Mortgage Processing Blog :

Plain Vanilla Home Loans

2009-06-26T11:29:00.002-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – Hope everyone is keeping busy. These days the mortgage business never ceases to amaze me. When perusing the newspapers and internet this week for a topic – I came across “Vanilla Home Loans” – I thought what next? While I have felt all along that there needed to be some regulations for the unscrupulous – I am not sure about these Vanilla Home Loans.

Just what is a Plain Vanilla Home Loan? As released by the Associated Press - According to President Barack Obama, if he gets his way – consumers who take out mortgages would automatically get a “plain vanilla” loan. A plain vanilla loan is considered a traditional 30 year fixed rate loan. Now – perhaps if consumers would like sprinkles on the loan that may include an adjustable rate or a loan that was riskier.

President Obama would like to revamp financial regulations to product borrowers from confusing and high-risk mortgages.

Government officials want to make the process of getting a mortgage as simple and abuse-free as signing up for a retirement savings plan. This I absolutely do not understand – the mortgage process is not that simple. If in fact the Vanilla Home Loan is implemented – I could see where less people would qualify for a mortgage. I feel it could actually backfire.

The questions that would arise would be – what loan-to-value; what DTI would lenders require for the Plain Vanilla Mortgage. Approximately 30-40 years ago, I think you could say the Plain Vanilla Mortgage existed; since most mortgages were given by loan Savings and Loans Institutions. You could go in talk to the bank manager – give him a pay stub; run a credit report and Congratulations you have a home mortgage.

If the Obama plan for simplifying the mortgage process is approved – here’s how it might work:

The government would give its seal of approval to a handful of mortgage types – a standard 30 year fixed rate mortgage and perhaps a few varieties of adjustable rate mortgage. For a loan to get the “vanilla” label, the lender would have to verify income and have the borrowers set aside money for property tax and insurance. (I am assuming they mean escrow for taxes and insurance).

To get an “unapproved government loan” the borrowers be warned about the risks – which would be a good thing. I am personally having a hard time wrapping my head around these “vanilla mortgages”.

In reading the documents that have so far been released regarding the “vanilla mortgage” – it is really for the protection of the consumers – who have expressed they did not understand the loans they signed up for during the housing boom. Many expressed concern they were not aware when their rates adjusted their mortgage payment would be much higher.

The Obama plan also calls for fees that brokers and lenders receive tied to inflated mortgage rates.

Brokers have already seen their market share dwindle – brokers currently only account for 20 percent of new loans. If these mortgage fees were eliminated that would be the kiss of death for mortgage brokers.

I will continue to follow this issue of the regulations of the mortgage loan/process and whether the “Vanilla Home Loan” will pass the test of time.

In closing – let me say – I hope every body is staying busy. More later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Reforms For American Homeowners and Consumers

2009-06-19T10:58:00.001-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – Hope you are keeping busy. With interest rates up and down, depending on the day and hour of the week – refinances have been fluctuating as often. However, there seems to be a trend that home sales are on the rise and many lenders are keeping busy.

According to the Office of the Press Secretary of The White House - On May 20, 2009 the President signed the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act into law. I don’t know about you – but I cannot recall hearing about these Acts, however, they are very important to the real estate industry.

We are going to outline the fact sheets on both pieces of legislation:

The Helping Families Save Their Homes Act - The deep housing market recession has created devastating consequences for homeowners and communities throughout the nation. However, by reducing the number of foreclosures, the average homeowner could see their house price bolstered and as many as 9 million may increase the affordability of their mortgages and prevent foreclosures.

New guidelines have been introduced for loan modifications which will establish a new standard practice for affordable modifications. Services covering more than 75% of loans in the country have now begun modifications and refinancing under the Making Homes Affordable Act. – Also please check out the government’s website –MakingHomeAffordable.gov which is a consumer website for the program.

There has been improvement to Hope for Homeowners which should significantly improve the ability of borrowers to benefit from the opportunities provided in the Administration’s housing plan. Incentive payments will be available for successful Hope for Homeowners refinances and services will be required to evaluate ALL applicants for eligibility for Hope for Homeowners and Home Affordability Modification Program.

Hope for Homeowners targets help to borrowers who are faced with the risks of foreclosure. The help would entail the write down of the principal amount to help homeowners increase the equity they have in their home. This program will ease restrictions on eligibility and enable refinancing of mortgages with no equity for a greater number of borrowers.

Increasing Consumer Protections Related to Housing

Consumers who are renters living in foreclosed homes is a very big problem which has not gotten a lot of attention. The problem exists when a property is foreclosed that renters reside. Tenants, who are being forced out of their homes with no notice, will require that in the event of foreclosure - existing leases must be honored, except if the lease is month-to-month; in that case the tenant must be given a 90 day notice to vacate the property.

This will also gives the homeowner the right to know who owns their mortgage. Many times mortgages are sold and then sold again and borrowers do not know who owns their mortgage or who to contact when there is problem. This legislation requires that borrowers be informed whenever their loan is sold or transferred. I also feel it is the homeowner’s responsibility to read all information that is sent by the service of their mortgage.

There seems to be much more legislation before the Senate regarding the rights of the homeowners and renters and what type of assistance will be available. I am doing my best to try and keep up with this legislation because I feel all homeowners and renters need to know their rights. If just one person is helped by this topic, I will have done my job.

In closing – if anyone has any ideas for a topic, please do not hesitate to contact me. – Till next week – More later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Who is FHA? When and Why Did They Get Into Mortgage Insurance?

2009-06-12T11:46:00.002-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – Another week in the mortgage industry is here and I am sure everyone uses the acronym FHA quite a few times a week. However, do we really know anything about FHA, when they were created, why they were created and what they really do? Who is FHA?

Let’s go first to the history of FHA – Congress created the Federal Housing Administration in 1934. Back when FHA was created the housing market was flat; two million construction workers lost their jobs. Homebuyers could not qualify for the mortgages needed to purchase a home. Mortgage terms were 50% loan to value and the repayment of the mortgage was 3-5 years. With these terms owning a home was not easy – only 40% of Americans were homeowners. Since owning a home was, and still is, the American Dream – something needed to make this possible.

Initially FHA was set up to finance the military housing for veterans returning from the war. In addition, they financed privately-owned apartments for elderly, handicapped and lower income Americans. We understand now FHA is for all buyers – I would say FHA has reached an all-time high of available mortgages.

Many borrowers today still do not understand FHA Mortgage Insurance. So let’s see how we can explain this. FHA insures loans they do not make the loan. FHA has set up guidelines and the lenders are responsible for actually loaning the money to the borrower and then if all of FHA guidelines were followed – FHA will insure the loan. For lenders, FHA mortgage insurance protects them against loss if the borrower defaults on his or her mortgage loan.

FHA Mortgage Insurance came into being because unlike conventional loans FHA loans require a smaller down payment. There is more flexibility in an FHA loan than conventional loans. The cost of the mortgage insurance is passed along to the homeowner and is included in the monthly payment. Also the FHA insurance will drop off after five years or when the remaining balance on the loan is 78% of the value of the property, whichever is longer.

How is FHA funded? – FHA operates entirely from self-generated income. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program. FHA still provides a huge economic stimulation to the country in the form of home and community development.

In the 1950s, 60s and 70s, FHA helped to spark the production of millions of units of privately owned apartments for elderly, handicapped and lower income Americans. When soaring inflation and energy costs in the 70’s threatened the survival of thousands of private apartment buildings; FHA’s emergency financing kept the cash strapped apartments afloat.

Also – back in the 80’s there was a time when FHA would run out of money – I remember actually a time when a home could not settle until FHA was funded again by the Senate. However, now days – it is refunded through payments as explained above.

By 2001, the nations homeownership rate soared to 68% - which was an all time high.

FHA has undergone many changes since its inception in the 1930s. Just reading the calendar of events above explains how it has changed. Two years ago with the 80/20 mortgages it was almost impossible for a borrower to agree to an FHA mortgage. You needed 3% down on an FHA mortgage – the borrowers were getting 100% financing conventionally. However, again the market has done a 180 and FHA is again in vogue for any borrower who is looking for a mortgage.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Who Can Certify a Permanent Foundation on Manufactured Homes?

2009-06-05T11:30:00.004-04:00

Written By: Paul Hayman, P.E.

There is confusion over just who can certify that a manufactured home foundation is permanent per HUD requirements. The simple answer is this. Only a professional engineer or registered architect can certify permanent foundations on existing manufactured homes whether under the September 1996 Permanent Foundation Guide for Manufactured Homes or the newer HUD Model Installation Rules.

Part of the confusion comes from the HUD manufactured home appraisal form itself, because it specifically requires an appraiser to state whether the home is attached to a permanent foundation. The only responses on the form are “yes” or “no”. However, the proper response should be “an engineering certificate is required” and it should be placed in the comments section. An appraiser does himself/herself no favors at all by answering this question. If they say yes and it is not HUD compliant, they are opening themselves up for a lawsuit and I know of several appraisers who are in legal proceedings over just this issue.

The September 1996 Permanent Foundation Guide for Manufactured Homes is very clear on the requirements. Only a “Licensed Professional” may certify foundations and/or seal drawings. The PFGMH defines licensed professionals as professional engineers or registered architects. The newer HUD Model Installation Rules also allow both engineers and architects to certify foundations.

However, that does not mean the engineer or architect must personally go under the manufactured home. Field technicians routinely collect field data for engineers in many engineering fields and this area is no different. The engineer is ultimately responsible for the information in his report.

Appraisers, home inspectors and any one else who puts in writing whether a foundation meets permanent foundation requirements accepts needless legal liabilities, and, for the most part, don’t get paid a penny more for there services. State engineering boards are very aggressive in contacting home inspectors who imply they can provide engineering certifications on their websites.

About the Writer. Paul Hayman, P.E., is owner of Hayman Residential Engineering Services, Inc. His company specializes in providing engineering certificates in 49 states. He can be reached at hresanswers@hayman-res.com or www.hayman-res.com.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Basic Mortgage Application Data

2009-06-05T11:16:00.006-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – Hope everyone is staying busy. In my hunt for a topic every week, sometimes it is easy and other times, I haven’t a clue what I will write about until the last minute. This week was one of those last minute thoughts – so I hope this blog is helpful.

This week, I have decided to cover completing a basic Mortgage Application – 1003. While this may seem elementary, I find those persons who do the same job every day may become complacent and forget why it is important to complete certain parts of the application. One issue to remember is – the more completed information that is on the 1003 – the easier the job for the processor and your loan will get to underwriting faster. Isn’t that the process that would make everyone happy, including the borrower?

Another reason it is important that all pertinent sections of the Loan Application be completed is because the 1003 downloads into the Automated Underwriting System (AUS). Any information not on the 1003 must be manually inputted. This, of course, if not only time consuming but if the processor or underwriter must research the information it takes time.

I have noticed in my years of underwriting – there are specific sections of the 1003 that do not get completed. Don’t know why – but it seems the same sections are always neglected – So let’s go over some essentials, which are most commonly missed.

Starting at the top of the 1003 – Section I – Type of Mortgage and Terms of Loan. This is a very self-explanatory statement. However, the type of loan – VA, FHA, and Conventional – must be completed or the processor will not know how to download the application to the AUS.

The next section that is 95% neglected is the II – Property Information and Purpose of Loan – fourth section down – COMPLETE THIS LINE IF THIS IS A REFINANCE LOAN. If this application is a refinance – this section must be completed with year acquired – original cost; amount of existing liens; purpose of refinance. This is absolutely essential when running the AUS. If this information is not on the original 1003; it must be researched by the processor or underwriter, again taking more time.

Another neglected section of the Mortgage Application seems to be the “Years of School”. I image some loan officers feels embarrassed to ask this question because I would say 90% of the applications – this question is not answered. Let me explain the importance of this question.

A borrower states his occupation as a School Teacher, the years of school is not completed; however, it is safe to assume a school teacher has at least 16 years of school. However, you learn the borrower is actually a Teacher Assistant with 12 years of school. If the years of school, would have been completed on the application – 12 years of school would have been a red flag the borrower was not a School Teacher. Having said these examples – certain occupations reflect the number of school years that should have been completed and it must all make sense.

Going down the first page of the application – It is important to enter the borrower’s home or cell telephone number. If the processor needs to contact the borrower – the telephone number on the application is very handy and again saves time because the processor does not need to contact the loan officer.

The last section – I will cover this week is the Years on Current job. Since everyone knows, two years of employment must be verified – many times the number of years on job is listed as “2 years” even if it is one year and three months. Again more processing time has just been added prior to giving the file to underwriting. When the processor looks at the W2 for the past two years, she can ascertain if the borrower has actually been on the job for two years. If the borrower's W2 for the prior year is much lower than the current year to date income; chances are the borrower has not been on his present job for two full years.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Footing/Pier Requirements on Manufactured Homes. What is Required?

2009-05-29T12:09:00.002-04:00

Written By: Paul Hayman, P.E.

This is another area that is chock full of misinformation that confuses everyone who tries to make sense of it. What does the HUD Permanent Foundation Guide for Manufactured Homes (PFGMH) require and will this change? Are there different requirements for existing homes as compared to new construction? Let’s look at each separately.

HUD PFGMH New Construction: The footing requirements are that the piers be sitting on a reinforced, poured concrete footing with frost line protection. Local authorities may define frost line, but the PFGMH stipulates a minimum 12 inch deep footing. While the PFGMH implies, depending on your interpretation, that CMU blocks must be mortared together, it does not explicitly state that without referring to examples given in the Appendices. Also, if you do accept the interpretation that the CMU blocks must be mortared together, then, in addition, you also must require the following:

open cells in the CMU blocks filled with concrete and rebar, rebar extending into the poured concrete footing, anchor bolts out of the top of the concrete stack, and the I beam bolted to the stack with no wooden shims. The purpose is to create a single, structurally sound post to attach the I beam to the footing. Eliminate any of the preceding and the structural adequacy is compromised. There are many ways to structurally attach the I beam to the footing that don’t require mortaring the blocks together. The PFGMH allows for such alternative designs. The design performance criteria for piers are that they be able to support the total design load of the home. Materials and methods are not mandated. There are states where CMU blocks are seldom used (AZ). There they use steel support stands rated for the design load.

HUD PFGMH Existing Construction: The existing clause (paragraph 101-2) states that the footing and anchorage must meet the intent of the definition of a permanent foundation contained in the document. The intent of the footing is that the home is protected from frost related heaving and weight related settlement. However, “intent” is a subjective term that ultimately means whatever the engineer says it means. Note that the piers are not mentioned here. A valid interpretation is that the PFGMH is not concerned with the specifics of piers on existing manufactured homes as long as they are adequately supporting the home. I have addressed the use of bonding cement on existing piers in other blogs, but I will repeat my firm belief that bonding cement on dry stacked piers (1) is a complete waste of money, (2) does absolutely nothing to increase the overall strength of the foundation and (3) cannot be properly applied using the manufacturer’s recommendations and (4) is not currently authorized by HUD. Other than that, it is fine.

HUD New Model Installation Rules (MIR): The new HUD rules for new construction take a giant step back from the PFGMH. They do not require poured footings. They do not require concrete anchored tie downs. They specifically allow dry stacked CMU piers (single or double stacked, depending on height). They do not require frost line footings unless the local authority requires it. They allow pier pads made of materials other than reinforced concrete. However, as of now (and who knows how long it will last) these rules apply to new construction only. They are much less vague than the current PFGMH. The foundation design must be the one supplied with the setup manual or it must be engineered and approved by the manufacturer prior to installing it. This rule puts the onus on the manufacturer to approve foundation methods and materials for new construction, but does not address existing construction.

It appears that, at least for a short time, there will be two sets of rules, one for new construction and one for existing. The irony will be that the rules for existing construction will be more stringent than the rules for new construction.

About the Writer. Paul Hayman, P.E., is owner of Hayman Residential Engineering Services, Inc. His company specializes in providing engineering certificates in 49 states. He can be reached at hresanswers@hayman-res.com or www.hayman-res.com.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

How To Try And Avoid Foreclosure

2009-05-29T12:01:00.004-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello everybody – Keeping busy? I feel the market is definitely picking up; however, there are still many people out of work and needing help to avoid foreclosure on their home. So this week, we are going to go through the process of how to try and avoid foreclosure.

When borrowers are in debt whether it be credit cards or mortgage payments many times they avoid answering the telephone because they do not want to talk to the collector on the other end. This is called the ostrich syndrome – if they put their head in the sand and not answer the phone, the collector will go away – WRONG!! Just the opposite is true especially these days when lenders really do want to help their customers. Foreclosures are really expensive for lenders – they do not want to own your home, however, they can allow you to live free, if you refuse to talk to them, they have no choice but to foreclosure.

So – you know someone who is a few months behind in their mortgage (banks prefer to work with borrowers who are one or two payments behind) The further you are behind the fewer options are available.

The first thing to do is contact your lender, explain your circumstances, why you are not able to make your payment. Lenders are also people - they too could be having a difficult time making their own payment – they will listen and hopefully have a solution to your problem. But you must call and ask.

When you call your lender, you should have the following information handy – Your account number; be ready to explain your circumstances of not being able to make your payment; have a paystub, because the person will ask about your current income. Have your overtime hours been cut, have you taken a cut in pay – be honest.

So you feel you have done everything right – called your lender explained your circumstances and your lender is promising to call you back and never do – You are at your wits ends – and feel like nobody is working with you and you need help.

There are some remedies that the have been set up.

FHA Insured Loan – your lender MUST be following FHA servicing guidelines. If your lender will not speak to you, your may call the FHA National Servicing Center toll free at (888)297-8685. Be ready to give the full names of all persons listed on the mortgage, including address of property. If by chance you have your 13 digit FHA case number, this can be found on your Settlement Statement in the upper left hand corner.

VA Insured Loan – Visit the VA Foreclosure Alternative page. Google – the site. If you have additional questions talk to a Loan Representative.

Conventional loans – If you have a conventional loan talk to a HUD approved Housing Counselor or call 800-569-4287. They may be able to help you with your lender. If you need additional help contact Hope Now – 888-995-HOPE and ask for assistance working with your lender.

All of the information was obtained on-line; however, when people need help many times they are distracted to the point they cannot find the help they need. So – if you know anyone who needs help with avoiding foreclosure, please pass this blog along to them.
Until next week. Keep processing – More later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

FHA Refunds Are Still Available

2009-05-22T11:46:00.004-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – Hope everyone is doing well and staying busy. In my quest to find a topic for this week’s blog and in the interest of the economy and everyone looking for extra money – I have an idea – Look on the FHA Refunds web site.

I was not sure there were still borrowers around who were due FHA Refunds – but there are still thousands of borrowers who are due money and do not know it. If you know anyone who acquired a FHA mortgage after September 1, 1983; paid an up-front insurance premium and has not defaulted on their mortgage, they could be eligible.

Many borrowers have refinanced their property who originally had an FHA mortgage and now have a conventional mortgage. According to the FHA website – FHA sent forms to those who had refinanced their homes and the borrowers were to complete and return to FHA – How many of these forms do you think have made it to the shredder without being read? There must be thousands because that is how many persons are listed that are due a FHA refund.

Also the site states – they have stepped up their efforts to locate homeowners who are owed FHA refunds. There are many companies who scan the website and try to locate the borrowers and charge a “finders fee”. FHA has stated that if someone from Immediate System Resources contacts a borrower – they are legit and are officially affiliated with HUD – they do not charge a fee.

Other tracer companies are legal, but they do not represent HUD and they will charge you a fee. Why pay a fee when you can get the information on your own.

As a processor, you could provide a service to your borrowers – since it only takes 10 seconds to determine if your borrower is on the list of those eligible for a refund – type in their name, who knows you could make your borrowers very happy. You could have a customer for life.

For FHA insured loans made with a closing date prior to January 1, 2001 and endorsed before December 8, 2004 – no refund is due after the seventh year of insurance. For FHA insured loans endorsed on or after December 8, 2004 – no refund is due to the homeowner unless they refinanced to a new FHA insured loan, and no refund is due these homeowners after three years.

While there have been changes regarding the refunds due to borrowers – the fact remains there are thousands of names listed. Why not check out the site and check the site for your new borrowers – You could make someone very happy.

Well – in closing this week – Keep processing. More later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

HUD Secretary Donovan Moving Forward With RESPA Reform

2009-05-15T15:27:00.004-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – I hope everybody is doing well and keeping busy. I sure am busy.
I have been following the changes going through the House of Representatives and the changes being made by HUD Secretary Shaun Donovan with much interest. Recently there have been lots of changes proposed, many of which will probably come to fruition. The latest changed – announced Monday, May 11th – you heard it hear first!! is the intent of the RESPA Reform. You can view the new docs on the hud.gov/news/release web site.

The new changes are scheduled to take effect on January 1, 2010 (only 6 months away). These changes will update the mortgage rules for the first time in more than 30 years. These changes will assist the consumers to show for the lowest cost mortgage and avoid costly and potentially harmful loan offers. These changes could save the consumer an average of $700.

“This administration is committed to proving consumers with clear and transparent information when they make the biggest purchase of their lives,” said Donovan. The RESPA changes are part of a bigger reform to the mortgage process.

There is one change that has been tabled for now in order that the bigger scope of the beginning of the RESPA changes could begin. The change that has been tabled for the now is the definition of “required use”. HUD is working on a clearer and more effective definition that protects borrowers from being forced to use affiliated business of the lender.

I have reviewed the new Good Faith Estimate (GFE) and Settlement Statement (HUD1) and the two forms should leave little doubt in the mind of the consumers what was disclosed at the time of application.

Starting with the GFE, which is now three (3) pages, the form is very personal to the borrower, i.e., in the Summary of Your Loan the questions begin with “Your” loan amount; “Your” loan term. Very specific – as to the amount, terms etc. Questions that the Loan Office will need to complete and answer with their borrower. There is also a “Shopping Cart” on the form which will allow borrowers to easily compare loans.

More interesting is the HUD1 Statement, which is also three (3) pages. The lines of the HUD1 now reference the numbers of the GFE. Any borrower going to closing will only need to take the GFE and easily find the numbers that were disclosed and what the actual numbers they are paying at closing. Again the form is very specific i.e., Line 801 of the HUD 1 – Our origination change (from GFE #l) these forms are also a protection to the lenders as much as to the borrowers – there will not be an “I was told” one thing by the LO and was charged something else. If this happens – everything will hopefully be specific enough to avoid any problems.

More changes will be coming to the mortgage industry, in part of because of the disastrous crisis that we have been muddled in for the past year and a half; I am sure those of us in the mortgage industry will like some of the changes and will not like other changes. However, once we get experienced in the new forms and procedures, it will be like we never knew any other way. We must remember that without borrowers, we have no jobs. Huge numbers of jobs were lost and many of our co-workers are still looking for jobs, so as a personal aside, if these changes increase consumer confidence and increase mortgage sales – I can live with them.

Well – this is all for this week. Keep busy. Keep Processing – More Later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

HR 1728 – Approved by Financial Services Committee

2009-05-11T19:10:00.003-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – Sorry I did not blog last week; however, I changed jobs and I was up to my ears in stuff. So now that I am on my new job and things are starting to settle down – I thought I would bring you up to date on an issue I reported on back in April regarding the Mortgage Reform and Anti-predatory Lending Bill.

I remember stating that by the time the Financial Services Committee got through dissecting the bill as presented by Barney Frank we probably would not recognize it. WOW – was I wrong!! On April 29, 2009 the House Financial Services Committee was approved. The House of Representatives is expected to consider the bill a soon as this week. The legislation approved by a vote of 49-21. It looks like there will be no stopping this bill – however, it will definitely effect the mortgage industry.

Per Representative Brad Miller (D-NC) stated that ten million American families will lose their home to foreclosure in the next four years, many of them falling out of the middle classes and into poverty. He feels that the mortgages that lead to this crisis should have never been made and he feels this can’t happen again.

The bill would ensure that mortgage lenders make loans that benefit the consumer and prohibit them from steering borrowers into higher cost loans. For mortgages refinancing, the bill requires that all loans provide a net tangible benefit to the consumer. Also, it would make the secondary mortgage market responsible for complying with these standards when they buy loans.

Lenders and secondary mortgage market who don’t comply with these standards would be held accountable by consumers for recession of the loan and the consumer’s costs for recession, including attorney’s fees. They would have the option to rework a loan to conform to the bill’s standards within 90 days of receiving notice from the consumer.

The bill also encourages the market to move back to fixed rate mortgage, full documented loans.

The legislations would also - Prevent Predatory and Abusive Lending – Many homeowners in the current mortgage crisis receiving more expensive loans than they qualified. Hence – stated loans, stated assets, stated income will cease. The bill would also require that originators to disclose to consumers the compensation they receive from the transaction.

In addition, the bill would require new federal rules to be written to require creditors to retain an economic interest in a material portion of at least 5% of the credit risk of each loan that the creditor transfers, sells or conveys to a third party.

Also – Renters would be protected from being evicted from the home they are renting. Appropriate notice would need to be given before the tenants could be evicted.

While this bill is still relatively new, I cannot help but think when it hits the House of Representatives it will be totally changed. Although I personally thought it would not make it through the Financial Services Committee and it did.

Well – that I all the news I have this week and I hope everyone is staying busy. I am sure busy. Until next week – keep processing. More Later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Surface Bonding Cement and HUD Requirements for Existing Manufactured Homes

2009-05-11T18:54:00.002-04:00

Written By: Paul Hayman, P.E.

It is very common to encounter a type of surface bonding cement under manufactured homes that has been applied as an upgrade to bring the foundation into compliance with HUD standards. However, I have never been able to understand how or why this is the case. There seems to be an interpretation among some engineers that the September 1996 Permanent Foundations Guide to Manufactured Homes (PFGMH) requires that CMU blocks always be mortared together and that the use of such a bonding cement will meet that requirement. In my opinion, this is wrong on both counts.

First, there is nothing in the definition of a permanent foundation in the PFGMH that requires block stacks to be mortared together. There is a section that does address masonry piers. The most common quote is taken from section 503.4 which states “All masonry piers and walls shall have mortared bed and head joints.” What is usually left out is the following statement, “Reinforcing and grouting shall be in accordance with the foundation concept selected from Appendix A.” Appendix A is a collection of pre-approved designs which are guaranteed to meet HUD requirements. When you look closely at what this requires, you find that the total approach requires several components seldom found, including: (1) a poured concrete footer, (2) voids in the CMU filled with concrete, (3) rebar connecting the CMU to the footer, (4) an anchor bolt coming out of the top of the stack and (5) the I beam securely bolted to the stack through the anchor bolt (with no wooden shims). This is a very complete structural stack that will meet every HUD requirement. Unfortunately, it is rarely encountered because it unnecessarily adds thousands of dollars to the set up costs and is not structurally necessary.

However, this entire design is not mandatory for existing construction for two reasons. One, the PFGMH clearly allows alternative designs that do not require the mortaring of CMU blocks. The PFGMH includes possible designs in the Appendix, but those designs are only examples and are not mandatory. Two, the PFGMH clearly addresses requirements for existing foundations in Chapter “101-2. EXISTING CONSTRUCTION. . . Upgrade of existing anchorages and footings shall meet the intent of the definition of permanent foundation stated herein.” Note that only the anchorages and footings are required to meet the “intent” of the new requirements. Piers stacks on existing construction do not have to meet the same requirements as new construction. So even if the mortared CMU blocks were universally required for new construction, which they aren’t, existing construction doesn’t have to meet these requirements.

This should be enough to eliminate the use of this product in this application, but there are several other even better reasons why it should not be used. The first is a matter of common sense. A manufactured home sitting on a pier stack will slip at the point of least resistance. On a pier stack, the point of least friction is where the I beam sits on the wooden shims—smooth surface on smooth surface. If that is not addressed, and the use of bonding cement does not touch this area, it doesn’t matter how strong the stack beneath the I beam/wood shim connection is, the stack will still slip at exactly the same applied force as it did before. The surface bonding cement does absolutely nothing to actually strengthen the overall foundation, so why use it?

Another reason is administrative. The usual HUD document referenced is the HUD Materials Release 907f which addresses the use of Bonsal Surface Bonding Cement in various applications. There are three reasons why this document is not applicable to existing foundations on manufactured homes:

1. Nowhere in this document is the specific application of upgrading foundations on manufactured homes even mentioned. This application was designed for agricultural block buildings, not residential housing;

2. The document expired in October 2007. I can find no evidence on HUD’s website (or anywhere else) that it was reviewed or re-released. The document clearly states ” Failure to apply for a renewal or revision shall constitute a basis for cancellation of the MR.” Based on its expiration, the MR can no longer be used;

3. Most importantly, the manufacturer’s installation instructions must be followed and their requirements are such that this product cannot be used for existing manufactured home foundations. Under the manufacturer’s instructions are statements such as “The first course of concrete blocks is laid in a full mortar bed,” “Bonsal. . . shall extend down to the top of the footing.” This product is designed to be used in buildings that (1) have a poured concrete footing and (2) have the first row of blocks mortared to that footing. There is not a manufactured home in this country that meets these two requirements that doesn’t have the rest of the block mortared. I have seen this product used in hundreds of manufactured homes and in every one, the piers are sitting on grade.

Based on the above, I never recommend the use of surface bonding cement to upgrade a foundation to compliance with HUD rules. However, when I encounter a foundation with this surface bonding cement, I usually don’t require the homeowner to do anything else because he has already spent (sometimes) thousands of dollars on this. It is not fair to a homeowner to continually require additional upgrades because the engineers can’t agree on what should be required.

About the Writer. Paul Hayman, P.E., is owner of Hayman Residential Engineering Services, Inc. His company specializes in providing engineering certificates in 49 states. He can be reached at hresanswers@hayman-res.com or www.hayman-res.com.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Anchorage Requirements on a Manufactured Home. What does HUD require?

2009-05-01T12:13:00.003-04:00

Written By: Paul Hayman, P.E.

The September 1996 Permanent Foundation Guide to Manufactured Homes (PFGMH) is not very clear on exactly what it requires by way of anchorage (also referred to as “
tie downs”). There are two kinds of anchorage: vertical anchorage to resist uplifting forces due to wind or seismic events and lateral anchorage to resist side-to-side movement.

The PFGMH has this to say about vertical anchorage (paragraph 100.C): “Vertical stability: 1. Rated anchorage capacity to prevent uplifting and overturning due to wind or seismic forces, whichever controls. Screw in soil anchors are not considered a permanent anchorage.” There are calculations to determine now much vertical anchorage is required. You might think the weight of the unit (which can exceed 80,000 pounds fully loaded) would be enough to resist uplifting in all but the most extreme weather—tornadoes and hurricanes, and you would probably be right.
Just to be clear, the PFGMH does not require anchorage to withstand a tornado or hurricane. In the vast majority of the US, anchorage is required to withstand an 80 mph wind. However, most, but not all, manufacturers, states and federal agencies do require additional anchorage.

The above quote plainly states that ground anchors, the most common type, are not permissible. This requires tie downs be anchored into concrete. This can be accomplished with metal straps (most commonly), welded rebar, cable or proprietary systems. In some states (i.e., AZ) it was, and still is, common to provide anchorage by nailing, or otherwise connecting, the rim joist to a substantive skirting wall.

Lateral anchorage protects the home from side-to-side movement. The PFGMH states: “Lateral stability. Rated anchorage capacity to prevent sliding due to wind or seismic forces, whichever controls, in the transverse and longitudinal directions.” Note that there is no restriction against ground anchors as there is in the vertical section. Very few engineers follow the letter of this requirement—concrete anchors for vertical stability and ground anchors for lateral stability—because it just doesn’t make any sense. Most engineers will either allow ground anchors for all anchorage or require concrete anchors for all anchorage. At least that way they are consistent. Metal strapping, cable, rebar or proprietary systems can supply this lateral anchorage.

The most common proprietary system, manufactured by several companies, consists of a large pan that sits under a pier. There are three arms attached to the pan that are bolted to the I-beams to resist lateral movement—two to the same I-beam as the pier and one to the adjacent I-beam. These systems are very easy to put in after the fact and are the most common upgrade systems. Often in upgrades, these proprietary systems are the only feasible option because the skirting wall prevents access for the equipment to install the ground anchors. The new HUD Model Installation Rules allow ground anchors for all anchorage requirements.

The bottom line is to find an engineer familiar with the nuances of the PFGMH. An engineer unfamiliar with the fine print of the HUD manual can wind up requiring much more substantial (and expensive) upgrades than necessary.

About the Writer. Paul Hayman, P.E., is owner of Hayman Residential Engineering Services, Inc. His company specializes in providing engineering certificates in 49 states. He can be reached at hresanswers@hayman-res.com or www.hayman-res.com.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

First time Homebuyers – preparing for the American Dream

2009-04-24T16:09:00.002-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – While I was thinking of a topic for this week’s blog, I could not dismiss in my mind the news reports of how many foreclosed homes are being sold at rock bottom prices. I think it is an absolute tragedy that so many people are losing their homes. And their lender could not help them save their home in the wake of all the stimulus money that has been poured into the system. Having said that and then I reflected back on the previous three years when housing prices were skyrocketing and houses were being sold for many thousands of dollars over the asking price - perhaps this is really a market adjustment at the cost of thousands of homeowners who are losing their homes.

Relating back to the news reports on buyers in the current market – could these buyers be those that were priced out of the market the previous three years. I think they may well be. Housing prices in Florida, Nevada, Arizona and California have plummeted. As an underwriter, I have seen houses in California that sold for $750,000 now under contract for $250,000. I have friends who paid $350,000 for a home in Naples, Florida, their current housing development is now 75% in foreclosure and they just got an offer for their home at $89,000. Their lender has agreed to a short-sale; but they put $100,000 down of their own money when they purchased the property. You can do the math.

The foreclosure crisis has opened up housing opportunities to many new borrowers, who could not afford to get into the bidding market of years past. I feel the market is doing a 180 – we are back to verifying employment; asking for pay stubs; asking for bank statements. Qualifying borrowers – it gives lenders a more secure feeling, a feeling of knowing their borrowers.

While there is no shortage of buyers in this market, I feel everyone is still a little shy to buy because of the job market. However, once the market opens to buyers, the choices of properties should be really good.

If you know anyone who will be looking to buy, help them along now. Suggest they get a copy of their credit report; go over the report very carefully – make sure everything is accurate. If there are any discrepancies now would be the time to notify the credit bureau and have the errors corrected. One is under enough stress when you buy a home – one does not need the added stress of an incorrect credit report.

Then - there is a very good probability that the mortgage payment is going to be higher then the current rent; and if they are not paying rent – it is especially important to start saving every month. As a non-profit housing counselor, many years ago, I would always recommended that first time buyers save the difference between their current rent and their new mortgage payment; if they were not paying rent – I would recommend they save their entire mortgage payment for at least three months before purchasing a home. How else were they able to know if they can really afford to buy or what sacrifices they might need to make. There are also the added costs of gas, electric, water, sewage and other utilities that may have been included with the rent – which are not included with the mortgage payment.

Purchasers should also be required to set up a “capital spending account” of X dollars per month – so they have the resources to repair a roof, fix a leak to keep the property in good condition.

With the new pricing of houses many more first time homebuyers will be able to purchase. However, care must be taken with these first time buyers so they understand the responsibilities of homeownership. I do not believe everyone should own a home, even though it is the “American Dream”. Purchasing a house is a huge responsibility which should not be taken lightly.

In conclusion – I want to say – Happy Homeownership to everyone who wants to own a home. Keep processing. More Later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Shallow Frost Protected Foundations

2009-04-24T14:35:00.001-04:00

Written By: Paul Hayman, P.E.

You have a manufactured home in a northern state that you want to finance. The engineering certification says the home is placed on grade with no footings. Is the homeowner’s only option to raise the home and pour a frost line protected foundation at a cost of $15,000 and up? It was until recently. Now it can be upgraded for significantly less.

The United States is discovering a foundation design that has been used for decades in Northern Europe. It is called a Shallow Frost Protected Foundation. It is a foundation design that holds reflected geothermal heat from the ground and waste heat from the home under the trailer (or other building) to prevent the ground from freezing. When properly designed, it is perfectly permissible to place a manufactured home on grade even when the local frost line requirement is 42” or greater. How? The perimeter skirting is designed with enough insulation to prevent the ground under the trailer from freezing. Depending on the location, it may just require extra insulation on the inside of the skirting wall and the closing of the vents during the heating season. In colder climates, it may require extra horizontal wings of insulation under the back fill surrounding the house.

The basic design guide is an American Society of Civil Engineers publication ASCE 32.01 Design and Construction of Frost-Protected Shallow Foundations (FPSF). You will hear more about these. The September 1996 Permanent Foundations Guide to Manufactured Housing doesn’t specifically address them one way or another. The new HUD Model Installation Rules that went into effect January 1 explicitly encourages their use. The 2006 International Residential Code has its own requirements for SFPF, but also allows designs compliant with ASCE 32.01. This is a very cost effective way to install a foundation resistant to frost heave. It can be used to upgrade a foundation or installed with a new foundation. It allows an installer not to pour concrete footers under the trailer, which can save a significant amount of money in installation costs.

Not everyone is convinced, though. Some of the northern states are very suspicious of a foundation that doesn’t involve pouring concrete and their building code officials are reluctant to approve them. The tide is changing and you will probably find these in the near future in most northern states.

About the Writer. Paul Hayman, P.E., is owner of Hayman Residential Engineering Services, Inc. His company specializes in providing engineering certificates in 49 states. He can be reached at hresanswers@hayman-res.com or www.hayman-res.com.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Home Inspection vs. Appraisal

2009-04-19T21:33:00.002-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – I feel the housing market is finally going to take a turn for the better. Although I have no crystal ball – I feel the questions, I have been fielding and the number of underwriting and processing jobs posted on CareerBuilder has soared. When the company I was working for approximately two years ago abruptly closed – I registered with CareerBuilder and I get available jobs everyday. Of course, they are not all in the area of the Country I am working – but since this blog is read nationwide – I feel this information would benefit everybody. So – heads up – the mortgage industry is picking up.

Soon we will be working with lots of buyers and fielding lots of questions – some will be answered by the loan officers and some will be answered by the processors. The topic this week will be answered mostly by loan officers; however, I feel it is important for everybody to be able to explain the difference between a Home Inspector and Appraiser.

The difference is sometimes very hard for the homebuyer to understand. The difference is the Home Inspector is responsible for the physical condition of the property. The appraiser is responsible for the Value and must be able to support the value with comparable houses within a 1 mile radius of the property. If the property is in a densely populated area – the comparables should be within a few blocks. Let’s talk about why the homebuyer should get a home inspection and make it a part of the purchase contract.

One thing to remember – Appraisals benefit lenders; home inspections benefit buyers.

A home inspector must be qualified and depending on the State in which you reside, they must be licensed. The home inspector is hired by the buyers – he has their interest at heart – he/she is working for them. Therefore it is important that the buyers choose their own home inspector. Perhaps the buyers have friends who recently purchased a property. If the buyers absolutely do not know anyone – they can look through the yellow pages and pick one or get a list of qualified home inspectors from their State’s licensed home inspectors. It is very important that the inspector be a person working for the home buyers, chosen by the home buyers.

OK – now what will the home inspector look at – the inspector takes an in-depth look at the home the borrowers are purchasing. He/she will evaluate the physical condition – the structure, construction and mechanical systems. Items needing attention either replaced or repaired will be pointed out and the inspector will also estimate the remaining useful life of the major systems (Heat, A/C, etc), structure and finishes.

Many buyers think that FHA guarantees the value or condition of the property they want to buy – FHA DOES NOT guarantee value or condition. If you find problems with your home after closing FHA will not give you money for repairs nor will they buy your house back. Which is the reason FHA emphasizes that it is the buyer’s responsibility to select a qualified inspector.

While it is the job of the buyers to get a qualified home inspector for their property; it is the job of the lender to get a qualified Appraisal to protect their interest in the property, should the unthinkable happen, such as a foreclosure.

The appraiser is also responsible for making sure the property meets FHA minimum property standards (Health, safety, soundness and structural integrity) and to make sure the property is marketable.

It is the appraiser’s responsibility to note visible problems with the property and with issues not to HUD’s standards. Some of these problems could be the same as noted by the home inspector.

Some other health testing to consider - Radon gas testing – which is a natural radioactive gas found in some homes. Lead testing is important if the property was built before 1978.

It is important that the borrower understand – if they spend the money prior to closing for inspections – it could save them thousands of dollars after closing.

In closing I would just like to say – no one wants to see the sale of a property fall through; however, do you want to see your buyers purchase a property that will not make them happy.

As usual – If you have any topics you would like to see covered in my blog – please let me know. Keep processing. More later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Manufactured Housing Anchorage Requirements

2009-04-19T21:27:00.001-04:00

Written By: Paul Hayman, P.E.

Exactly what kind of anchorage is a manufactured home required to have? A better first question is: What exactly is “anchorage” on a manufactured home? A manufactured home must be built to withstand external forces on it caused by wind and/or seismic events. “Anchorage” is the system that ties the home down and prevents it from being damaged by winds or minor earthquakes. Often the terms “anchorage” and “tie downs” are used interchangeably. The forces that the home must withstand include those that tend to lift the home straight up off the foundation and those that tend to move it sideways in one direction or another. “Vertical anchorage” prevents the home from being lifted off the foundation while “lateral anchorage” prevents it from moving sideways in any direction.

The September 1996 Permanent Foundations Guide for Manufactured Housing lists its anchorage requirements in the definition of permanent foundations. Under vertical stability, it requires “ rated anchorage capacity to prevent uplifting and overturning due to wind or seismic forces, whichever controls. Screw in soil anchors are not considered a permanent anchorage [paragraph 110.C].” For lateral stability, it requires “rated anchorage capacity to prevent sliding due to wind or seismic forces, whichever controls, in the transverse and longitudinal directions [ibid].”

Traditionally, there are a number of ways to anchor a manufactured home to the ground with the most common being a series of ground anchors with galvanized straps attached to the I beams that support the home. Depending on the state, they have been placed anywhere from a little over five feet apart (FL) to twelve feet apart (many states). Most states don’t have specific requirements for anchorage. A few states that have large numbers of manufactured homes such as Florida, Arizona and California have adopted very specific requirements and many other states are following suit, but it is important to note that the engineering requirements for manufactured home foundations for loan purposes are independent of any state requirements.

The HUD requirements are federal requirements and the HUD manual is not particularly clear in stating exactly what constitutes proper anchorage. For example, in the quotes above note that soil anchors are not permitted for vertical anchorage, but there is no such restriction for lateral anchorage. Most engineers interpret this as a requirement that all tie downs be anchored into concrete even though that is not what is says. Add to this the fact that no state requirements and no manufacturer requirements mandate the use of concrete anchored tie downs and you get a sense of the confusion. Homes that fully meet state and manufacturer anchorage requirements may not meet HUD anchorage requirements.

I have a hard time explaining to a homeowner in Florida that his home that fully meets Florida state requirements and has withstood several hurricanes unscathed does not have a “permanent foundation” as defined by HUD. To this point, I have just been talking about new construction. Take this amount of confusion and multiply it by ten, and you have an idea of the amount of confusion surrounding existing construction. That is because, according the September 1996 HUD manual, anchorage on existing construction need only meet the “intent” of the new requirements. That turns the whole issue into a subjective quagmire in which every engineer has his own opinion of what constitutes “intent.”

The new HDU Model Installation Rules, which have not gone into effect yet, attempt to solve this problem. But until then, required HUD anchorage is defined by whatever the engineer who inspects the property says. An engineer knowledgeable of HUD rules can save your borrower thousands of dollars in unnecessary upgrades.

About the Writer. Paul Hayman, P.E., is owner of Hayman Residential Engineering Services, Inc. His company specializes in providing engineering certificates in 49 states. He can be reached at hresanswers@hayman-res.com or www.hayman-res.com.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Summary of H.R. 1728 - Part 2 of 2

2009-04-11T17:45:00.001-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody - I hope everyone found the information contained in Part 1 of HR 1728 as interesting as I did. As I stated I cannot image all the changes in the House Bill actually becoming law; I feel by the time it is chopped up and amended, we probably will not recognize it as it reads today.

The HR 1728 bill also provides protection for tenants who are renting when the homes they rent go into foreclosure. Under the proposed Bill the tenants with a lease have a right to remain in the property until the end of the existing lease. However, if the purchase intends to use the property as the primary residence, the lease may be terminated with giving the tenant 90 days to vacate. Tenants without a lease or a month-to-month lease must receive 90 days to vacate.

Section 8 Housing Assistance - If a tenant is currently receiving Section 8 assistance; the purchasers of the property are subject to the existing lease and housing assistance payments for Section 8. While foreclosure does not constitute good cause for termination of Section 8 if the property is unmarketable while occupied of if the new owner will use the property as his primary residence the lease may be terminated.

Additional standards also fall under this Bill to protect consumers. They are – prohibiting certain prepayment penalties; prohibiting the credit from directly or indirectly financing a single-premium credit insurance; prohibiting mandatory arbitration and requiring specific disclosures for loans that include negative amortization features.

In the case of an adjustable rate mortgage, a notice at least six months before the expiration of a fixed introductory rate must be sent to the borrower. The notice must explain the rate adjustment process and the consumer’s alternatives and they must be given an annual notice regarding interest rate terms.

With regard to Title III (High-Cost Mortgages) there will be changes to enhance the consumer protection. Some recommended changes are: lowering the points and fee trigger from 8% to 5% for transaction of $20,000 or more and including additional costs and fees in the trigger. Prohibiting the financing of points and fees; charging excessive fees for payoff information, modifications or late payments; prohibiting practices that increase the risk of foreclosures, such as balloon payments, encouraging a borrower to default and call provisions. The Bill is also requiring pre-loan counseling.

Title IV – (Office of Housing Counseling) - The Office of Housing Counseling at HUD will be charged with carrying out and coordinating homeownership and rental housing counseling programs. The public will be informed of Housing Counseling through public service announcements, multimedia campaigns to promote housing counseling. In addition – HUD will be required to update the Mortgage Information Booklet to provide consumers with a greater understanding of the terms and purchasing a house.

Title V – (Mortgage Servicing) - This title requires borrowers with higher-cost and subprime loans to have accounts established to provide protection again tax liens and force placement of homeowners insurance.

If borrowers waive the right to have their taxes and insurance paid by the servicer, written disclosure must be given by the lender that explains the need to pay property taxes and homeowners insurance. RESPA will also be updated to create safeguards so the borrower understands when the servicer may impose force-placed hazard insurance. There will also be a mandate for swifter responses to consumer written inquiries, increasing penalties for abuses and requiring the prompt crediting of payments.

Title VI (Appraisal Activities) - Establishes strong, enforceable Federal standards with tough penalties, which allow appraisers to act as independent referees to verify the value of the property for buyer, the seller, the lender and the investor. This new Bill will also strengthen the appraiser licensing and education standards and a Federal grant program to assist States in their regulatory activities.

WOW – all these changes really get my mind racing. I am not sure how all these new regulations will be set into place. I can only image it could take years for any of these new regulations to take effect.

If anyone has any ideas for a Blog, please let me know. Until next week – keep processing. More later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Multiple HUD Regulations for Permanent Foundations on Manufactured Homes

2009-04-03T12:22:00.001-04:00

Written By: Paul Hayman, P.E.

There is more than one regulation that determines the requirements for foundations on manufactured homes. There is the September 1996 Permanent Foundations Guide for Manufactured Homes (PFGMH), which is an engineering document that is commonly used by engineers in designing and certifying foundations on manufactured homes. There is also the HUD Handbook 4150.2 Valuation Analysis for Home Mortgage Insurance for Single Family One- to Four- Unit Dwellings July 1, 1999. This is the manual that appraisers use in evaluating manufactured homes. Engineering Certifications generally certify compliance only with the PFGMH, not HUDHandbook 4150.2, and this sometimes creates confusion.

For example, HUD 4150.2 requires that the running gear and towing hitch (and usually also the wheels and axles) be removed, but the PFGMH does not address this. Some lenders find it confusing that the tongue could still be attached but the foundation is certified by the engineer as HUD compliant. Also, HUD 4150.2 requires that the HUD tag be attached and visible. If the HUD tag is missing, the loan is in jeopardy as the handbook mandates that the appraiser reject the property. Sometimes a replacement document can be obtained at http://www.ibts.org/certification_label.shtml. This is the website of the Institute of Building Technology and Safety. This verification is issued by IBTS, HUD's contractor, and is acceptable in lieu of a replacement label. Labeling information for all homes built under the Federal Program since June 15, 1976 is maintained by IBTS.

HUD Handbook 4150.2 references the PFGMH and mandates compliance with it. “The home must beerected on a permanent foundation in compliance with the Permanent Foundation Guide for Manufactured Housing. All proposed or newly constructed manufactured homes must meet the standards set forth in the Permanent Foundation Guide. A licensed professional engineer's seal and signature (certification) is required to indicate compliance with the Foundation Guide. The lender should furnish the appraiser with a design engineer's inspection of the foundation prior to the appraisal.” Note that HUD 4150.2 requires that the engineering certification be completed prior to the appraisal.

This is the opposite of what most lenders do, but it hasn’t seemed to create a problem for the lender. It does create a problem for the appraiser as he is required to do the following: ” The appraiser must inspect the crawl space for the following: poured in place concrete footings placed below the frost line supporting the manufactured home carriage frame, tie-downs anchored to the footings, protection from the elements and enclosed with material imperious to rot and infestation and perimeter foundation-type construction with footings extended below the frost line.” Most appraisers would have a hard time verifying this without the engineers input. And why would they want to accept the liability for this when they don’t make an extra dime for it?

What is confusing is that HUD 4150.2 requires the appraiser to verify foundation features that are not required by the PFGMH. “Tie-downs anchored to the footings” are not absolutely required by the PFGMH. THE PFGMH appears to require concrete anchors for vertical anchorage while not requiring concrete anchors for lateral anchorage, but it is not very clear on exactly what it is requiring. HUD 4150.2 also requires the appraiser to verify “perimeter foundation-type construction with footings extended below the frost line,” which the PFGMH does not require.

All this makes it difficult for a lender to know what to do. Just keep in mind that the engineer has his requirements and the appraiser has his own separate requirements. It is usually better for all if the lender lets the engineer decide what the permanent foundation requires and lets the appraiser decide the rest.

About the Writer. Paul Hayman, P.E., is owner of Hayman Residential Engineering Services, Inc. His company specializes in providing engineering certificates in 49 states. He can be reached at hresanswers@hayman-res.com or www.hayman-res.com.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Summary of H.R. 1728 - Part 1 of 2

2009-04-03T11:16:00.005-04:00

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody – What is this Blog title you ask – Well it got your attention, now I will explain. The Blog Title is referring to the Summary of House of Representatives Bill Number 1728, which was introduced on March 26, 2009 by House Financial Services Committee Chairman Barney Frank, Rep. Brad Miller (D-NC) and Rep. Mel Watt – (D-NC). This House Bill, if passed, will change the mortgage industry as we know it today. Because of the length of the bill which is 155 pages in the original form – I will report on the summary of the bill.

First in the long list of changes is – All mortgage originators (including individuals as well as companies and banks that originate mortgages) will be subject to a federal duty of care that requires, licensing and registration under State or Federal law. All originals must present consumers with appropriate mortgages loans (i.e., loans that a consumer has a reasonable ability to repay and for which he/she receives a net tangible benefit (for refinancing) and that do not have predatory characteristics). The originators will make full disclosures to consumers, certifying to lenders compliance with origination requirements and including a mortgage originator’s unique identifier in loan documents.

Yield Spring premiums and other compensation that could cause mortgage originators to “steer” applicants toward more costly mortgages are banned for all mortgage loans. The total direct and indirect compensation from all sources permitted to the mortgage originator may not vary with the terms of the mortgage loan.

It gets more interesting. A mortgage originator that violates the duty of care will be liable to a consumer for the greater of actual damages or an amount equal to three times broker fees plus costs, including attorney’s fees.

Title II – Minimum Standards for ALL Mortgages – Ability to repay/net tangible benefits. Every residential mortgage loan will be subject to two new Federal standards that apply to creditors, assignees and securitizes.

At the time the mortgage is entered into, the creditor must make a reasonable good faith determination that the consumer has a reasonable ability to repay the loan at a fully indexed fully amortizing rate, based on verified and documented information including the consumer’s credit history, current and expect income debt-to-income ratios.

For refinancing – the will loan must provide a net tangible benefit to the consumer, based on information known or obtained in good faith by the credit. The Federal banking agencies shall prescribe relations that define “net tangible benefit” and loans for which the cost of refinancing exceeds the newly principal specifically do not provide a net tangible benefit.

Qualified Mortgage – Safe Harbor is a mortgage that provides prime, fully documented 30 year fixed-rate mortgage that have no negative am or interest-only features are presume to the meet the ability to repay and net tangible benefits standards. However, this presume is rebuttable. Qualified mortgages are defined as such – the APR does not exceed an average prime offer rate (i.e. 1.5 percentage points for a first lien and 3.5 percentage points for a subordinator lien); the income and financial resources have been verified; the underwriting process is based on a fully indexed rate; the loan meetings a combined debt-to-income test prescribed by the Federal banking agencies and the loan has a fixed rate of not less than or more than 30 years.

If this Bill passes as presented the consumer will have other remedies against the creditor under the Truth in Lending Act. If the creditor violates the ability to repay or net tangible benefit standards they will be liable to the consumer for recession plus the consumer’s costs for the recession unless the creditor provides a cure within 90 days after receiving notice from the consumer.

What is the cure? A no-cost modification or refinancing of the loan to provide terms that would have satisfied the minimum standards if the loan had contained terms as of the original date, as well as the payment of costs the consumer incurred as a result of the violation.

Is this enough information for this week? I think so. Every time I read this Bill, my head starts to swim. So I will save some for next week – however, it is a start and it will be very interesting to see if this Bill passes as introduced.

So until next week – keep processing. More Later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)