Loan Processor Blog :

Why Aren’t More Lenders Following HUD’s “Flipping Waiver?”

noreply@blogger.com (Editor in Chief) — Fri, 12 Mar 2010 17:37:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

One of the hot buttons in our industry these days seems to be the lack of lenders honoring HUD’s recently issued “Flipping Waiver” for FHA lending. I’ve had a number of originators vent their frustrations with not having any outlets to turn to for this and a number have asked for further explanation. As someone who spends a majority of my time working with credit risk, I feel I can offer a pretty darn good explanation for why.

We all know what’s lead us to the state of the industry that we’ve dealing with for the past two plus years. Credit policy standards were far too low for us to eliminate high risk borrowers and far too little attention was paid to high risk trends because everybody was too busy making money. But FHA was a bit ahead of the game in that at last they had the 90-day seller seasoning requirement in place through that entire period. That gave lenders the ability to refuse lending to FHA borrowers who were purchasing properties from flippers and flipping rings that hadn’t been in title for at least 90 days. It offered at least some protection to the lenders. Unfortunately many of the flippers and flipping rings managed to get through the system using sub-prime and conventional lending which eventually contributed to the mass of foreclosures and default trends that eventually lead to the fall of our markets.

When mortgage defaults increased and foreclosures started rising, the lenders all found themselves having to expand their quality control monitoring which in many cases meant expanding the sizes of their QC staff. This lead to more costs while allowing them to meet minimum agency QC standards which the agencies had no choice but to start paying real attention to. Lenders started paying real attention to the details and trends of their defaulted loans and foreclosure portfolios.

With the major change from the world of sub-prime and conventional lending over to a dependence upon FHA lending for the first time in many years, lenders all experienced a significant learning curve. It took over a year for originators, processors, closers, funders, shippers, insurers, auditors, purchasers and servicers to really learn and get comfortable with the ins and outs of FHA lending. Many of them had come into the industry when it was booming and may have had no experience whatsoever with FHA lending. Now, with a major switch in lending trends, lenders had to get their staffs trained, reorganize their divisions, hire in FHA experts, spend money and time getting FHA-approved if they weren’t already and take serious looks at their internal processes and procedures. They all had to ramp up their training and education on high risk and fraud recognition and awareness.

It’s really just within the past few months I feel that the industry as a whole has really come to fully comprehend the differences between the former dependence on mainly conventional lending to now depending upon FHA-insured lending options. Employees of the industry now have gained an understanding of FHA guidelines and requirements and most lenders likely encounter many fewer “screw ups” than in the previous 12-18 month period. But just when we all feel like things have settled a bit BAM! HUD comes out with the flipping waiver that completely contradicts the message we’ve all been learning in the past few years about FHA. We are surrounded by constant crackdowns on credit policies and tougher lending standards and we’ve all read the articles and seen the news coverage about the FHA insurance funds being in trouble. But then instead of tightening standards, as they have in so many other areas, they tell us to ignore the 90-day seller seasoning standard to allow properties to move. Say what?

I remember my initial reaction when I received notice of the waiver. I believe I yelled out something like “have they lost their *(&*^&^ (&) P_&*&*(&(Y mind!” I immediately know that I wasn’t the only person who was thinking what I was thinking. My thoughts were of the contradictory message the waiver sends to the industry in these times where lending is tightening and fraudsters are sought out moreso than ever in the past. I expected that our main lenders might have serious issue with the waiver, just as I did. And I was correct in my thinking.

To date I have heard only of two outlets honoring the waiver. I am not aware of any significantly large and common lenders that are. To be honest, I don’t expect they will. They don’t trust the message that’s being sent out from HUD right now. On one hand, HUD has made it particularly clear they are monitoring lender performance moreso now than ever in the past. They have made their point known by the various news articles and announcements they’ve made subpoenaing lenders for investigations. We’ve seen the penalties and sanctions they’ve been distributing out there.

What it comes down to is this: In the past, lenders jumped on the bandwagon when opportunity presented itself to capitalize on the market because the other lenders were doing it. They were quick to ignore the risks of allowing no doc borrowers to go through the system, were quick to ignore the risks of allowing borrowers with no credit, minimal credit and borrowers who flat out didn’t qualify to go through the system, were quick to offer lending products like interest only when they clearly knew borrowers didn’t come near to qualifying for the full payment on said mortgage. All of those lenders have paid dearly for their bad business decisions.

In today’s world, lenders stop to weigh the options before jumping on the bandwagon of opportunity because they have all learned the hard way that opportunity now can end up costing later. With limited seller seasoning being a clearly identifiable lending risk, lenders simply cannot afford to take a chance on HUD’s waiver.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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 Case Transfers and Appraisal Portability

noreply@blogger.com (Editor in Chief) — Fri, 05 Mar 2010 16:12:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

With all of the recently implemented FHA appraiser and appraisal changes, it can be somewhat confusing as to what detail and information you as a loan officer or processor may need to be aware of when it comes to new appraisal orders and appraisals received as the result of case transfers. Below is some information you may find useful.

There are two common situations that can lead to an incoming FHA case transfer:

1. The borrower starts their FHA loan application with Lender A who obtains an FHA Case Assignment but the borrower chooses to finish out the loan process by re-applying with Lender B and requests their case be transferred from Lender A to Lender B; or

2. Lender B attempts to request a case assignment for a new application but receives a message in FHA Connection that an existing case, belonging to Lender A, exists in association with the subject property. (most often this involves different borrowers than applied with Lender A)

In either case, Lender B in is position to request a case transfer from Lender A. There are a number of things that must be taken into consideration by Lender B when requesting the case been transferred from Lender A to Lender B. These are pertinent questions that should be asked whenever you are in position to accept an incoming case from another lender:

1. Does Lender B have application from the same or differing applicants than started the process with Lender A?

2. Has Lender A underwritten and rejected a loan for the same borrower’s who are now in process with Lender B?

HUD requires that Lender A complete the Mortgage Credit Reject screen in FHA Connection prior to transferring the case to Lender B if indeed the loan was underwritten and rejected. When this screen is completed by Lender A, Lender B can “overturn” the rejection of Lender A by specifically explaining and documenting the reasoning in Lender B’s case file for insuring.

3. Has an FHA appraisal been received for the subject property by Lender A?

- If Lender A does not have an appraisal in hand, your borrower’s will be able to obtain an appraisal specifically for them and their property through whatever appraisal ordering process your organization has implemented for purpose of maintaining appraiser independence.

- If Lender A does have an appraisal in hand, Lender B should be aware of any internal procedures and requirements that may apply within Lender B’s organization for the review and acceptance of incoming appraisals related to FHA case transfers.

4. If Lender A has a completed FHA appraisal in hand, is the existing appraisal still valid? Will the appraisal remain valid by the time Lender B’s loan is set to close?

- If the case was assigned prior to January 1, 2010 the appraisal has a six month validity period for existing construction or a 12 month validity period for new construction.

- If the case was assigned after January 1, 2010 but before February 15, 2010 the appraisal expires after 120 days and a new appraisal is required after expiration.

- If the case was assigned on or after February 15 the appraisal has a validity of 120 days but when it expires, FNMA Form 1004D may be used to request an appraisal update If the appraisal meets the requirements of Mortgagee Letter 2009-51. If the appraisal does not meet such requirements, a new appraisal must be requested from the same appraiser who completed the incoming appraisal through whatever appraisal ordering process your organization has implemented for purpose of maintaining appraiser independence.

5. If Lender A has a completed FHA appraisal in hand, is the appraiser on Lender B’s ineligible list? Is there any reason Lender B cannot accept an appraisal completed by the appraiser who completed the appraisal for Lender A?

- Unless the situation meets either of the requirements listed in Mortgagee Letter 2009-29, Lender B must re-use the appraisal being transferred in from Lender A.

6. Does Lender A intend to charge Lender B for transferring the appraisal?

- Transferring lenders are entitled per HUD to charge reasonable fees for reimbursement of the appraisal expense. When the case involves different borrowers for a common property, FHA instructs that Lender B is to collect an appraisal fee from the new borrowers and present the fee to Lender A so that Lender A may reimburse the original borrower’s for the appraisal expense.

For any case transfer request, Lender B should specifically request that all rights to the existing case and appraisal be transferred to Lender B and that Lender B will accept all rights to the case. The questions listed above should also be kept in mind when requesting the case transfer so that informed decisions can be made at point of transfer and so that effective communications can be made to your borrower(s) involved with the case transfer process.

One thing to note of importance - If Lender B determines that any portion of the transferred appraisal received from Lender A requires updating, additional commentary, corrections, etc. the appraiser is obligated by the confidentiality regulations within USPAP and cannot honor the request of Lender B without considering it a new appraisal assignment. These situations can lead to additional fees and in some cases, requirements for another appraisal fee to be charged. HUD does not allow the borrowers to be charged for more than one appraisal.

HUD does not require that the borrower names, client (lender name) or transaction details match on the appraisal in cases of case transfer. They are concerned most that the value of the property is justified to meet the requirements of your transaction type and that the property meets HUD minimum property standards. However, Lender B may have their own requirements for all data to match between the appraisal and the transaction. Be aware that you cannot request that the appraiser change the client (lender) name or any of the other minor details without it being considered a new assignment which leads to added charges. HUD does not get involved with the appraiser charges or charges between the lenders concerning case transfers.

If the transferring lender is uncooperative, prior to contacting HUD, the new lender should attempt to resolve the situation with the original lender at a management level. If the new lender cannot reconcile the situation with the original lender, the new lender can fax the following items to the Director of Processing and Underwriting Division in the appropriate Home Ownership Center (HOC) containing the following:

1. The steps taken by the lender to try and accomplish the transfer;
2. A Listing of the fees (if any) the original lender has requested be paid;
3. The resolution, if any, to the request for payment of fees by the original lender;
4. A letter signed by the borrower stating that the borrower wants to work with the new lender.

HUD staff will transfer the case number or cancel the existing case number so that a new case number may be issued, as appropriate.

Fax the above listed information to the appropriate Homeownership Center as listed below:

- Atlanta Homeownership Center oversees the following states: Alabama, Florida, Georgia, Kentucky, Illinois, Indiana, Mississippi, North Carolina, South Carolina, and Tennessee.

Fax request to: 404-331-3361

- Denver Homeownership Center oversees the following states: Arkansas, Colorado, Iowa, Kansas, Louisiana, Missouri, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Wisconsin, Wyoming, and Utah.

Fax to (303) 672-5211 or (303) 672-5210, if busy

- Philadelphia Homeownership Center oversees the following states: Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia.

Fax to (215) 656-3434 for properties in DE, DC, MD, MI, PA, VA, WV

Fax to (215) 656-3438 for properties in CT, ME, MA, NH, NJ, NY, OH, RI, VT

- Santa Ana Homeownership Center oversees the following states: Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon and Washington.

Fax to (714) 796-5521

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Freddie Mac Favorites

noreply@blogger.com (Editor in Chief) — Fri, 26 Feb 2010 16:26:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

This week I am providing the last of my favorite lists of agency websites and resources. I like to visit these often to obtain as much training and education as I can get my hands on. Freddie Mac offers some of the most thorough and user-friendly education materials out there and I highly recommend taking advantage of everything they offer. Whether you are a loan officer, processor, underwriter, auditor, shipper or seller, you can benefit from Freddie Mac’s extensive list of resources!

View the list by clicking here: List of Freddie Mac Favorites.pdf

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Fannie Mae Favorites

noreply@blogger.com (Editor in Chief) — Fri, 19 Feb 2010 16:11:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

At the end of last year and beginning of the New Year I like to share my favorite resources for finding information that can be utilized to learn agency product guidelines, requirements and restrictions. Because HUD was so active releasing Mortgagee Letters and a number of important FHA guideline change dates were taking affect, I was interrupted a bit before finishing the issuing of my lists. Now that things have slowed a bit on the “FHA front” for now, I would like to resume my communications of my favorite freebie lists.

That being said, here are my favorite and most commonly utilized Fannie Mae websites and links:

Fannie Mae Single Family Main Page:
https://www.efanniemae.com/home/index.jsp

Subscribe to Receive Fannie Mae Bulletins, Announcements and Updates
https://www.efanniemae.com/lc/newsletters/index.jsp

Single Family Loan Limits:
https://www.efanniemae.com/sf/refmaterials/loanlimits/index.jsp

Mortgage Products Page:
https://www.efanniemae.com/sf/mortgageproducts/

Mortgage Product Training:
https://www.efanniemae.com/lc/mtgproducts/index.jsp

Selling and DU Guides:
https://www.efanniemae.com/sf/guides/index.jsp

Desktop Originator Main Page:
https://www.efanniemae.com/is/brokcorresp/do/index.jsp

Desktop Originator Training:
https://www.efanniemae.com/lc/technology/do/

DO Release Notes:
https://www.efanniemae.com/sf/guides/duguides/doreleasenotes/

Desktop Underwriter Main Page:
https://www.efanniemae.com/sf/technology/ou/du/index.jsp

Desktop Underwriter Training:
https://www.efanniemae.com/lc/technology/du/

DU Release Notes:
https://www.efanniemae.com/sf/guides/duguides/dureleasenotes/

DU Lender Administrator Quick Steps Training Page:
https://www.efanniemae.com/lc/technology/du/quicksteps/lenderadmin/index.jsp

DU Guide for FHA:
https://www.efanniemae.com/sf/guides/duguides/pdf/fhaug.pdf

DU Guide for VA:
https://www.efanniemae.com/sf/guides/duguides/pdf/vaduug.pdf

Fannie Mae Forms:
https://www.efanniemae.com/sf/formsdocs/index.jsp

Single Family Reference Materials-Matrices, Summaries,
Approved Condo/PUD Listing:
https://www.efanniemae.com/sf/refmaterials/approvedprojects/

Glossary of Mortgage Terms: (available in English & Spanish!)
https://www.efanniemae.com/sf/refmaterials/glossary/pdf/etosglossary.pdf

Housing Finance Institute Live Training Opportunities:
https://www.efanniemae.com/lc/hfi/index.jsp

Originator & Underwriter Web Training Seminars: **These are great!**
https://www.efanniemae.com/lc/ou/index.jsp

Web Training Seminars on Income, Assets, Liabilities, Credit, Appraisals, etc.
https://www.efanniemae.com/lc/ou/websem/

Becoming a Landlord Guide for Borrowers:
https://www.efanniemae.com/lc/publications/pdf/landlord.pdf

Mortgage Fraud Prevention Resources: **Great Tools & Resources!**
https://www.efanniemae.com/utility/legal/antifraud.jsp?from=hp

Publications for Quality Assurance, Underwriting, Servicing & Selling
https://www.efanniemae.com/lc/publications/index.jsp

Fannie Mae In the Loop Newsletter Archives:
https://www.efanniemae.com/lc/newsletters/sfnews/index.jsp?referrer=frpromobx

Letters and Announcements:
https://www.efanniemae.com/sf/guides/ssg/2010annlenltr.jsp?from=hp

Brokers & Correspondents Page:
https://www.efanniemae.com/is/brokcorresp/index.jsp

Appraisers Page:
https://www.efanniemae.com/is/appraisers/index.jsp

LOS Vendor Page:
https://www.efanniemae.com/is/losvendors/index.jsp

Mortgage Insurers Page:
https://www.efanniemae.com/is/mis/index.jsp

Real Estate Developers & Manufacturers:
https://www.efanniemae.com/is/redevelopers/index.jsp

Real Estate Professionals Page:
https://www.efanniemae.com/is/reprofessionals/index.jsp

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Helpful Tips on Calling the FHA Resource Center

noreply@blogger.com (Editor in Chief) — Fri, 12 Feb 2010 16:28:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

FHA offers a number of resources that I utilize on a regular basis to help find answers to questions that often come up on FHA lending. Most often I refer to FAQ sites because in the past, I haven’t been a big fan of calling 1-800-CALLFHA and sitting on hold forever with the depressing background music only to propose my question to a body who could only answer based on searching for something I’d already searched for. But I must admit, it sure seems like FHA has stepped up their customer service capacity and training because the last two times I’ve called I didn’t have to hold at all and the person at the end of the line was actually quite knowledgeable and able to really help with my question. How refreshing! I no longer hesitate to call with questions when needed.

Here is something I just learned about calls to FHA that I think you’ll find helpful: Each time you call 1-800-CALLFHA with a question, you are asked for your name, company and phone number. Behind the scenes, that information is used to develop tracking and a tracking number. The call center does not provide that tracking number as a normal course of business but you can ask for it. It’s in your best interest to always get the tracking number so that if you have to call again with additional questions on the same topic, you can provide the reference number to the call center associate who can then simply pull up the record(s) of your previous call(s) on said topic. This can save you time from having to re-explain the question or situation all over again. How handy is that?!

The FAQ sites that I refer to regularly are listed at HUD’s Frequently Asked Questions website at http://www.hud.gov/offices/hsg/sfh/faqs/faqsmenu.cfm. There you’ll find FAQ lists broken down in categories.

I also like to go directly to the FHA Resource Center FAQs at http://www.fhaoutreach.gov/FHAFAQ/ to search by topic because I know that questions that come through 1-800-CALLFHA are all eventually listed there. It’s pretty likely that someone else may have already asked the same question I have. Just choose the “Solutions” tab and click to “Search By Keyword.” Then simply enter the key word and scroll through the questions listed to see if you can find the answer you’re looking for.

You can also choose the tab “Contact FHA” which provides data fields for you to complete so you can send off your question directly to the FHA Resource Center. If you prefer, you can even email the Resource Center directly with your question by sending it to info@fhaoutreach.com.

FHA Resource Center Contact Information:

Website: http://www.fhaoutreach.gov/FHAFAQ/
Email: info@fhaoutreach.com
Ph: 800-CALL FHA (800-225-5342)

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Important Information about IRS Tax Transcripts for Income Verification

noreply@blogger.com (Editor in Chief) — Fri, 05 Feb 2010 16:02:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

This is always a confusing time of year as we all scramble to figure out who filed their taxes when and how, how soon we can get copies of transcripts, how to verify someone really did file and what exact documentation our lenders will require and accept in various qualifying situations.

I’d compiled a growing list of questions on this topic myself since the beginning of the year so I thought it important to take time out of my day to get answers straight from the Internal Revenue Service. I think you may find the following list of Q&A helpful to you as you review your loan situations and direct your borrowers on how to get you the information you need for their application as efficiently as painlessly as possible.

1. Once a taxpayer electronically files his/her 2009 tax return, approximately how long does it take before the taxpayer can obtain copies of his/her tax transcripts directly from the IRS?

3 Weeks. The consumer can call 1-800-829-0922 to check to see if their transcript is available and request it directly from IRS at no cost. However, they must allow 10 days to receive it.

2. If the taxpayer mails their return, approximately how long should they expect to need to wait until they can obtain a copy of their transcript directly from the IRS?

6-8 weeks and times may extend longer after April 15th. The consumer can call 1-800-829-0922 to check to see if their transcript is available and request it directly from IRS at no cost. However, they must allow 10 days to receive it.

3. Can taxpayer file their tax returns by visiting a local IRS office? And if so, will they get some sort of receipt as evidence they’ve filed their return with the IRS?

Yes and Yes.

4. Can taxpayers get copies of their tax transcripts by visiting their local IRS office in person?

Yes but only IF their return has been processed through the system (meaning still subject to the 3 week average expected turn time from date of electronic filing or 6-8 week turn time for mailed filings). However, once the transcript is available, keep in mind that if the borrower can get it at the local IRS office, it will save the added 10 day waiting period for mail time from requesting from the IRS 800 number.

5. How can we direct taxpayers to find their local IRS office location information?

Go to http://www.irs.gov/localcontacts/index.html, scroll down the page to the U.S. map and click on the state.

6. How does the taxpayer go about requesting copies of transcripts directly from the IRS? Is there a charge?

They can request their transcripts directly from IRS at no charge by calling one of the following numbers:

- 1-800-829-0922
- 1-800-829-1040 and listen to menu to select prompts to get to proper menu
- Visit local IRS office to request directly on site
The IRS does charge $57 if the consumer requests a copy of his/her actual return (not the same as a transcript).

7. Can you explain the different types of “products” that can be requested using the 4506-T and what purpose each might be used for?

- Return Transcript: includes most of the line items of a tax return as filed with the IRS. A tax return transcript does not reflect changes made to the account after the return is processed. Transcripts are only available for the following returns: Form 1040 series, Form 1065, Form 1120, Form 1120A, Form 1120H, Form 1120L, and Form 1120S. Return transcripts are available for the current year and returns processed during the prior 3 processing years. Note: Transcripts will not show amount of tax owed or paid, outstanding balance or IF an amended return has been filed.

- Account Transcript: contains information on the financial status of the account, such as payments made on the account, penalty assessments, and adjustments made by you or the IRS after the return was filed. Return information is limited to items such as tax liability and estimated tax payments. Account transcripts are available for most returns. Note: Verifies outstanding taxes owed, account status, payments made, penalties, interest and fees etc. This is what you may need if there is any concern that a borrower may have a large amount of outstanding tax liability with IRS

- Record of Account, which is a combination of line item information and later adjustments to the account. Note: Ideally THIS is what we should require rather than just transcripts because this actually shows line item filing information PLUS includes information on amendment filings. THIS is what we would want to require in any case where the tax return copy provided by the borrower doesn’t match up to the transcript we receive.

- Verification of Non-Filing: Proof from the IRS that the borrower did not file a return for the year. Current year requests are only available after June 15th. There are no availability restrictions on prior year requests. Note: We would need to require this product to verify that a particular individual was perhaps not required to file and therefore did not.

- Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. A transcript that includes data from these information returns. State or local information is not included with the Form W-2 information. The IRS may be able to provide this transcript information for up to 10 years. Information for the current year is generally not available until the year after it is filed with the IRS. For example, W-2 information for 2007, filed in 2008, will not be available from the IRS until 2009.

So ideally, for a borrower who has recently filed tax returns for 2009 income that is for instance, required for qualifying such as may be a the case for some self-employed borrower situations, the most efficient way to obtain transcripts right now is to direct the borrower to check with the IRS periodically to determine when transcripts are indeed available. Then, if possible, have the borrower go to the local IRS office in person to request and obtain the transcripts on site. This will help avoid the additional 10 day or so waiting period for the IRS mailing process. This method also costs the borrower no fee for obtaining the transcripts.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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 Changes-An Active Start to the New Year

noreply@blogger.com (Editor in Chief) — Tue, 26 Jan 2010 15:52:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

So many changes happening so far in the New Year I thought it would be helpful to put them down in chronological order to help us all keep track! It’s looking like it will be a very active year for FHA program and guideline changes. Here is what we need to be aware of thus far:

December 16

I mention this one only because with people being so busy over the holidays, wanted to make sure nobody missed it! Mortgagee Letter 2009-52 stated HUD’s FHA Short Sales and Short Payoff Policy effective 12/16/2009.

January 1

RESPA revisions are effective on and after this date for all loan types which as we are all now well aware brings forth a completely new way of reflecting loan fees, charges and revenues. Be sure to visit HUD’s RESPA page which provides a lot of great resources to answer the questions you may have regarding the new rules. Mortgagee Letter 2009-53 also added some last minute clarifications for FHA.

January 1

2010 FHA Maximum Loan Limits announced in Mortgagee Letter 2009-50 become effective for loans with credit approval dates on and after 01/01/2010.

January 1

FHA appraisals for ALL cases assigned on and after this date will be valid for 120 days which is a change from prior FHA appraisal validity periods of 180 days for existing construction and 12 months for proposed and under construction cases. This change is announced in Mortgagee Letter 2009-30.

January 1

Mortgagee Letter 2009-29 stated that effective for cases assigned on and after this date, Mortgagees are expected to complete requested case transfers as well as transfer valid appraisals that have been completed for the property to the requesting lender. The announcement expands to state that the receiving lender may request a 2nd FHA Appraisal in particular cases where material deficiencies are noted in the transferred appraisal, when the appraiser who completed the first appraisal is ineligible as per the receiving lender’s exclusionary list, or when lack of receipt of the first appraisal in a timely manner would have a negative affect on the borrower’s circumstances. Reason for obtaining a 2nd appraisal must be explained and documented in the case binder and copies of BOTH appraisals must be saved in the case binder.

Be sure to check out the FAQs re: Mortgagee Letter 2009-29 at HUD’s new Lenders Page!

January 21

Effective with Mortgagee Letter 2010-03, HUD will systematically review all Direct Endorsement (DE) underwriting mortgagees’ defaults (loans 90 or more days’ delinquent) and claim rates on loans during the initial 24 months from the date of the commencement of the amortization. HUD, at its option, will exercise its authority to terminate the underwriting authority (Authority) of DE mortgagees with excessive default and claim rates. The Department will be publishing a list of Mortgagees which have had their Authority terminated in the Federal Register and on HUD’s website starting February 1st.

January 31

This is the last day that non-HUD approved condominium properties may be assigned FHA case numbers to be processed as spot loan approvals. Effective February 1, all condominium properties must be located in projects approved by HUD (HRAP) or by eligible lenders with full DE authority (DELRAP). Details on condominium project requirements and approval options can be found in Mortgagee Letter 2009-46B and Mortgagee Letter 2009-46A.

You’ll find HUD’s Condo FAQs at http://www.hud.gov/offices/hsg/sfh/condo/faqs_condo.pdf.

February 1

HUD implements the most recently signed waiver of 90 day seller ownership requirements for FHA loans that meet the criteria described in the waiver at http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf. This waiver is effective for cases assigned 02/01/2010-02/01/2011 unless otherwise amended by HUD and applies to all re-sales; not exclusive to foreclosure properties.

February 15

HUD adopts a stance similar to that of HVCC in that for cases assigned on and after this date, Mortgagees are expected to have processes and procedures in place to certify appraiser independence. As per Mortgagee Letter 2009-28, the original effective date of these requirements was set for January 1st but HUD issued an extension for implementation of the rules until 02/15/2010. The big change for lenders is the following:
FHA-approved lenders are now prohibited from accepting appraisals prepared by FHA Roster appraisers who are selected, retained or compensated in any manner by a mortgage broker or any member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan.

You’ll find a number of helpful resources on this topic at HUD’s newly organized Lender’s Page: http://portal.hud.gov/portal/page/portal/HUD/groups/lenders. There you can access a copy of the announcement of extension for implementation and FAQs regarding ML 2009-28.

February 15

HUD adopts the ability to re-certify property value by using Fannie Mae Form 1004D. The effective date
was originally slated for January 1 but was extended by HUD out to 02/15/2010. Details regarding the terms of use for FNMA 1004D are reflected in Mortgagee Letter 2009-51. Details regarding delayed implementation of the Mortgagee Letter content can be found at http://www.hud.gov/offices/hsg/sfh/appr/delayed.cfm.

April 5

For cases assigned on and after this date, up-front mortgage insurance premiums change from the current structure to 2.25% for ALL standard FHA purchases and refinances. Details on the increase to MIP are reflected in Mortgagee Letter 2010-02.

In a press release issued on Wednesday, January 20th HUD also communicated the following which are expected to be formally released in the very near future:

- New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%. This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

- Interested party contributions will be limited to 3% which is a change to the current 6% allowance. This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Big News- Big Changes from HUD for FHA Lending!

noreply@blogger.com (Editor in Chief) — Fri, 22 Jan 2010 16:51:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

It’s been a BIG news week for FHA and is about to get even bigger with the anticipation of a number of Mortgagee Letters to be issued January 21st which will communicate further significant tightening of FHA qualifying calculations and guideline requirements.

Temporary Flipping Waiver

On Friday, January 15th, HUD released their most recent Waiver of Requirements of 24 CFR 203.37a(b)2. The waiver, which is in regards to time restrictions for property sales, applies only to FHA forward mortgages, not HECMs, and is effective 02/01/2010-02/01/2011.

As copied from the Code of Federal Regulations, here is that exact portion of the Code that is being waived:

a(b) Time restrictions on re-sales—(1) General. The eligibility of a property for a mortgage insured by FHA is dependent on the time that has elapsed between the date the seller acquired the property (based upon the date of settlement) and the date of execution of the sales contract that will result in the FHA mortgage insurance (the re-sale date). The mortgagee shall obtain documentation verifying compliance with the time restrictions described in this paragraph and must submit this documentation to HUD as part of the application for mortgage insurance, in accordance with §203.255(b).

(2) Re-sales occurring 90 days or less following acquisition. If the re-sale date is 90 days or less following the date of acquisition by the seller, the property is not eligible for a mortgage to be insured by FHA.

However, to summarize, the HUD announcement goes on to state the following conditions for the 90 day time-restraint waiver to be effective on a specific transaction:

- The transaction must be at arms length; meaning there cannot be any identity of interest between any of the interested parties to the transaction. This means that the lender must perform due-diligence to determine there are no undisclosed relations of interest which should include the following:

- LLCs, partnerships, corporations, etc. must be fully investigated to determine exactly who holds interest in the business. No party with interest in the business should be related to any other party participating in the transaction.

- 12-24 month minimum chain of title from the title company should be reviewed carefully to establish that there are no patterns of flipping between interested parties, that the owner of record listed in title is the same seller represented as the seller on the sales contract and is also the same owner of record listed in any public property tax record. You should never rely on the transfer records based on the prior 36 month history listed in the appraisal alone but should rather obtain the chain of title directly from the title company.

- Marketing history in regards to the sale of the property should be carefully reviewed to determine that it was marketed for sale openly via MLS, Sheriff Sale, Auction, FSBO, etc. If the marketing of the property cannot be determined through public means, be cautious!

- Sales prices for recent transfers of the subject property must be verified and if the proposed transaction contains a sales price that represents a 20% or greater increase from the prior sale price of the property, the lender must justify the increase in price/value using any of the following methods:

- Obtain specific documentation from the seller for improvements made to the property between the seller’s acquisition date and proposed sale of the property. This would include copies of paid invoices or receipts from contractors, builders, suppliers etc. with a complete list of the upgrades, repairs and/or improvements made

- Obtain a 2nd appraisal to justify the property sale price/value and recent improvements/repairs/upgrades made to the property

- Obtain a property inspection report from a state-licensed/certified inspector that is to be given to the buyer prior to closing and which must include:

- Inspection of the foundation, floor, ceiling, walls and roof;
- Inspection of the exterior siding, doors, windows, balconies, decks, walkways, driveway
- Inspection of the roofing, plumbing, electric, heating and air systems;
- Inspection of the interior of the property including insulation and ventilation systems, fireplaces, fuel-burning appliances

The waiver ONLY waives the 90 day timing restraint requirement IF the conditions listed above are met. Don’t forget that all other requirements set forth in Mortgagee Letter 2006-14 apply for all other properties acquired for up to one year from the seller’s acquisition date. In those situations, when the sales price increases 100% or greater, 2nd appraisal and other potential documentation requirements must be applied.

I will pass on more information next week in regards to the upcoming MIP rate hikes, minimum fico score requirements, minimum downpayment requirements and reduction to maximum allowed seller concessions. Those changes will have major affects on FHA qualifying in the near future!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Beware- HUD Isn’t Messing Around!

noreply@blogger.com (Editor in Chief) — Fri, 15 Jan 2010 16:40:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

As a person in the Mortgage Industry who works in a position that involves business and credit analysis and writing credit policies to protect the interests of the company, one particular article got my attention this week when it crossed my desk. It was an article released in Market Watch, part of the Wall Street Journal digital network. The article stated that HUD issued subpoenas to 15 mortgage companies on Tuesday in regards to higher-than-average default rates on FHA loans and an overabundance of mortgage insurance claims.

When I took a looked through the list I immediately recognized a number of pretty big players; mortgage brokers we have all likely dealt with at some point in our mortgage careers for one reason or another. But I can’t say I’m surprised to see a couple of them. I clearly recall that they were accepting what I considered “bottom of the barrel” FHA borrowers back in 2006 and 2007 before the market started its downward spiral due to foreclosures and market declines. In fact, I see two of them that I know flat out drug their feet implementing minimum credit score requirements in order to corner the market while other FHA lenders starting cracking down on their own qualifying requirements in anticipation of what was to come.

What always bothers me most when I see these things is the lack or moral judgment and integrity that was used by all of those involved. The unfortunate result of so many bad decisions made by bad companies is that the good companies are now subject to the consequences of the bad. One of our originators made a statement this week I found humorous though very valid. He said “I feel like things have gotten so out of control we can’t even get loans done anymore. I mean, what more documentation can I request from my borrowers short of them providing a sample of their DNA?” It’s unfortunate that so many of us have begun to feel this way.

I am still outraged that those responsible for the sub-prime market crisis aren’t rotting in prison somewhere. It still blows my mind to think that anyone in their right mind could sleep at night knowing they’d just agreed to grant a $200000 mortgage to borrowers with credit scores in the 400s, unstable employment and no verified history of housing expense. And it’s not just the lending part that concerns me but more importantly, the burden of knowing you’d put such borrowers in that position having to realize full well that they were headed toward disaster. They were guaranteed to fail but somebody lent them the money anyway. It doesn’t get more wrong than that.

So, what kinds of things can we all do to make sure our companies don’t end up being investigated for higher-than-average default rates? It’s really as simple as diverting back to the days of full loan documentation requirements in partnership with utilization of modern tools and technologies.

Even if your lenders aren’t requiring tax transcripts for underwriting, most companies are pulling them pre-purchase or post purchase so you may as well simply obtain them for all of your loan files and make sure qualifying income is tight and right from the beginning. Transcripts can be used as a great resource for more than just income verification. They can also be used to validate identity, occupancy and marital status. Transcripts validate most importantly that the person listed on your loan application filed taxes under the social security number and residence address listed on the loan application.

They also verify whether or not the returns were filed on time. Transcripts also confirm whether each borrower filed individually or jointly and will confirm the number of dependents so you can compare with loan application data. In addition, transcripts may verify undisclosed businesses potentially uncovering business losses that can negatively affect future financial stability and the borrower’s ability to make timely mortgage payments. In my opinion, any company that hasn’t incorporated transcript requirements into originating and underwriting procedures is a “sitting duck” for potential fraud and early defaults.

Transcripts have become much less expensive in recent months also. A year ago we may have been paying $20 and more for two years but with the IRS lowering their processing fee by $4 effective October 1, 2009, many companies became more cost-friendly. Now obtaining two years transcripts can cost as little as $15 and even lower for those companies that have the luxury of offering volume discount rates.

Other tools to be taken advantage of in today’s market are the fraud detection tools and services offered by credit bureaus and third party vendors like First American CoreLogic and Interthinx. Most credit vendors now have the ability to offer a full suite of fraud detection and risk analysis options that are available right as you pull your standard credit reports. These services have the ability to analyze a minimum data set in order to render risk scoring based on data combinations and public record searches. Vendors like CoreLogic and Interthinx take risk analysis even further by evaluation all of the loan parties as well as the property in order to render a full report that analyzes the overall loan risk by category to give red flags of potential loan fraud. Tools like this are invaluable in today’s world.

When researching vendor options for things like transcripts and fraud detection services, be sure to ask questions about volume discounts, support resources, systems integration and training abilities.

The sooner you implement tools and resources like those I’ve mentioned above, the less likely your company will be to end up subpoenaed by HUD for excessive defaults and claims like these lenders did:

- First Tennessee Bank N.A., Memphis, Tenn.
- Alethes LLC, Lakeway, Texas
- Security Atlantic Mortgage Co., Edison, N.J.
- Pine State Mortgage Corporation, Atlanta.
- Birmingham Bancorp Mortgage Corporation, West Bloomfield, Mich.
- Alacrity Financial Services, LLC, Southlake, Texas
- Assurity Financial Services, LLC, Englewood, Colo.
- D and R Mortgage Corporation, Farmington, Mich.
- Webster Bank, Cheshire, Conn.
- Mac-Clair Mortgage Corporation, Flint, Mich.
- Americare Investment Group, Inc., Arlington, Texas
- 1st Advantage Mortgage, Lombard, Ill.
- American Sterling Bank, Independence, Mo.
- Sterling National Mortgage Company Inc., Great Neck, N.Y.
- Dell Franklin Financial LLC, Columbia, Md.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

What are YOUR Business Goals for 2010?

noreply@blogger.com (Editor in Chief) — Fri, 08 Jan 2010 15:02:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

2009 is certain to be a year that will go down in our memories as one of the most challenging and stressful years many of us have experienced in our industry. Between all of the regulatory changes, guideline revisions, product eliminations and overall market challenges, it’s a wonder we all remain standing here at the start of 2010. But THAT is the key- we ARE still here! We made it through the adversity and for all of you that remain committed and motivated, I commend you! High fives all the way around!

Now, let’s put 2009 behind us and move forward to 2010. It’s a new year and a new opportunity for us to work forward using what we’ve learned in 2009. Time for a new attitude, new determination and business goals for the New Year. With that in mind, exactly what are your business goals for 2010? Here are a few suggestions and some things to think about as you contemplate your goals for the New Year:

1. Prepare a list of topics to help you evaluate the strengths and weaknesses you realized in 2009. Some areas to consider for the list:

- How well did you absorb and understand the market issues?
- How well did you absorb and understand the agency guideline changes? How well were you able to keep track of them?
- How do you feel you dealt with changes in technology such as LOS software, website detail, automated underwriting capabilities, imaging systems, etc.
- How well do you feel you dealt with communications?
- Were you able to absorb information from meetings and training?
- If you work in sales and originating, how would you rate your marketing abilities and capabilities? How do you think your borrowers would rate you on the same topic?
- If you work in sales and originating, how would you rate your communications with outside referral sources such as builders and realtors? How do you think those sources would rate you on the same topic?
- If you are a processor, how would you rate your overall organization level? How do you feel your loan officers and affiliates such as underwriters, closers, etc. would rate you for same topic?
- If you are a processor, how would you rate your communications for 2009? How do you feel your loan officers and affiliates such as underwriters, closers, etc. would rate you for same topic?
- If you are in sales/originating or processing, how would you rate your efficiency overall? How do you feel your colleagues and business partners would rate you for same topic?
- How would you rate your knowledge and understanding of the regulatory changes that occurred in 2009-2010 such as the TILA and RESPA changes?
- How would you rate your time management abilities in 2010? Do you feel you could benefit from more effective strategies so you can accomplish more in less time?
- What were your greatest achievements in 2009?
- What your greatest disappointments and faults in 2009?
- How well do you feel you were able to balance your work and business responsibilities in conjunction with your family life, hobbies, friends, free time and religion in 2009?
- Exactly what things do you feel you need to learn more about in 2010? How will you go about getting the information, education and training you need to learn what you wish?

2. Set appointments to discuss and review your progress and overall business dealings with those parties that can assist you in evaluating the areas you should focus on improving in 2010. Such should include:

- Your manager or supervisor
- Your immediate work colleagues; those you interact with on a daily basis; those who rely on you to achieve overall results and common goals
- If you are in sales, your realtors, builders and other business partners. What did they like and dislike about your relations in 2009? What did they expect and not receive? What are their goals involving your relations for 2010? Can you discuss each of your goals in order to establish team goals for the new year and how to hold each other accountable for them?
- Loan officers and processors should meet to discuss their faults, weaknesses and to establish areas where improvements can be made. Most often communications is a big concern.

3. Use the information from your own self-evaluation and the information you receive from your personal meetings with others to establish your top five goals for 2010 in priority order.

4. Determine the exact steps that need to be taken from where you are now to what it will involve and take to meet each of the top five goals. Once you are able to see the steps involved, you will be able to develop and establish fair and reasonable timeline expectations.

5. Establish and set timeline expectations for each of the top five goals on your list. Begin working forward through the steps needed to achieve and check off each goal.

6. As each of the top five goals is reached and cleared from your list, add another goal from your original list and work forward from there. This will keep you on track and will keep you challenged to strive for positive end results.

7. Be sure to document your goals and your progress in a place where it can be seen and viewed throughout your day. Whether it’s on a calendar, a bulletin board, on a piece of paper taped to the side of your computer monitor, scheduled in your electronic calendar, penciled in your planner, or spray painted on your wall, make sure that the goals are clear and that you hold yourself accountable for reaching to achieve them.

Always keep in mind, you made it through 2009, which was one of the most challenging years in our industry, so there is NOTHING you cannot door achieve in this New Year 2010. Reach for the stars!

Happy new year to you all! I wish you much success in 2010 and always!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

My Favorite Freebies Part Three- USDA Guaranteed Rural Housing Websites

noreply@blogger.com (Editor in Chief) — Mon, 04 Jan 2010 17:08:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

I re-familiarized myself with rural housing lending programs in 2009 and the best part is that I’m passing on what I learned to you! Below are my most used GRH websites. Add them to your favorites and utilize them often in 2010! The Guaranteed Rural Housing Program is a great program for homebuyers who qualify!

Subscribe to receive Single Family Housing News for GUS & GRH: http://www.rdlist.sc.egov.usda.gov/listserv/mainservlet

USDA Rural Housing Home Page: http://www.rurdev.usda.gov/RHS/

Rural Development Contacts Page: http://www.rurdev.usda.gov/RHS/Admin/contact.htm

Rural Development Regulations Page: http://www.rurdev.usda.gov/regs/

Rural Development FAQ Page: http://www.rurdev.usda.gov/rd/faqs.html

Rural Development Income & Property Eligibility Site: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

Single Family Housing Guaranteed Loan Income Limits: http://www.rurdev.usda.gov/rhs/sfh/sfh%20guaranteed%20loan%20income%20limits.htm

Loan Application Package Checklist: http://www.rurdev.usda.gov/regs/an/an4470.pdf

Rural Development Regulations: http://www.rurdev.usda.gov/regs/

Rural Housing Origination Handbook 1980-D: http://www.rurdev.usda.gov/regs/regs/pdf/1980d.pdf

GUS Lender User Guide 2008: https://usdalinc.sc.egov.usda.gov/docs/rd/sfh/gus/lender/GUSLenderUserGuide.pdf
GUS Login Page: https://pws.sc.egov.usda.gov/login/login.aspx?TYPE=33554433&REALMOID=06-f8405ea7-471f-474d-8a4e-731f76f1e536&GUID=&SMAUTHREASON=0&METHOD=GET&SMAGENTNAME=-SM-S3%2fpukYCkOnlZ%2feImVktFvcBZTmcxsBEbQyvAIf2sN6XculadBu%2f5WF4TmWxHg2x&TARGET=-SM-HTTPS%3a%2f%2fgus.sc.egov.usda.gov%2faus%2findex.jsp%3fcallingPath%3dusdalinc.sc.egov.usda.gov%2fRHShome.do

Administrative Notices for Loan Origination and Underwriting: http://www.rurdev.usda.gov/wi/programs/rhs/sfhg/handbook/originating/ans.htm
USDA Rural Development Forms Library: http://www.rurdev.usda.gov/regs/formstoc.html

Rural Development State Office/Service Center Locator: http://www.rurdev.usda.gov/recd_map.html

USDA Live WebEx Training Schedule: https://rurdev.webex.com/mw0305l/mywebex/default.do?siteurl=rurdev&service=7

USDA LINC Training and Resource Library: https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do
Guaranteed Rural Housing Consumer Marketing Brochure: http://www.rurdev.usda.gov/RHS/sfh/GSFH_Information/Common/09_2009_Website_%20Hooray%20For%20Housing%20GRH%20Brochure.pdf

Guaranteed Rural Housing Consumer Marketing Booklet: http://www.rurdev.usda.gov/rd/pubs/pa1501.pdf

Rural Development Lender Information Page: http://www.rurdev.usda.gov/rhs/sfh/GSFH_Information/lenders.htm

Digital Rights and Copyright

Most information presented on Rural Development's website is considered public domain information. Public domain information may be freely distributed or copied, but use of appropriate byline/photo/image credits is requested. Attribution may be cited as follows: "USDA Rural Development."
Some materials on the Rural Development site are protected by copyright, trademark, or patent, and/or are provided for personal use only. Such materials are used by Rural Development with permission, and they have made every attempt to identify and clearly label them. You may need to obtain permission from the copyright, trademark or patent holder to acquire, use, reproduce or distribute these materials.

Best wishes for a productive and successful 2010!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

It’s that time of year again- My Favorite Freebies!

noreply@blogger.com (Editor in Chief) — Mon, 28 Dec 2009 19:18:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

Last week I offered you my list of favorite FHA-related websites and this week, I’m offering my favorite VA websites as follows:

• http://www.homeloans.va.gov/ - VA Loan Guaranty Home Page
• http://www.homeloans.va.gov/ls.htm - VA Lenders, Servicers and Real Estate Professionals Home Page
• http://www.homeloans.va.gov/rlcweb.htm - Links to Regional Loan Centers
• https://vip.vba.va.gov/portal/VBAH/Home - Veterans Information Portal (VIP)
• http://www.homeloans.va.gov/help/html/portal/frameset.htm - Veterans Information Portal Help Guide
• http://www.warms.vba.va.gov/pam26_7.html - VA Lender’s Handbook
• http://www.homeloans.va.gov/loan_limits.htm - VA Loan Limits
• http://www.homeloans.va.gov/lgyfaq.htm - VA Home Loan FAQ by Category
• http://www.homeloans.va.gov/new.htm - VA Circulars
• http://condopudbuilder.vba.va.gov/2.2/frames.html - VA Condo/PUD/Builder Locator Site
• http://www.homeloans.va.gov/faqcv.htm - VA Construction & Valuation FAQ
• http://www.homeloans.va.gov/cav_approved_local_conditions.htm - Local Construction & Valuation Requirements by state
• http://www.usmilitary.com/2009-military-pay-chart/ - U.S. Military Pay Chart
• http://www.archives.gov/veterans/military-service-records/ - National Archives-Military Records
• http://www4.va.gov/vaforms/ - VA Forms Search Page
• http://www.homeloans.va.gov/sar.htm - Staff Review Appraiser Page (SAR)

Helpful Training Information for VA Home Loan Program

• http://www.homeloans.va.gov/train.htm - VA Training Options
• http://www.homeloans.va.gov/broadcast.htm - VA Live Training Broadcast schedule
• http://www.homeloans.va.gov/broadcast09.htm - VA Recorded Training Broadcasts
• http://www.homeloans.va.gov/docs/va101_handout.pdf - VA 101-Home Loan Program Basics Booklet
• http://www.homeloans.va.go/docs/Broadcast_Handouts_%20LGY_Eligibility_12162009.pdf - VA Eligibility booklet
• http://www.homeloans.va.gov/target_video.htm - VA Targeted Topic Short Videos

Home Loan Program Information For Veterans

• http://www.homeloans.va.gov/faqelig.htm - Eligibility FAQs
• http://www.homeloans.va.gov/pdf/veteran_registration_coe.pdf - Guide-How to Obtain Certificate of Eligibility
• http://www.vba.va.gov/VBA/benefits/factsheets/index.asp - Veteran’s Benefit Fact Sheets
• http://www.vba.va.gov/VBA/benefits/factsheets/homeloans/Homeloaneg_0906.doc - Home Loan Guaranty Fact Sheet for Veterans
• http://www.vba.va.gov/VBA/benefits/factsheets/homeloans/homemods.doc - Home Modification/Specially Adapted Housing Fact Sheet for Veterans

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

It’s that time of year again- My Favorite Freebies!

noreply@blogger.com (Editor in Chief) — Fri, 18 Dec 2009 16:53:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

At least once a year I like to share a list of “freebies” that I’ve discovered along the road associated with the various hats I wear within our beloved mortgage industry. For the most part, this is a list of websites I’ve discovered that offer vast information for learning purposes or websites that offer products that serve a great need for those of you that work as originators or processors in our business.

Because I’ve discovered so many, I’ll be dividing my list into categories- FHA, VA, USDA and standard freebies. Add these websites to your favorites list of internet sites and be sure to utilize them as they are a great recurring source of important and helpful information.

This week, I’m offering my favorite FHA-related websites and here is my list:

• www.hud.gov - HUD Home Page

• www.fha.gov - FHA Home Page

• http://www.hud.gov/offices/hsg/sfh/ref/hsgregst.cfm - Subscribe to HUD’s Single Family Mailing List

• http://hud.gov/offices/hsg/sfh/events/events.cfm - HUD Single Family Events & Training Page

• http://hud.gov/offices/hsg/sfh/talk/parc/phiarch.cfm - Phili HOC Recorded Webinar Archives

• http://www.hud.gov/groups/lenders.cfm - HUD Lenders Page **NEW**

• http://www.hud.gov/offices/hsg/sfh/lender/mtgeekit.cfm - Title II Mortgagee Starter Kit of HUD Handbooks

• http://www.disasterhousing.gov/offices/adm/hudclips/handbooks/hsgh/ - Complete List of Handbooks

• http://www.fhaoutreach.gov/FHAHandbook/prod/contents.asp?address=4155-2 - Link to Home Page for new 4155.1 and 4155.2 Searchable Handbooks

• http://www.hud.gov/offices/hsg/sfh/ref/hsgrcont.cfm - HUD/FHA HOC Reference Guide

• http://www.hud.gov/offices/hsg/sfh/faqs/faqsmenu.cfm - HUD/FHA FAQ by Category

• http://www.hud.gov/faqs/faqbuying.cfm - HUD Common Questions Page

• http://www.nls.gov/offices/adm/hudclips/letters/mortgagee/ - HUD Mortgagee Letters

• https://entp.hud.gov/idapp/html/hicostlook.cfm - FHA Mortgage Limits Search

• https://entp.hud.gov/idapp/html/condlook.cfm - FHA Condominium Search

• https://entp.hud.gov/idapp/html/apprlook.cfm - FHA Appraiser Roster Search

• http://www.hud.gov/groups/appraisers.cfm - FHA Roster Appraiser Home Page

• http://www.hud.gov/offices/hsg/sfh/reo/reohome.cfm - HUD REO Home Page

• http://www.hud.gov/offices/hsg/sfh/owning.cfm - HUD Owning a Home Consumer Info Page

• http://portal.hud.gov/portal/page/portal/HUD/states - Links to State-Specific HUD Home Pages

• http://www.hud.gov/library/index.cfm - HUD Online Library-Links to Various Common Topics

• http://portal.hud.gov/portal/page/portal/HUD/webcasts/archives - HUD Webcast Archives-Recorded Webcasts

• http://portal.hud.gov/portal/page/portal/HUD/webcasts/archives/sinfamily - HUD Single Family Housing Webcast Archives

• https://entp.hud.gov/clas/index.cfm - FHA Connection

• http://portal.hud.gov/portal/page/portal/HUD/program_offices/administration/hudclips/forms - HUD Forms Search

• http://www.hud.gov/offices/hsg/sfh/fharesourcectr.cfm - FHA Resource Center Home Page

• http://www.fhaoutreach.gov/FHAFAQ/ - FHA Resource Center Searchable FAQ

• http://www5.hud.gov:63001/po/i/netlocator/ - HUD Employee Locator-Online Search Engine

• http://www.hud.gov/offices/adm/dds/ - HUD Direct Distribution Center- Order Publications!

• http://www.hud.gov/library/bookshelf11/hudgraphics/fheologo.cfm - Equal Housing Graphic/Logo for Printing

• http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm - HUD CAIVRS Home Page

• https://www.epls.gov/ - Excluded Parties Listing System Home Page (EPLS)

• http://www.hud.gov/offices/fheo/promotingfh/928-1.pdf - Fair Housing Poster-English Version

• http://www.hud.gov/offices/fheo/promotingfh/lep.cfm - Booklets HUD Materials in English and Other Languages

• http://www.hud.gov/offices/hsg/sfh/buying/homebuyingguide.pdf HUD Homebuying Guide for Consumers

• http://www.hud.gov/offices/hsg/sfh/buying/loanfraudfaq.pdf HUD Smart Consumer Fact Sheet

• http://www.hud.gov/offices/hsg/sfh/ins/hoctenyr.pdf - HUD Approved 10 year Warranty Plans

• http://www.hud.gov/assist/webpolicies.cfm - HUD Web Policies

The below is copied and pasted from HUD’s Web Policies and Important Links Page

HUD's Linking Policy:

o HUD uses links to other websites if they add value to HUD content and help further the goals and mission of the Department, they help HUD's website visitors find related information, and they eliminate the need to duplicate information that already exists.

o We review all of our links at least quarterly, as part of our routine content certification process, to make sure they still work and that they still add value.

o When we choose a link, we make sure that it will add value, do not exist solely to promote specific products or services, are in good taste, and comply with all laws, regulations, and policies.

o As a rule, our links do not promote specific for-profit products or services. Sometimes, however, we do link to the home pages and/or email addresses of a category of private for-profit HUD partners (for example, HUD approved lenders) when it will promote HUD's program and customer service objectives. To make sure that we are fair, we post a complete list of the vendors in that category (both those with and those without websites/email); and we notify all vendors in that category that we will be creating links to the websites/email addresses of those that have them, before any links are posted.

o When we link to a non-federal website, you will see an "interceptor" page that reminds you that you are leaving the HUD website and that HUD does not endorse the organization or content on the site you will see.

o Because HUD's Internet website is in the public domain, anyone can link to it or replicate it without permission.

o If you have or know of a website that you think would add value to the content on HUD's website, you can send us the link. We will review the site to see if it meets our criteria.

Stay tuned next week for my list of VA website freebies!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

BIG News! HUD Announces Acceptance of Appraisal Form 1004D for Value Recertifications!

noreply@blogger.com (Editor in Chief) — Fri, 11 Dec 2009 18:30:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

Mortgagee Letter 2009-51 communicates HUD’s acceptance of FNMA Form 1004D effective for cases assigned on and after January 1st.

The form is actually designed to serve two purposes:

1. To extend the validity period of an existing appraisal that is due to expire or has expired

2. To report the completion of a repair and/or the satisfaction of requirements and conditions noted in the original appraisal report referenced in the header of the Summary Appraisal Update and/or Completion Report.

You may recall that appraisal validity periods change effective January 1 for all property types to 120 days from the current validity periods of 180 days for existing construction and 12 months for all proposed and under construction cases. With the ability to have the appraiser recertify value with use of form 1004D when the original appraisal validity period expires, it will save the borrowers the expense of having to pay for a second appraisal and will save us lenders time from having to wait for a whole new appraisal to be completed when the original appraisal expires.

There are however, circumstances that render form 1004D invalid or not useable for purposes of re-certifying appraised value and such include the following:

- Property value has declined since original value effective date

- Building improvements that must be acknowledged to contribute to value cannot be seen from the street view

- Exterior of the property reflects deficiencies or other significant changes that were not in existence at the time of the original appraisal report.

When Form 1004D is utilized to re-validate the original appraised value of a property, the FHA Roster Appraiser who completed the initial appraisal must be the same person to complete the value recertification. The appraiser is responsible to complete the following actions in relation to appraisal updates:

1. Adhere to the Scope of Work and Appraiser’s Certification listed on the form, which includes an exterior inspection of the subject property from, at least, the street.

2. Research, analyze and verify current market data to determine if the property has declined in value since the effective date of the appraisal report being updated.

3. Assure compliance with development and reporting requirements of the Uniform Standards of Professional Appraisal Practice (USPAP), and specifically Advisory Opinion

4. Retain all supporting documentation in the work file.

5. Check the box applicable to Part A.

6. Concur with the original appraisal report and update the appraisal by incorporating the original appraisal report if the market value of the subject property has not declined since the effective date of the original appraisal.

7. Provide a photo of the street scene and photos from as many angles of the home that are visible from a public way.

The second part of form 1004D, Part B, can be used to report the completion of a repair and/or the satisfaction of requirements and conditions noted in the original appraisal report referenced in the header of the Summary Appraisal Update and/or Completion Report. Part B of the form, however, may not be used in lieu of HUD-92051 Compliance Inspection Report, if the case involves new construction or manufactured housing.

For Part B, the original FHA Roster Appraiser or any other FHA appraiser currently in good standing is allowed to complete the report. The appraiser is responsible to:

1. Review the requirements and/or conditions noted in the appraisal report referenced in the header of the Summary Appraisal Update and/or Completion Report.

2. Check the box applicable to Part B.

3. Perform a thorough inspection of the items noted in appraisal referenced in the Summary Appraisal Report and confirm completion/satisfaction of requirements and/or conditions.

4. Describe the impact on the value of the property if requirements and/or conditions are not completed in accordance with the original appraisal report.

The validity period of Form 1004D Appraisal Update and/or Completion Report is 120 days, which begins with the effective date of the appraisal report. The initial or underlying appraisal that has been subsequently updated with form 1004D cannot exceed 12 months old at the time of loan closing.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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 Mortgage Limits for 2010

noreply@blogger.com (Editor in Chief) — Fri, 04 Dec 2009 16:11:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

As they do about this same time each year, HUD has announced FHA mortgage limits for 2010 with Mortgagee Letter 2009-50.

First, we all know by now that the conforming loan limit will remain at $417000. That in itself means little change for maximum mortgage limits. However, HUD allows any interested party to submit a request for a higher county limit to the Homeownership Center that serves jurisdiction over the area in question if one is under the opinion that the mortgage limit set forth doesn’t serve the area’s true market. The request must be accompanied by reliable housing price data provided by a local taxing authority, title company, or real estate data company. Specific details on the data requirements can be found within Mortgagee Letter 2007-01. Upon receipt of the request, the HOC will review the request for compliance within Departmental requirements, will verify the housing sales data and if revise the limit if it is deemed appropriate.

In most cases, maximum mortgage limits are determined by county. But there are also mortgage limits assigned to metropolitan statistical areas (MSA) and micropolitan areas. A metropolitan area has at least one urban area with a population of 50,000 or greater and an urban core that exerts economic influence on the surrounding territory as measured by commuting patterns. A micropolitan area contains a small urban center population between 10,000 and 49,999 where commuting patterns are also taken into account to determine overall economic influence. Micropolitan areas can be populated regions without large cores but metropolitan areas generally consist of large cores and may or may not be surrounded by additional population.

Metropolitan statistical areas (MSA) and micropolitan areas often overlap into more than one county. The mortgage limits in these areas are set based on the county with the highest median price within the metropolitan or micropolitan area.

The FHA maximum mortgage limits for 2010 consist of the higher of the loan limit established under the Economic Stimulus Act of 2008 (ESA) or the regular limits established under section 203(b) which was amended by the Housing and Economic Recovery Act (HERA).

Floor Limits-Low Cost Areas

These area loan limits are calculated at 65 percent of the conforming loan limit according to both ESA-2008 and HERA-2010 and since the conforming loan limit remains the same, so do the FHA floor limits for low cost areas:

- One Unit $271,050
- Two Unit $347,000
- Three Unit $419,400
- Four Unit $521.250

Ceiling Limits-High Cost Areas

Because the calculation of maximum mortgage is higher with The Economic Stimulus Act of 2008 (ESA) than it was in the Housing and Economic Recovery Act (HERA), ESA calculations prevail for high cost areas where the loan limits exceed the floor limit.

- One Unit $729,750
- Two Unit $934,200
- Three Unit $1.129.250
- Four Unit $1,403,400

However, if the area did not have loan limits as high as stated by ESA in 2008, the area will not be eligible for the highest ESA loan limits.

Loan Limits for AL, HI, Guam and U.S. Virgin Islands

The National Housing Act permits these areas to adjust up to 150 percent of the regular national ceiling limits so loan limits in these areas can be as high as:

- One Unit $1,094,625
- Two Unit $1,401,300
- Three Unit $1,693,875
- Four Unit $2,105,100

Between the Floor and Ceiling

Dependent upon the median home price calculations in the area, many area loan limits fall between the floor and ceiling limits as determined by the higher of the calculation allowed by Esa-2008 or HERA-2010. These areas reflect single unit loan limits ranging from 271,400 to as high as 716,250.

If you are like me, much of this doesn’t make much sense at first read but I highly recommend referring to the following additional resources which will explain further to help you become more comfortable in understanding federal max mortgage limits and their determinations:

- OMB Bulletin No. 09-01- Update of Statistical Area Definitions and Guidance on Their Uses
- FHA Mortgage Limits Website: https://entp.hud.gov/idapp/html/hicostlook.cfm
- HUD Mortgagee Letter 2009-50
- HUD Mortgagee Letter 2007-01
- HUD FAQ-Mortgage Limit Increases
- Metropolitan Median Prices-Quarterly Reports from National Association of Realtors (NAR)
- Various Housing Market Data from Federal Housing Finance Agency (FHFA)

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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 Lightens Up on FHA Second Appraisal Requirements

noreply@blogger.com (Editor in Chief) — Wed, 25 Nov 2009 16:33:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

Mortgagee Letter 2009-48 which was issued November 18, 2009 communicates the immediate elimination of requirements for second appraisals on high balance loans in declining market areas. Second appraisals are no longer required effective for cases pulled on and after November 19th.

As you may recall, second appraisal requirements were originally added for high balance loans in declining market areas with the issuance of Mortgagee Letter 2008-09 which HUD now rescinds in its entirety.

HUD has also rescinded the second appraisal requirements listed in Mortgagee Letter 2009-08 which originally implemented second appraisal requirements for cash-out refinances exceeding $417000 loan amounts when the subject property was considered in an area of market decline.

The only remaining second appraisal requirements apply for situations that fall under HUD’s Property Flipping Prohibition. These requirements were communicated in Mortgagee Letter 2006-14 which states the following second appraisal requirements:

• If the resale date is between 91 and 180 days following acquisition by the seller, the lender is required to obtain a second appraisal made by another appraiser if the resale price is 100 percent or more over the price paid by the seller when the property was acquired.

• If the resale date is more than 90 days after the date of acquisition by the seller but before the end of the twelfth month following the date of acquisition, FHA reserves the right to require additional documentation from the lender to support the resale value if the resale price is 5 percent or greater than the lowest sales price of the property during the preceding 12 months. At FHA’s discretion, such documentation may include, but is not limited to, an appraisal from another appraiser.

Underwriters are also allowed to use discretion and may require review appraisals to justify questionable value in certain circumstances. The important thing I always remind people in these situations is to always request an interior/exterior inspection with the second appraisal. HUD states that the second appraisal requirement is limited to a 2055 exterior only appraisal but in many situations, recent interior upgrades have contributed to the value assigned by the first FHA appraiser and need to be taken into consideration by the second appraiser. When the second appraiser isn’t allowed access to the interior of the property, most often property values will differ by far more than the accepted tolerance levels and you will be stuck with requirement to use the lower of the two appraised values. That is often a “deal killer.”

Third Quarter Delinquency Reports Reflect Trends of Concern

Mortgage Bankers Association recently released third quarter delinquency and trend reports and I’ll be honest, based on what I read I don’t think we’ve bottomed out in the housing market quite yet. In certain areas of the country, delinquency rates are still extremely high.

For serious VA mortgage delinquencies, the states of Florida, Indiana, Michigan, New Jersey, and Ohio stand out with the North Central region having the highest overall serious delinquency rates.

The states of Florida and Nevada take the lead by far in the category of prime fixed rate mortgage delinquencies with the South region having the highest overall serious delinquency rates.

It’s amazing how much the delinquency rates jump when comparing fixed programs to adjustable rate programs in the prime sector. It’s fair to state that nearly all states entertain delinquency rates close to 10% and greater with just a few exhibiting lower percentages. Florida, as example is showing a 28.93% serious delinquency rate in this category. Arizona, California and Nevada also display higher than average delinquency rates with West region averaging highest.

For FHA delinquency trends, the states of New Jersey, the entire East North Central region, and the South Atlantic region (includes Florida), display higher delinquency rates in comparison to other states and regions. The North Central Region is out in front in this category. And once again, the delinquency trend is much higher when comparing the delinquency rate of FHA fixed rate loans versus FHA adjustable rate loans.

Based on these statistics I can derive a few main facts worth mentioning:

• It’s clear where the most severely declining market areas are within the U.S. The states of Arizona, California, Florida, Georgia, Illinois, Indiana, Michigan, and Nevada appear to consistently display the highest delinquency rates across the board for nearly all program statistics.

• These tend to be areas where questions of artificially inflated values cropped up in the recent past in combination with areas of secondary residence ownership and also areas where the employment sector has been severely affected by the financial state of the country.

• Collateral value will continue to be a major area of concern for lenders who are accepting loans in these areas. The appraisals for properties in these states have to be strong and I suspect lenders will continue issuing conservative lending guidelines to cover the risk concerns for loan applications in a number of these areas- Florida and Arizona in particular.

Next week will bring forth more information on FHA Condominium Policy Changes.

Have a wonderful Thanksgiving with family and friends! May your tables be blessed with turkey!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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 Issues Final Condo Policy Decisions

noreply@blogger.com (Editor in Chief) — Fri, 20 Nov 2009 16:26:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

The anticipated guidance from HUD in regards to the final Condo Policy finally arrived last week in the form of two Mortgagee Letters. ML 2009-46B, which replaces the previously issued ML 2009-19 and ML 2009-46A which communicates additional temporary guidance on a number of topics.

One thing I found very odd when first reading these bulletins was the reversal of the numbering. I find it makes much more sense chronologically to reverse them and read them as if ML 2009-46B is actually 46A and as if 46A is really 46B. So let’s go to 46B FIRST.

December 7th remains the magical date for implementation of the new condo review and approval requirements. For cases pulled on and after December 7th, the condo project must either be currently approved on the approved condo list at https://entp.hud.gov/idapp/html/condlook.cfm or must be reviewed and approved before the case can close with FHA financing.

HUD still offers the two approval options- DELRAP and HRAP. DELRAP stands for Direct Endorsement Lender Review Approval Process and HRAP stands for HUD Review Approval Process. One major change from ML 2009-19 though is that HUD will allow lenders to mix the two approval options if they feel necessary. Previously it had been communicated that HUD was not allowing DE Lenders to “pick and choose” which projects they were comfortable reviewing and approving. It was an “all or nothing” option. It seems they received a lot of backlash on that requirement and have agreed to allow experienced lenders the option of taking on responsibility for reviewing and approving some projects while choosing to submit others directly to HUD for their expertise on others.

General project eligibility requirements include the following:

1. The project must include no less than two units

2. All projects must be covered by hazard and liability insurance and applicable projects must provide evidence of coverage for flood insurance and fidelity bond insurance when required.

3. For projects whose master insurance policy does not include interior unit coverage, evidence of the borrower’s HO-6 coverage must be obtained and provided.

4. Right of first refusal is now deemed acceptable as long as it does not subject any person to discrimination as listed or defined under the Fair Housing Act regulation 24 CFR part 100. In short, this regulation states that discrimination associated with the sale of or rental of housing because of race, color, religion, sex, handicap, or familial status is not to be tolerated under United States Policy.

5. No greater than 25% of the total project’s floor space may be used for commercial purposes, the commercial business(es) must be homogenous with residential use, and must be free of adverse conditions for the occupants of the condominium units. Note- The word “homogenous” is said to mean the following: All of the same or similar kind or nature; A term used to describe an area or neighborhood where the property types and uses are similar and compatible; same, alike, or unvarying in consistency, or components; The same or similar material throughout; Uniform in structure or composition.

6. No more than 10% of the units can be owned by a single individual or investor.

7. No more than 15% of the unit owners are allowed to be delinquent on their HOA fees.

8. Evidence of a minimum 50% pre-sale must be presented in the form of any of the following:

• Evidence of closed sales;
• Copies of executed sales agreements between seller and buyer with evidence of the buyer’s lender’s commitment to lend;
• Chart, spreadsheet or tracking sheet from the builder/developer displaying the sales data along with a signed certification statement, a sample of which is attached as Attachment F in ML 2009-46B.

The Certification requires the builder/developer to sign and certify as to the following:

The undersigned hereby certifies that in lieu of providing (1) Copies of sales agreements and evidence that a mortgagee has issued approval; or (2) Evidence that units have closed and are occupied; the Developer/Builder has attached to the signed and dated certification, a list documenting all units sold, under contract or closed (i.e., and excel spreadsheet). This information will be used to document the required minimum presale requirement of 50 percent.

Title 18 U.S.C. 1014, provides in part that whoever knowingly and willfully makes or uses a document containing any false, fictitious, or fraudulent statement or entry, in any matter in the jurisdiction of any department or agency of the United States, shall be fined not more than $1,000,000 or imprisoned for not more than 30 years or both. In addition, violation of this or others may result in debarment and civil liability for damages suffered by the Department.

9. At least 50% of the units must be occupied by owners or sold to owners who intend to occupy. For purposes of calculating owner-occupancy in units that contain multiple phases, refer to the following instruction:

• On multi-phased projects the owner-occupancy percentage is calculated on the first declared phase and cumulatively on subsequent phases if the ownership of the condominium project remains the same.
• If multi-phasing includes separate ownership per phase, each phase is calculated individually.
• In single-phase condominium project approval requests, all units are used in the denominator when calculating the 50 percent owner-occupancy percentage.

10. Projects consisting of three or fewer units must not have more than one unit encumbered by FHA financing.

Projects consisting of four or more units must not have greater than 30% of the total number of units encumbered by FHA.

HUD will be tracking the number of cases assigned in each project and the FHA concentration will be listed within the condo approval data screens at https://entp.hud.gov/idapp/html/condlook.cfm.

11. The homeowners association budget must be reviewed for adequacy to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project.

Additional requirements, which are referenced in Mortgagee Letter 2009-46B, apply for conversions, manufactured and new construction projects.

It’s important to note that condo project approval is not required for FHA to FHA streamline refinances, HUD REO Sales or for Site condominiums in most cases.

Mortgagee Letter 2009-46A does offer some temporary good news. Spot loan condominium eligibility has been extended for cases pulled through January 31, 2010. The new condo policy review and approval rules are being phased in starting with eligibility requirements effective December 7th. Project review and approval will be required for non-approved projects effective for cases pulled on and after February 1st.

In addition to the good news on spot loan eligibility extension, HUD has also agreed to allow FHA project concentration to exceed the standard 30% allowance with the ability for project concentration to go to a full 100% in some cases. These temporary limit increases are effective from December 7, 2009- December 31, 2010.

HUD is also offering the ability to calculate owner occupancy off of the number of pre-sold units for proposed and under construction projects still in their marketing phases. Vacant or tenant-occupied real estate owned (REOs), including properties that are bank owned, may be excluded from the calculation of the required owner-occupancy percentage (should be removed from both the numerator and denominator. Plus, they are lowering the pre-sale requirement from 50% to 30% for new construction projects.

In short, the changes offered by these two Mortgagee Letters are positive ones. HUD has offered added flexibilities to allow condominium business to continue thriving. However, I still have concerns about HUD’s ability to handle the capacity of project reviews they are likely to see coming in. I was told that HUD had no plans or budget availability to add staffing in the Technical Review departments at the homeownership centers. (those are the departments that handle condominium project reviews and approvals). For these condo requirements taking effect in December and end of January, I would expect many folks at HUD take vacations and time off during the holidays and winter months. I can only imagine what the waiting times will be for some of these project reviews.

Use this time to assemble your project lists, check approval statuses, start gathering project documents and prepare your project packages for submission NOW before the lines grow longer in Atlanta, Denver, Phili and Santa Ana!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Reminder- FHA Streamline Guidelines Change Effective November 17th!

noreply@blogger.com (Editor in Chief) — Thu, 12 Nov 2009 22:33:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

As announced in Mortgagee Letter 2009-32-Revised Streamline Refinance Transactions, major changes will be effective for cases requested on and after Tuesday, November 17th! Are you ready for these changes?

For many years, streamline refinances have been a treat for FHA-insured mortgagors because they have offered the benefit of little required documentation, immediate interest rate and/or payment reduction, and the ability in many cases to roll in all costs without the need for any funds out of pocket. Starting Tuesday I suspect we won’t be seeing nearly as many of them or we will be seeing more of them done with the need for borrowers to bring funds to their closings.

A number of things are changing with the implementation of the new requirements; one of them being a requirement for a minimum of six month’s seasoning on any FHA loan to be streamlined. In the past no seasoning has been required aside from investor overlays. Another requirement is the need for a strong payment history in the most recent 6-12 month period. If the mortgage being refinanced is seasoned less than 12 months, a perfect payment history must be verified. For those mortgages seasoned 12 months or greater, no more than 1 30-day late payment may have occurred in the most recent 12 month period and late payments cannot have been made in the most recent 90 day period.

Streamline refinances must still clearly exhibit a tangible benefit to the borrower(s) but requirements have been detailed a bit more specifically within the Mortgagee Letter than in the past.

Investor overlays have included the requirement for verbal employment verifications in some cases but starting Tuesday, the lender is required to certify that the borrower is employed and/or has income at the time of the loan application. This will lead to a requirement for verbal VOEs in all cases and if the lenders are wise, they will require that the employment be verified within a few days of settlement to protect their interests.

HUD still isn’t requiring minimum qualifying credit scores with the changes, however, they are said to be adding data fields within FHA Connection where credit scores must be entered if they are obtained to comply with lender minimum score requirements.

No caps on subordinate financing CLTV has always been a great benefit of streamline refinances in the past; especially in those areas that have experienced market decline but effective on the 17th, the CLTV when secondary financing is subordinated, can no longer exceed 125% of the property value. I suspect many lenders will cap this at 100% though.

I did verify with HUD that once a loan is run through TOTAL, it cannot be processed and closed as a non-credit qualifying streamline. Once it’s run through TOTAL, there is a record of the AUS run for the loan and it must close as a full credit qualifying rate/term refinance.

The most significant of changes to the streamline guidelines involves the new max mortgage calculations which, starting Tuesday, look like this:

To view the FHA Streamline - Max Mortgage calculation Tables
CLICK HERE: FHA%20Streamline%20Max%20Mortgage%20Calculation%20tableS.pdf

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Reminder- FHA Streamline Guidelines Change Effective November 17th!

noreply@blogger.com (Editor in Chief) — Thu, 12 Nov 2009 16:22:00 +0000

Updates on FHA Condominium Changes

noreply@blogger.com (Editor in Chief) — Fri, 06 Nov 2009 20:42:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

Updates on FHA Condominium Changes

Since last week’s article, I’ve learned of additional information you may find helpful as we all wait to hear from HUD on revisions to Mortgagee Letter 2009-19.

I posed a number of questions to my client contact at HUD and received prompt responsive answers to what I asked. Here is a list of the Q&A that resulted:

QUESTION TO HUD: I’m hearing that very few Mortgagees will be utilizing the DELRAP approval process which obviously means HUD will be potentially overwhelmed with project submissions for review and approval. Has HUD expanded staffing within the HOCs to deal with the increased demand for project reviews and approvals?

ANSWER FROM HUD: We indeed foresee some back up as to time frames because there have been no additional funds allocated to increase staff in these areas.

QUESTION TO HUD: Does HUD intend to centralize the processing of condo review requests or will we continue submitting documentation to the appropriate Homeownership Centers for project reviews and approvals?

ANSWER FROM HUD: HUD has no plans to centralize condo reviews and approvals; therefore, you are correct in that you will continue submitting to the HOCs.

QUESTION TO HUD: Does HUD intend to perhaps offer some sort of Checklist or Questionnaire of sorts so we can easily determine if a project is potentially approvable and exactly what we need to submit for full project approval?

ANSWER FROM HUD: There will be more detail given about the review and approval process in the anticipated Mortgagee Letter. We have not heard that a checklist other than the list included in the original mortgagee letter will be included.

The Mortgage Bankers Association Advocacy group communicated their involvement in the pending revisions to ML 2009-19 late last week which provides a bit more clarification on what we might expect when HUD communicates the anticipated changes. Below are highlights as communicated by MBA:

1. FHA concentration will remain at 50 percent.
a. In "well established" project, the concentration may go up to 100 percent.
b. "Well established" buildings show clear financial stability, including a minimum of 10 percent reserves, owner occupancy of 50 percent, and a transfer of title.
c. In the ML, HUD will provide an explicit definition of "established."

2. Owner Occupancy will remain at 50 percent.
a. REOs will be excluded altogether from calculation.

3. Pre-sale requirement will be 50 percent.
a. FHA will accept a spreadsheet from the developer as certification under the pre-sale requirement.
b. Additionally, FHA has created a specific document that developers must sign to certify that all of the information is accurate.

4. Temporary Certificate of Occupancies will be accepted.

5. All 40,000 + condo projects currently approved will remain approved

6. HUD Review and Approval Process (HRAP) is permissible in Florida.

7. The ML will clarify that under Direct Endorsement Lender Review and Approval Process (DELRAP), a lender is not responsible for another lender's approval process (specifically, additional project review is not required).

8. New ML will clarify that reserves should be at 10 percent, if not then a lender can request a reserve study.

9. New ML will add specific guidance on insurance (specifically, gap insurance).

10. Transfer of control requirements will be dictated by the state and local requirements.

11. New ML will clarify the definition of site condos.

12. New ML will clarify phasing requirements.

Based on everything I’ve learned recently, I want to further my previous advice. I wouldn’t recommend sitting and waiting for the new Mortgagee Letter. Now is the time to start putting together lists of condominium projects in your market areas and determining whether or not they are currently on the FHA approved condominium project list or if you will need to gather documentation to get the projects submitted for review and approval. This is an excellent opportunity to set meetings with realtors and builders and get those condo project connections established and get moving on this. Don’t put it off or your future FHA business may be held up as a result of procrastination!

Here are the HUD Homeownership Center condominium project review submission addresses for all four respective HOCS, which I have verified remain current as of right now:

Atlanta Homeownership Center-Alabama, Florida, Georgia, Kentucky, Illinois, Indiana, Mississippi, North Carolina, South Carolina, and Tennessee.
U.S. Department of Housing and Urban Development
Atlanta Homeownership Center
Five Points Plaza
Attn: Technical Support Branch I (FL, NC, SC, TN)
OR
Attn: Technical Support Branch II (AL, GA, IL, IN, KY, MS)
40 Marietta Street
Atlanta, GA 30303-2806

Denver Homeownership Center- Arkansas, Colorado, Iowa, Kansas, Louisiana, Missouri, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Wisconsin, Wyoming, and Utah.
Condominium Approval Requests
Office of Single Family:
U. S. Department of Housing and Urban Development
Denver Homeownership Center
Attn: Technical Support Branch, 21st Floor
1670 Broadway
Denver, CO 80202

Philadelphia Homeownership Center- Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia.
U.S. Department of Housing and Urban Development
Philadelphia Homeownership Center
The Wanamaker Building
Attn: Technical Support Branch 1 (ME, VT, NH, MA, CT, RI, NY, NJ)
OR
Attn: Technical Support Branch 2 (PA, DE, VA, MD, DC, WV, DC, MI, OH)
100 Penn Square East
Philadelphia, Pa. 19107-3389

Santa Ana Homeownership Center- Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon and Washington.
U.S. Department of Housing and Urban Development
Santa Ana Homeownership Center
Attention Technical Support-Condominium Reviews
Santa Ana Federal Building
34 Civic Center Plaza, Room 7015
Santa Ana, CA 92701-4003

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Another Delay to Condo Changes- Let us all be Thankful!

noreply@blogger.com (Editor in Chief) — Fri, 30 Oct 2009 14:51:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

As I’m sure we’ve all learned by now, HUD announced late last Wednesday afternoon that another extension had been issued in regards to the implementation of the new condominium project approval procedures mentioned in Mortgagee Letter 2009-19. I, for one, am extremely grateful for the additional time; though the extension was issued just as I was wrapping up a very thorough review of the Mortgagee Letter- go figure!

I’ll be honest- condo project reviews are not near the top of my list of favorite things to deal with. I saw the length of that Mortgagee Letter when it first came out, I started reading it, ADHD kicked in, I tossed it aside and kept it on my list of things to review when I got to it. Well last week, I finally got to it! And I also came away from it with a long list of questions and complete confusion as to why on earth any of us brokers or lenders would be the least bit motivated to participate in the DELRAP option. The risk is HUGE!

Now I can tell you this though- for lenders who have the staff and expertise to afford them a department of knowledgeable and experienced staff with direct access to legal opinions, these new project review and approval options are golden and being able to offer DELRAP will help them stand out in their market. But somehow I don’t think we’re going to see very many jump right up at the chance.

Condominium project reviews are very complex. The list of exhibits alone is completely overwhelming. Refer to Attachment A which includes a listing of 16 different document sets and start adding up the inches of paper. I’m thinking, wow, one project might have a pile of condo docs about three feet high- what a fun job for somebody else!

I came away from my review of the Mortgagee Letter with a pile of notes- let me see if I can explain them as they may help put some of the risk concerns in perspective.

1. It states clearly that the DELRAP option is only available to lenders with full DE designation who have staff with knowledge and experience reviewing and approving condo projects.

How many of us really have that knowledge and expertise?

2. Page 7- Letter E- A lot of folks missed this one and this was the one thing that grabbed my attention the most, to be quite honest. This paragraph states that all of us lenders have to make up our minds which option we are going to utilize and stick with it. WE cannot pick and choose which projects we are comfortable approving and which we want to send in the HUD to review and render decision on. If we start reviewing projects under DELRAP, we are required to send in our first five files to HUD for review so they can make sure we know what we’re doing. In sending in those cases, it puts us on the “DELRAP Radar.” At that point HUD knows we’ve elected to go DELRAP and we cannot change our mind after that.

Now in HUD’s defense, I get this one. I don’t like it but I get why they felt it necessary to put it in writing. If they don’t, they will have absolutely no control on volume and will have no idea what to expect in terms of the number of project approval submissions they’ll have coming. Within six months or so after this rolls out, they’ll have a pretty good idea of who the DELRAP lenders are so they won’t have to expect any more project review requests from those folks. They’ll also know which lenders are sticking with HRAP and will get an idea of how much project activity certain areas have so they can better gauge their own staffing needs.

But the thing that is concerning about that is say for instance a lender decides to hire in a department of experts to manage their condominium project review and approval department but for whatever reason, the department experiences extreme turnover, the lender can’t maintain the right staff, can’t keep positions filled because they are so demanding, etc. The lender may reach a point where they can no longer handle DELRAP. Are they then completely stuck? They can’t then turn to HUD for project reviews while they try to get a better grip on their vision for their department? Seems a bit extreme to REQUIRE all lenders choose their method of review and approval without option to change their minds.

3. Lenders who choose the DELRAP option must certify compliance with Section 203(b) of the National Housing Act and 24 CFR 203 of HUD regulations.

Before we would even know what we are certifying to, we would need to pull and read through federal regulations. (This part right here just lost the attention of about 90% of those who were reading the Mortgagee Letter and gave them ongoing nightmares).

4. It states that we can obtain an attorney opinion letter if we wish but that we as the lender are still completely responsible for certifying that the project meets all requirements.

The concerns on that one need no further explanation.

5. One thing that hasn’t changed much-We must certify that no greater than 30% of the project is encumbered by FHA-insured mortgages.

Now come on- seriously? We can’t get that information most of the time on the spot loan questionnaire as it is! Name me an HOA who knows how many of their units are financed FHA? Why would they keep track of that and why would it matter to them? With privacy laws as they are now, we can’t just have a title company pull the recordings for all units in a project any longer either. So aside from obtaining a list of all unit addresses within a project and running case queries in FHA Connection for each individual address to check for hits, how on earth are we expected to do that? Say there are 650 units in a project- is someone supposed to sit and pull 650 case queries to determine whether or not each unit has an FHA case attached to it? Crazy!

6. Once a DELRAP lender reviews and approved a project, they are responsible for inputting the correct project approval information.

So say Lender2 happens to have a unit in that same project. Lender2 relies on the project approval information entered by Lender 1. What if Lender1 has a file audited and for one reason or another, HUD determines Lender1 approved a project in error. How liable is Lender1 for Lender2’s loan which closed based on Lender1’s approval information?

Also- How confusing will it be for everyone when different DELRAP lenders end up reviewing and approving different phases in the same project? Not to mention how confused will the builder be?
.
7. DELRAP lenders are responsible for maintaining all of the condominium project document exhibits listed on Attachment A.

The question is- what are we looking for as we review them? Why isn’t that information clearly covered? I can request and collect piles of documents all day long but if I’m not told what to watch out for, how can I determine if any one thing makes a project not approvable?

8. In the past, FHA and VA project approvals have always been interchangeable. Will that still be the case once these new condo approval procedures roll out? If a project is on VA’s approval list, can I assume it will be accepted by FHA?

9. One factor that renders a project non approvable is if it is considered a condotel. Nowadays we’re finding that internet searches on projects and HOAs are bringing forth advertisements for rentals and rental agreements that some lenders interpret as the project being deemed a condotel.

HUD’s position is very vague in this area. How do we know whether or not HUD would side with out conventional lenders who are taking the condotel research to the extreme?

10. DELRAP lenders must certify that the project maintains acceptable insurance.

I’ve hunted everywhere and find nothing specific on condominium project insurance requirements for HUD.

By now I would imagine the concerns I’ve outlined above are enough to make your head spin. Mine has been spinning for over a week because I just do not see that many lenders will have the ability to take on the DELRAP option. What this means is that if HUD hasn’t planned for a complete overload of project approval submissions, turn times for project reviews and approvals will be out of this world ridiculous and likely will happen very quickly.

The best advice I can offer to everyone in the meantime is to start reviewing your market areas with your realtors, get lists of local projects together and start spread sheeting approval statuses NOW. It’s crucial to establish how many non-approved projects you have in your area so you can start preparing to get those projects submitted for review and approval ASAP.

In the meantime, we’ll all await HUD’s much-anticipated Mortgagee Letter which is said to be announcing some minor changed to the content of ML 2009-19. So far, I’ve not been able to gather any inside information on what the changes may be but as soon as I know, I’ll certainly pass the information on.

If anyone learns of any lenders who will be offering DELRAP review and approval, please let me know so I can pass on the information for everyone’s benefit!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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-Helpful Changes and Updates

noreply@blogger.com (Editor in Chief) — Thu, 22 Oct 2009 19:58:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

I usually check HUD’s Mortgagee website at least once daily for any signs of newly issued Mortgagee Letters that haven’t yet been announced. Today I see that Mortgagee Letter 2009-42 is posted and the subject is Sub-Servicing of FHA-Insured Mortgages.

Now if you’re like me, you take a look at the subject line, realize it doesn’t apply to your daily business and cruise right on past it and on to whatever else you’ve been working on. For some odd reason, I took a minute to read through this one and wow! I am absolutely blown away! Whoever wrote this communication is my new hero. I am hoping we see content written this way on other Mortgagee Letters as they are issued in the future. The verbiage is easy to read, easy to understand and gets straight to the point which isn’t always the case with Mortgagee Letters. Often I start to read one and find myself chomping at the bit just trying to find the time and patience to hash through it and decipher the exact message.

I must say, I’m quite impressed by HUD’s efforts recently. We recently learned that HUD has assigned “account liaisons” to mortgagees. These liaisons are person we can turn to with questions, for clarifications, for guidance and direction. I have been very pleased with the liaison I have had the pleasure of working with. I hope that you have perhaps been introduced to and have had the opportunity to meet and greet with your assigned account liaison as well.

As we all know, HUD also updated our “bible” earlier this year as well. The 4155 handbook is a wonderful tool now that we can search the PDF copy by topic to nail down the information we are specifically looking for.

HUD has also obviously been hard at work reformatting and updating the many websites and online resources we have come to depend on over the years. The updated sites have a much more modern look and fresh feel to them. Gone are the older mainly red colored sites which have since been transformed into a much fresher and more appealing. If you haven’t had the opportunity as of yet, go ahead and check out www.hud.gov which is a great example of updating. You’ll notice that www.fha.gov has changed also. The FHA website is now a sub-site of the main HUD website. Originators and processors will find a majority of our usually needed information linked under the Resources topic tab at top of the page.

If you’re like many folks I know, myself included, you’ve become a social networking junkie in which case, check out these cool new HUD pages!

HUD on FaceBook: http://www.facebook.com/HUD
HUD on Flickr: http://www.flickr.com/photos/opahud/
HUD on YouTube: http://www.youtube.com/HUDchannel
HUD on Twitter: http://portal.hud.gov/portal/page/portal/FHA_Home/twitter
FHA Wiki: http://en.wikipedia.org/wiki/Federal_Housing_Administration

One thing is for certain, I am liking all of these changes! They’ve been long awaited and I’m certainly pleased with the progress!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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 Case and Appraisal Transfers- What HUD Doesn’t Tell You That You Need to Know!

noreply@blogger.com (Editor in Chief) — Fri, 16 Oct 2009 16:04:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

This week’s topic was an easy one because of an ongoing situation I’ve been involved with that I learned a lot about over this past week. And to be honest, I am really frustrated about this one because it has taken up many people’s time, nearly cost a borrower close to $1000 in appraisal fees and put an appraiser in an awkward position to serve as “trainer” on appraisal regulations when in fact the “trainer” should have been HUD in their own instruction and communication.

I think we’ll all agree that it’s always been understood that when a lender transfers a case assignment where an appraisal has been completed, the appraisal is transferred with the case to the new lender. In fact, if you search by topic of “case transfer” within the FHA Outreach FAQ at http://www.fhaoutreach.gov/FHAFAQ/ you will read a number of times that HUD states the following:

Lenders are expected to cooperate in the transfer of case numbers. At the request of a borrower, the case number is to be assigned to the new lender using the Case Transfer function in FHA Connection. The transferring lender is entitled to retain any lock-in fee collected from the borrower at the time of application. The transferring lender is required to provide the new lender with the appraisal, if any, but is not required to provide any processing documents, if any. If processing documents are transferred, the fee for providing these documents is to be negotiated between the lenders. No separate charge to the borrower is allowed for the transfer of a case number.

Well here is what HUD doesn’t mention or answer that is more than likely to occur many many times if they do not. This is what happened on a recent incoming case transfer to our company:

Lender A held a case assignment and received a completed appraisal for borrower A. For whatever reason, Lender A never closed the case with Borrower A, never entered a mortgage credit reject in FHA Connection and never cancelled the case with HUD.

Months later, Lender B received an application from borrower B and when Lender B requested the case assignment in FHA Connection, Lender B learned that there was an existing case held by Lender A. Lender B then contacted Lender A with a request for case transfer and Lender A advised Lender B that a complete FHA appraisal was completed and logged by Lender A. Next, Lender A refused to transfer the case to Lender B and would not release the appraisal to Lender B without complete payment for the appraisal. So in order to get the new deal moving for Borrower B, the originator for Lender B proceeded to make payment to Lender A from his personal credit card so as not to allow Lender A to withhold the case transfer any longer. Wait, it gets worse.

Once Lender B received the case transfer and appraisal, Lender B contacted the appraiser to update the client and borrower names on the appraisal. It was at that point that the appraiser explained to Lender B that she could not do anything requested by Lender B because the appraisal was “owned by” Lender A. The appraiser explained that the only thing she could do was require that Lender B submit a request for a complete new appraisal and that Lender B would incur a charge of $400 for the new appraisal.

As you may know, HUD actually addresses some of this in their recently released Mortgagee Letter 2009-29-Appraisal Portability which includes an effective date of January 1, 2010. In that Mortgagee Letter, it states the following:

In cases where a borrower has switched lenders, the first lender must, at the borrower’s request, transfer the case to the second lender. FHA does not require that the client name on the appraisal be changed when it is transferred to another lender.

In accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), the lender is not permitted to request that the appraiser change the name of the client within the appraisal report unless it is a new appraisal assignment. To effect a client name change, the second lender and the original appraiser may engage in a new appraisal assignment wherein the scope of work is limited to the client name change. A new client name should include the name of the client (lender) and HUD.

Here is where the Mortgagee Letter is completely unclear and misleading. It states that HUD doesn’t require the client name to be changed from Lender A to Lender B. It goes on to explain that the 2nd lender cannot request that the appraiser make a client name change without the appraiser treating it as a new order. However, let me explain what I’ve learned based on the situation I explained above.

We assumed that based on HUD’s FAQ answers on FHA Outreach and in ML 2009-29 that when the case and appraisal are transferred from Lender A to Lender B, Lender B doesn’t have to get the client name changed in the appraisal from Lender A to Lender B. However, there are a couple of things that came up on our situation in particular that threw that assumption out the window.

In our case, the appraisal that Lender A had done for the case they ended up transferring to Lender B (us) was done subject to repairs and a final inspection. When Lender B’s processor requested the final inspection from the appraiser, the appraiser stated she could not complete a final inspection for us because we were not the client of the original appraisal. At that point the processor stated that HUD specifically states they don’t require a client name change on a case and appraisal transfer. The appraiser then explained that even though HUD does not, USPAP essentially does. She stated the only way she could do anything for us relating to the subject property and appraisal would be dependent upon our ordering a new appraisal from her which would be a completely new full appraisal charge.

I found this all a little hard to believe because HUD’s FAQ answers and ML 2009-29 seemed to contradict what she was telling us so I went out and started reading USPAP myself and by golly am I glad I did because I learned a lot by doing so!

Essentially, here is what I feel SHOULD HAVE happened with this case to have prevented all of the confusion:

1. When Lender A’s deal fell apart for whatever reason after they’d clearly received and logged a complete appraisal, they should have completed the mortgage credit reject and should have requested a case cancellation from their homeownership center (HOC). But they did not so the case remained in FHA Connection tied to the property.

2. When Lender B requested the case transfer from Lender A. Lender A should not have “held the case and appraisal hostage” for payment because it should have been Lender A’s responsibility to have collected for the appraisal from their Borrower before their deal went south. At the point when Lender B requested the case transfer, the appraiser has already been paid in full for the appraisal invoice in question by Lender A. So for Lender B to have had to reimburse Lender A for an appraisal they don’t even have rights to according to USPAP was ridiculous. Lender B’s borrower should not have to pay out close to $1000 in appraisal and final inspection fees.

I’m actually waiting for a response from HUD on a list of questions that arose from this situation specifically. I feel it’s important they be answered so that I can pass on what I learn to others in hopes others don’t have to go through all of what we’ve dealt with trying to resolve this case and get our borrower’s loan closed. I feel that HUD may need to clarify their instructions a bit further for transferring lenders and receiving lenders and may need to define the expectations and responsibilities a bit further.

My questions to HUD included the following:

1. Is it correct that the existing lender should have requested a case cancellation from HUD HOC as soon as they determined that their borrower would not close an FHA-insured loan on the property? If yes, is it true that in the future should we encounter a situation where a property is tied up with a different lender and different borrower(s), we should have that lender request a case cancellation so we can then proceed with requesting our own new case and appraisal for the property and the new borrowers?

2. Am I correct in that the existing lender should not have held up the transfer of the appraisal for payment of an FHA appraisal that was made for a different borrower? The fact that this appraisal showed an effective date of 5/15/09 and is just now being transferred in 10/09 would certainly lead me o believe that the appraiser has likely already been paid and that it should have been the existing lender’s responsibility to collect for reimbursement of the appraisal fee from their borrowers who they had obviously rejected or whose deal had fallen through for one reason or another?

3. There was no noting of Mortgage Credit Reject in FHA Connection for the case in question. Am I also correct in that prior to completing the case transfer, it was the obligation of the prior lender to input some indication/explanation regarding what happened with the prior borrowers to explain WHY we are now processing a case on the same property for a new borrower?

4. Since USPAP does not allow an appraiser to make changes requested by the new lender when the initial appraisal request was made by prior lender, why does HUD state you don’t require the client name change reflect the final lender? It’s not made clear in ML 2009-29 that the appraiser cannot complete a final inspection, cannot provide additional commentary, additional comps, listings, or correct any errors at the request of the lender who received the transferred case and appraisal.

5. ML 2009-29 references case transfers made at the request of the same borrower electing to close with a different lender but does not address any situation where the case is tied up with a prior lender in the name of prior buyers. Why is that topic not addressed or mentioned?

As soon as I receive answers to my list of questions posed to HUD on case and appraisal transfers, I will certainly pass on more for education purposes.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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 Mortgagee Letter 2009-37- Flood Zone Requirements and Responsibilities of FHA Mortgagees and Appraisers

noreply@blogger.com (Editor in Chief) — Fri, 09 Oct 2009 15:26:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

HUD seems to be on a roll lately with issuing Mortgagee Letters as they’ve issued yet another recent communication, Mortgagee Letter 2009-37 dated October 1st, covering the topic of flood zones and flood insurance responsibilities.

Flood Certifications Early in the Loan Process- a Must for all Brokers and Bankers

HUD’s letter actually brings forth a topic I wish to point out to be taken into consideration by all mortgage brokers and bankers. It’s important that you utilize a flood zone determination vendor within your organization and that you require the pulling of flood certifications early in the processing of each loan application file. It’s not smart to wait for the appraiser or end lender to make the flood determination for the subject property and ultimately the loan requirements for your borrowers.

You are doing a major disservice to your customers by not working proactively to determine the flood plain status of the property as soon as possible in the loan process. You may think you’re an expert on knowing whether or not a property is actually zoned to require flood insurance when in fact, unless you have an “in” with the municipality’s building or zoning board or with the Federal Emergency Management Agency (FEMA), you can’t possibly know everything for certain.

There’s nothing more frustrating to a borrower than learning at the very last minute that the property they are wanting so badly to purchase is in a flood zone because of some small body of water that overflowed 80 years ago and that they need to shell out hundreds of dollars for a flood insurance premium and additional escrow reserves in order to close on their dream property. I’ve seen these things happen to many times and each situation ends with a very unhappy borrower.

However, if you pull the flood certification early on and it comes back showing the property in a flood zone, you at least have the time to do further investigating if needed and have the opportunity to explain the whole situation to the borrowers. When they’re given sufficient time to understand and handle the application and premium, they are much less combative and end up much more appreciative.

When attempting to determine what flood cert vendor to do business with, keep a couple of things in mind. First, check to make sure the vendor is accepted by the majority of your end lenders. Second, check pricing and see if you are able to negotiate bulk discounted rates. If you are able to guarantee the vendor all or a major portion of your flood cert business, they will be much more likely to bring down their standard pricing for you.

And lastly, make sure the flood cert ordering process is an easy one for anyone in your office who will be responsible for requesting and reviewing the flood certifications. Ask if the flood certs can be ordered electronically, if there is interfacing available between the vendor and the loan origination software program your office uses regularly. Be sure to check out each vendor thoroughly to make the best decision for your staff and your customers.

The Appraiser’s Responsibility

The recently issued HUD bulletin explains that the appraiser is responsible for reviewing the applicable FEMA Flood Insurance Rate Map (FIRM) to determine whether or not the property lies within a FEMA-designated flood plain. If indeed the map reveals that the property’s location is within a flood zone, the appraiser is to include a copy of the map panel with the appraisal report. In addition, the appraisal itself must include the appropriate notation as to the flood zone designation, the map panel number and date of the map.

The Mortgagee’s Responsibility

Ultimately, HUD holds the lender responsible for making the correct final flood zone determination and for the meeting of all requirements. This is why no broker or lender should rely solely on the appraiser’s review of the FIRM map as the only method of determining the flood status of the property. Mortgagees are responsible to inform borrowers of the requirement to obtain adequate flood insurance for properties where any portion of the dwelling, related structures or equipment are located in a SFHA. In addition, as a condition of closing, the Mortgagee must require up front payment of the first year flood insurance premium and an escrow account for payment of future premium payments when they fall due. Also, it’s important to note that if the property is located in a SFHA and insurance under the National Flood Insurance Program (NFIP) is not available in the community, the property is not eligible for FHA mortgage insurance. This is why the review of a third party flood zone certification is vital early in the processing of each loan application.

Flood Insurance Requirements for Existing Properties Determined SFHA

For properties over one year old (as determined by the date of certificate of occupancy or equivalent), flood insurance must be available to the community and must be maintained for the life of the loan. If the flood zone determination is ever amended by a LOMA (letter of map amendment) to state that the property is no longer considered to be in a flood zone, the flood insurance may be dropped. However, in retrospect, if FEMA amends the flood zone status of the property at any point during the duration of the loan to state that the property has been added to a SFHA status, the servicing lender may contact the borrower to state a requirement for the borrower to obtain and add acceptable flood insurance for their loan. (I have seen this happen on numerous occasions).

Flood Insurance Requirements for New and Proposed Construction Properties and Manufactured Homes Determined SFHA

If any part of the property improvements is located within a SFHA, the property is ineligible for FHA UNLESS:

• FEMA provides a final Letter of Map Amendment (LOMA) or final Letter of Map Revision (LOMR) removing the property from SFHA in which case no insurance would be required; or

• Lender obtains a FEMA form 81-31 elevation certificate prepared by a licensed engineer or surveyor documenting that the lowest floor/finished grade of the residential building is built at or above the 100 year flood plain in which case, flood insurance would still be required.

The only case where flood insurance is waived is when a Letter of Map Amendment (LOMA) or Letter of Map Revision (LOMR) is issued by FEMA specifically removing the subject property from the flood plain status.

In cases where an elevation certificate is obtained in lieu of a LOMA or LOMR, you will need to make sure your end lender will accept such. Most lenders actually require the LOMA or LOMR regardless of the fact that HUD will allow an elevation cert with evidence of flood insurance.

Flood Insurance Requirements for Condominium Homes Determined SFHA

If the condominium unit or project is determined SFHA, the homeowners association (HOA) is responsible for maintaining adequate flood insurance. If the HOA does not maintain flood insurance and rather holds the unit owner responsible for maintaining flood insurance on the unit, the loan is not eligible for FHA.

Flood Insurance Coverage Requirements

You will want to consult your end lender’s guidelines to be certain their requirements do not vary from standard requirements which state that flood insurance must be obtained and maintained in an amount at least equal to the least of:
• The outstanding principal balance of the loan(s); or
• The maximum amount of the NFIP insurance available with respect to the property improvements; or
• The development cost of the property, less estimated land cost.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)

Mortgagee Letters in Review

noreply@blogger.com (Editor in Chief) — Thu, 01 Oct 2009 16:05:00 +0000

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

As continued from last week’s article, this week we’ll review the numerous Mortgagee Letters HUD has issued recently on topics relating to appraisers and appraisals.

Mortgagee Letter 2009-36 dated 9/23/09 simply reiterates the announcements made in Mortgagee Letter 2008-39 that I actually already reviewed and presented in my article on Friday, September 11th. Click here to access that article. As of 10/1/09, any appraisers that are not state certified residential or general appraisers will be removed from HUD’s appraiser roster.

Mortgagee Letter 2009-30 dated 9/18/09 discusses Appraisal Validity periods. Effective for cases assigned on and after January 1, 2010, ALL FHA appraisal types will be valid for only 120 days. This includes existing, proposed and under construction property types. This is a large change as to date, appraisals for existing properties are valid for 180 days and those for new construction properties are valid for up to 12 months.

Note that HUD doesn’t allow for re-certifications of value so once an appraisal expires after 120 days, it would need to be completely redone.

Mortgagee Letter 2009-29 dated 9/18/09 discusses Appraisal Portability and states that its content will be enforced for cases assigned on and after January 1, 2010 as well. The bulletin reaffirms HUD’s rule against lender’s using “appraisal shopping” techniques to obtain and appraisal with the highest possible property value and least amount of required repairs and states that when one lender transfers an existing case and appraisal to a second lender, the second lender is not allowed to request another appraisal except under any of the following circumstances:

• The DE Underwriters for the second lender determines the existence of material deficiencies in the appraisal provided by the first lender
• The appraiser who performed the first appraisal is on the second lender’s exclusionary list of appraisers.
• The first lender neglects to provide the second lender with a copy of the appraisal in a timely manner and the borrower’s contingency, rate lock or closing date may be negatively impacted.

In such situations are listed above, the end lender must include copies of BOTH appraisals in the case binder. The lender must explain and document WHY another FHA appraisal was ordered for the case.

HUD also goes on to clarify that when the first lender transfers the FHA case assignment to the second lender, they are REQUIRED to transfer the appraisal as well. However, HUD does not require nor does USPAP allow for the appraiser to change the lender’s name within the original appraisal report to reflect the name of the second lender. To do so constitutes a completely new appraisal and the appraiser then has the right to charge for a complete new appraisal.

It’s important that the Appraisal Logging in FHA Connection reflect the correct data information for the appraiser who completed the appraisal being used in the final underwriting decision. Lenders who fail to comply with the requirements set forth in said Mortgagee Letter are subject to administrative sanctions.

Mortgagee Letter 2009-28 dated 9/18/09 covers the topic of Appraiser Independence as well as announces new requirements pertaining to entities that are eligible to order appraisals for FHA insured mortgages. These new requirements are effective for cases assigned on and after January 1, 2010.

In summary, this bulletin revokes the ability of loan officers, loan officer assistants, loan production personnel and processors to communicate directly with FHA roster appraisers and reiterates HUD’s stance that the appraiser is not to be unduly influenced in any way whatsoever to provide an appraisal containing a desired value. The lender may not add the appraiser’s name to any exclusionary listing without first notifying the appraiser directly. The lender is obligated to follow HUD’s regulations to maintain appraiser independence as outlined in past Mortgagee Letter 1994-54 and in Mortgagee Letter 1996-26.

These are BIG changes for HUD on FHA appraisers and appraisal rules but transitioning to follow them should not be of major concern because we are already following similar regulations set forth for conventional appraisers and appraisals with the Home Valuation Code of Conduct. Most lenders will likely replicate their processes and procedures to include and encompass their FHA case ordering and appraiser assigning as of January 1st of the New Year.

One big note of importance for processors- When logging the FHA appraisal, you need to make sure the appraiser who completed the appraisal is the same appraiser who is assigned to perform the appraisal duties on the FHA Case Assignment itself. If the appraisal comes in from someone other than the person originally assigned, you must first complete and “Appraiser Re-Assignment” in FHA Connection to transfer the original appraisal assignment to the appraiser who actually completed the appraisal. THEN you will proceed with logging the case. ML 2009-28 states that after January 1, if those do not match, the lender may be subject to administrative sanctions. I see those errors on a daily basis so it’s important you learn to pay attention to those important details!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer 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)