Here is what the FHA Guidelines say. It is about as clear as mud though. Basically, it is OK to lend on it, but if it looks anything like the borrowers are helping the co-borrower generate a portfolio of rentals, you will have a problem.
LTV for Two to
To reduce risk exposure, mortgages with non-occupying borrowers are
limited to one-unit properties if the LTV exceeds 75 percent. The nonoccupying
borrower arrangement to assist in financing a property may not be
used to develop a portfolio of rental properties. The financial contribution by
the non-occupying borrower, and the number of properties owned may
indicate that the family members are acting as â€œstrawbuyers.â€... more