Written By: Glenn Michaels, Op-Ed Writer
Living and working in the New York Metropolitan area we often come in contact numerous religions, numerous ethnic groups and numerous traditions.
In the New York area we have many orthodox Jewish people who do not believe in paying or receive interest from another. This group has GMACH which is one of the largest interest free bank staffed by volunteers. Very religious Muslims have a similar interest free bank. The religious individuals do pay or receive interest at all.
Individuals from Haiti and Jamaica very often are involved with “SuSu” accounts or what the FHA now calls “Private Savings Clubs” that are acceptable by FHA.
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In the new Single Family Handbook 4000.1 FHA addresses how to handle “private Savings Clubs.
FHA considers Private Savings Clubs as a non-traditional method of saving by making deposits into a member – managed resource pool.
You the underwriter may consider Private Savings Club funds that are distributed to and receive by the borrowers as an acceptable source of funds.
The underwriter must verify and document the establishment and duration of the club and the borrower’s receipt of the funds. The underwriter must also determine that the received funds were reasonably accumulated and not borrowed.
There is required documentation for Private Savings Clubs, the required documentation is:
• Account ledger
• Receipts
• Verification from the account treasurer that the club is still active
Private Savings Clubs are acceptable under the standard and manual underwriting guidelines.
The big issue when accepting Private Savings Clubs is determining if the borrower is the type of person that does not use traditional banks. If a borrower utilizes traditional banks and a Private Savings Club the Private Savings Club is often not acceptable.
About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.
