a policy that would allow ADU rental income to be considered when underwriting these types of loans, as well as for the analysis and reporting of ADU market rent in FHA appraisals. It also suggests a policy to add ADUs to the types of improvements eligible for the FHA Standard 203(k) Renovation Mortgage Insurance Program and for including ADU rental income when performing final assessments for home equity conversion mortgages.
Comments from stakeholders are due to the FHA by April 27.
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