Correspondent ALERT – FHA Update and IRS Extension in CA

Due to the impact of the series of natural disasters, the Internal Revenue Service (IRS) has issued an additional extension for the filing of 2022 tax returns until November 16, 2023. This extension is available for residents of all California counties EXCEPT Lassen, Modoc, and Shasta counties.

Borrowers utilizing the IRS extension must provide the following documentation:

·         Evidence their Primary Residence is located in one of the impacted California counties

·         Evidence of an existing extension filed with the IRS

Important Note: Freddie Mac will NOT honor this extension. As a result, the use of a tax filing extension for the 2022 tax year is NOT permitted for Freddie Mac loans with a Note Date on or after November 1, 2023. Please refer to Freddie Mac Selling Guide Section 5302.4 (b)(i) for complete details.

Arc Home will align with the update announced in FHA Mortgagee Letter 2023-17 for the topic noted below, effective immediately. This revision will be incorporated in the FHA Single Family Housing Policy Handbook 4000.1 (available HERE on the HUD website) at a later date.

·         Accessory Dwelling Unit (ADU) Rental Income: Expanded guidelines to allow rental income from an Accessory Dwelling Unit (ADU) as Effective Income for the purposes of qualifying. The subject property must be a 1-unit residence with a single ADU. Refer to Mortgagee Letter 2023-17 for complete requirements and eligibility details of this improvement.