In the waning hours of the first Trump Administration the U.S. Department of Housing and Urban Development (HUD) announced that effective January 19, 2021 individuals who are classified under the “Deferred Action for Childhood Arrivals” program (DACA) with the U.S. Citizenship & Immigration Service (USCIS) and are legally permitted to work in the U.S. are eligible to apply for FHA mortgages. The second Trump Administration has now reversed course by issuing Mortgagee Letter 2025-09 limiting the eligibility for FHA mortgages to individuals who hold permanent lawful resident status in the U.S. The provisions of the Mortgagee Letter may be implemented immediately but must be implemented for FHA case numbers assigned on or after May 25, 2025.
In the Mortgagee Letter, HUD states:
The Administration has reaffirmed its commitment to safeguarding economic opportunities for U.S. citizens and lawful Permanent Residents while ensuring that federal benefits, including access to FHA-insured Mortgages, are reserved for individuals who hold lawful Permanent Resident status. Currently, non-permanent residents are subject to immigration laws that can affect their ability to remain legally in the country. This uncertainty poses a challenge for FHA as the ability to fulfill long-term financial obligations depends on stable residency and employment.
The change in policy was accomplished through the removal of provisions addressing the eligibility of non-permanent residents from HUD Handbook 4000.1. The Mortgagee Letter also has provisions addressing the eligibility for FHA mortgages for individuals who are citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau, and makes related revisions to certain portions of the Handbook. The provisions of the Mortgagee Letter apply to all FHA Title II Single Family forward and Home Equity Conversion Mortgage (i.e., reverse mortgage) programs.
The change may invite challenges, particularly as it relates to individuals with DACA status. Numerous cases have been filed against financial institutions asserting that the failure to offer unsecured and secured consumer loans to DACA recipients and other non-permanent residents constitutes discrimination on the basis of immigration status in violation of Section 1981 of the Federal Civil Rights Act, 42 U.S.C. § 1981 (as well as the California Unruh Civil Rights Act). These cases have involved credit cards, auto loans, student loans, and loan refinancing. The Mexican American Legal Defense and Educational Fund (MALDEF) reports that since 2017 it has brought some 21 lawsuits over these issues. An important distinction with regard to FHA mortgage loans is that lenders must follow FHA guidelines for loans to be eligible for FHA insurance.
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