Jan 18, 2024 2024-02

HUD Increases Passbook Savings Rate – Asset Test Affected

Dear Participating Lenders:

As described in Memo No. 2023-14 dated September 6, 2023, an Asset Test must be performed for households in which the cash and cash equivalent assets exceed $5,000.

As a reminder, an asset is defined as an item of value that may be turned into cash, like a savings account. Because interest is earned on these accounts, the interest income is income that must be counted toward household income.  Examples include but aren't limited to the following: checking, savings, broker accounts, and IRAs.

HUD previously set the imputed passbook savings rate at .06%, however, on January 1, 2024, HUD increased the imputed passbook rate to .40%. Note: The passbook savings rate is subject to change without prior notice or as adopted by HUD.

MFA will begin calculating income using the new passbook savings rate of .40% with loans locked on Monday, January 29, 2024. MFA always wants to put forth its best efforts but must follow the IRS and Bond Counsel guidance. Unfortunately, not all applicants will meet program guidelines once an Asset Test is performed.

The annual income included as household income will be the greater of the actual income or a percentage of the assets based on the current 0.40% passbook savings rate.


Cash Asset Type Cash Value Actual Yearly Income
Checking Account (noninterest bearing) $455 $0
Savings Account (interest at 2.5%) $6,000 $150
Stocks (not paying dividends this year) $3,000 $0
Total $9,455 $150

In this example, cash assets equal $9,455, which is greater than $5,000. Therefore, it is necessary to compare the actual income from assets to the imputed income from assets.

Imputed income calculation- The total cash value of assets ($9,455) is multiplied by 0.40% to determine the imputed income from assets. (0.40/100) =0.004 x $9,455 = $37.82. Since $150 (actual income) is greater than the imputed income from assets ($37.82), $150 would be used in the income calculation. Please note these figures are already annualized.

Should you have any questions, please contact an MFA homeownership representative at 505.843.6880 or by email: singlefamily@housingnm.org.

Thank you for participating in MFA’s programs.