A sweeping change took place this morning that blocks non-permanent residents in taking FHA loans.
After complying with loans supported by Fannie Mae and Freddie Mac, they are the most popular loan type available to home buyers today.
They also have the most liberal guidelines for insurance companies that allow credit results down to 580 with a 3.5% payment.
As a result of this change, only fixed residents will be able to get an FHA loan that goes on.
Political change is intended to prioritize legal US residents while protecting “the integrity of government -related loan programs.”
Illegal aliens prevented from taking FHA loans
A new mortgagee letter published today will update “will remove the justification for illegal foreigners from accessing FHA-insured mortgage loans.”
This is done by completely removing the “non-permanent residents” category in both single-family title I and Sections II programs.
The FHA lock programs in FHA include the basic FHA loan, known as 203 (B), house renovation 203 (K) loans and vice versa priority program known as a HECM.
The FHA title in the program includes loans to improve property and the manufactured house (mobile) home program.
As always, mortgage lenders must determine the residence status of borrowers based on information provided about the mortgage application along with other supporting documentation.
The letter notes that “a social security card is not sufficient to prove immigration or work status.”
But only “permanent residents” are eligible for FHA insurance financing, which means they must have legal resident status.
It adds that US citizenship and immigration services (USCIS), a department of the Department of Homeland Security, provide evidence of legal resident status.
Note: The changes can be implemented immediately by lenders, but must be implemented for FHA case numbers awarded on May 25, 2025.
Policy change is in accordance with the recent executive orders
As for why the change is made, the letter notes that it adapts FHA’s demands with recent performing acts performed by President Trump.
It prioritizes the use of federal resources for legal US residents, while protecting both the financial interests of US citizens and FHA.
In addition, it ensures that the integrity of government -related loan programs is maintained.
One question specifically mentioned in the letter is the notion that a non-permanent resident could be “subject to immigration laws that may affect their ability to remain legal in the country.”
In other words, a non-permanent resident borrower who is approved for a FHA loan could be theoretically deported, at what time the loan would probably fall into arrears.
The loan would go into default and the property would fall into shielding, which would damage FHA’s mutual priority insurance fund (MMI).
This can bring their ability to insure lenders against losses and possibly lead to the MMI Fund in need of taxpayers’ funds.
Of course, FHA has only ever received a rescue in its nearly 100-year history and it wasn’t a big one.
How many illegal immigrants actually have FHA loans?
There is also the question of how many illegal immigrants actually have FHA loans.
In the letter, FHA said it does not retain citizenship or residence data from the loan application.
As such, it does not know the number of non-permanent residents who received FHA “Loans under previous policies.”
My guess would not be many because it is not easy to be approved for a mortgage loan these days unless you have a solid employment history, robust credit history and stable income.
A person who is not legally in the United States probably does not fit that description, although it is possible to get the odd borrower through insurance, I assume.
But again, this would probably be the exception, not the rule.
However, I am aware that FHA allowed non-permanent resident foreigners to be approved for loans in the past. So this will no longer be the case.
This also relates to streamlines, which means that existing FHA borrowers cannot refinance their priority loans.
The larger takeaway here is that the new administration obviously does not want any state assistance, which is essentially what an FHA loan is that goes to non-Americans.
And this could just be the tip of the iceberg.
Last week, the USDA Rural Development Office sent a bulletin that non-American citizens are no longer justified for USDA loans.
This message completed a temporary authority that was initially communicated on April 29, 2022.
The second largest type of state home loan, the VA loan, is reserved for military members and requires legal permanent residence to earn. So it’s also covered.
