HUD recently issued Mortgagee Letter 2008-25: Converting Existing Homes to Rentals - Underwriting Instructions. According to the Mortgagee Letter, the underwriting analysis may not consider any rental income from the property being vacated except under circumstances described in the Mortgagee Letter. This will assure that a homeowner either has sufficient income to make both mortgage payments without any rental income or has an equity position not likely to result in default on the mortgage for the property being vacated. The requirements as described in the Mortgagee Letter take effect on September 19, 2008 and shall remain in effect until further notice.
