A buyer wants to assume a seller's 2021 FHA mortgage in an ordinary sale. The mortgage requires approval, the seller retains no ownership interest, and the transfer is not by inheritance. Under 24 CFR 203.512(b), what credit condition applies before the mortgagee may approve the transfer?
Correct Answer
B) At least one acquiring owner must meet HUD's creditworthiness standards
B. At least one acquiring owner must be found creditworthy. The regulation conditions an approval-required transfer on creditworthiness unless a listed alternative applies. The facts exclude retained seller ownership and transfer by devise or descent. Scope and exceptions: This resolves the credit condition, not every assumption requirement or release of the original borrower's liability. Other restrictions remain relevant. Source: 24 CFR 203.512(a)-(d), eCFR current through October 6, 2026 — https://www.ecfr.gov/current/title-24/section-203.512
Why This Is the Correct Answer
B. At least one acquiring owner must be found creditworthy. The regulation conditions an approval-required transfer on creditworthiness unless a listed alternative applies. The facts exclude retained seller ownership and transfer by devise or descent. Scope and exceptions: This resolves the credit condition, not every assumption requirement or release of the original borrower's liability. Other restrictions remain relevant.
Why the Other Options Are Wrong
Option A: No assumption is permitted because all insured loans prohibit transfer
Confuses permitted restrictions with a blanket ban.
Option C: Insurance eliminates credit review for every acquiring owner
Insurance does not eliminate the specified review.
Option D: A lower existing interest rate replaces the creditworthiness requirement
Rate savings do not establish creditworthiness.
Exam Tip
Separate assumability from approval and borrower-release requirements.
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