The Condo Question

Written By: Bonnie Wilt-Hild
Senior DE Underwriter & NAMP Instructor

Since the implementation of the new condo rules I have had several of my loan officers come to me with condo cases which they state have been turned down by other lenders because of information found in the condo questionnaires that the lenders are requiring to be completed on each case. I have to say that it has caused quite a bit of confusion for me because I was not aware that we needed a condo questionnaire on every condo case. I was under the impression that the condo development need simply to be listed on HUD’s condo list with a demonstrated expiration date that did not precede loan application.

At any rate, one loan officer in particular came to me over and over with multiple cases stating that other lenders had rejected the cases because of the questionnaire and asked what he needed to send to HUD or demonstrate in the file to overcome this. I kept conveying, over and over, that we didn’t need the questionnaire if the condo was on HUD’s approved list after which I received multiple office visits with a new question which was “are you sure?” Ok I have to say after having this conversation at least six times I started to doubt myself thinking perhaps I missed something, say 3 mortgagee letters which completely changed how we were supposed to go about the new condo rules so instead of looking for any missed mortgagee letters (I am actually far too lazy for that) I emailed HUD, the Philadelphia Homeownership Center to be precise and they shared information with me regarding how to complete underwriting on a condominium which I thought was lovely of them.

As HUD was so generous with this information I thought I too would share what I have been told and clear these questions up once and for all so as to eliminate all of the confusion and yes to keep a particular loan officer out of my office. First, as we are all aware Condo guidelines changed per ML 2009-19 which eliminated our ability to perform spot approvals on condo’s that were not located in a HUD approved condominium development. These rules were further defined in ML 2009-46a & ML 2009-46b. These mortgagee letters provide further clarification as to the approval process for condo’s that are not listed on HUD’s approved list and what we need to do if they are. Now if you need to have a development approved I strongly recommend pulling the mortgagee letters because there is a few things you are going to need to provide in order to make that happen but if you have a condo that is in a development that is already approved by HUD then all you need to do is print evidence of the approval from FHA connection, make sure it has not expired and sign the Lender Certification to Condominium Requirements provided in ML 2009-46b. That’s it and this I verified with HUD.

So for all of you and I won’t mention any loan officers name, who are trying to make this more difficult than it has to be, you may stop because it’s really not that complicated. As for the rest of you who appreciate nice and easy, I hope I have made your day. As always, happy underwriting!

About the Writer. As an NAMP staff writer, Bonnie serves as a senior instructor for FHA Online University as well maintains a full-time job as Senior DE Underwriter for a major banking institution. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

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

Housing Finance System Reform

Written By: Bonnie Wilt-Hild
Senior DE Underwriter & NAMP Instructor

I came across an interesting press release today issued by the US Department of Housing and Urban Development. It was titled “Obama Administration Seeks Public Input on Reform of the Housing Finance System”. Within the press release it was requesting that the public suggest solutions by providing answers to a few questions put forth by the administration in order to improve America’s housing finance system.

For those of you that have read my blogs in the past, you know that this is one that I couldn’t leave alone as my opinion of why and how it broke has documented in previous blogs for at least the past 3 years. So finding this request far more constructive than my usual rants, I decided to share it with all of the mortgage professionals out there who have the knowledge and experience to help clean the mess up and request that all of you provide a reply to at least one of the questions appearing in the survey. The replies can be sent to Regulations.gov. I have listed below the questions as solicited in the press release.

Questions for Public Solicitation or Input:

1. How should federal housing finance objectives be prioritized in the context of the broader objectives of housing policy?

-Commentary could address: policy for sustainable homeownership; rental policy; balancing rental and ownership; how to account for regional differences; and affordability goals.

2. What role should the federal government play in supporting a stable, well-functioning housing finance system and what risks, if any, should the federal government bear in meeting its housing finance objectives?

- Commentary could address: level of government involvement and type of support provided; role of government agencies; role of private vs. public capital; role of any explicit government guarantees; role of direct subsidies and other fiscal support and mechanisms to convey such support; monitoring and management of risks including how to balance the retention and distribution of risk; incentives to encourage appropriate alignment of risk bearing in the private sector; mechanisms for dealing with episodes of market stress; and how to promote market discipline.

3. Should the government approach differ across different segments of the market, and if so, how?

- Commentary could address: differentiation of approach based on mortgage size or other characteristics; rationale for integration or separation of functions related to the single-family and multi-family market; whether there should be an emphasis on supporting the production of subsidized multifamily housing; differentiation in mechanism to convey subsidies, if any.

4. How should the current organization of the housing finance system be improved?

- Commentary could address: what aspects should be preserved, changed, eliminated or added; regulatory considerations; optimal general organizational design and market structure; capital market functions; sources of funding; mortgage origination, distribution and servicing; the role of the existing government-sponsored enterprises; and the challenges of transitioning from the current system to a desired future system.

5. How should the housing finance system support sound market practices?

- Commentary could address underwriting standards; how best to balance risk and access; and extent to which housing finance systems that reference certain standards and mortgage products contribute to this objective.

6. What is the best way for the housing finance system to help ensure consumers are protected from unfair, abusive or deceptive practices?

- Commentary could address: level of consumer protections and limitation; supervising agencies; specific restrictions; and role of consumer education

7. Do housing finance systems in other countries offer insights that can help inform US reform choices?

I really hope that all of our readers participate in this survey as again all of you are the mortgage professionals that are on the front lines each day dealing with the current issues that plague this industry both now and in the past. Your input is not only valuable but necessary. Best of luck!

About the Writer. As an NAMP staff writer, Bonnie serves as a senior instructor for FHA Online University as well maintains a full-time job as Senior DE Underwriter for a major banking institution. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

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

The New RESPA Rule: Does it Help or Hurt

Written By: Bonnie Wilt-Hild
Senior DE Underwriter & NAMP Instructor

I am sure at this point everyone is aware of the new rules governing RESPA and have been practicing them since they became mandatory, that being January, 2010. I will admit it has been somewhat of an adjustment for everyone, from brokers to lenders because the consequences for improper or incorrect disclosure can be quite costly for lenders in particular. Adjustment aside, there is a more pressing issue when considering the rules and that being consequences to borrowers due to improper or incorrect disclosure which sometimes is simply the result of human error.

As you know, there are certain conditions which must be present in order for a good faith estimate to be revised, those being the changed circumstances that must be documented before re-disclosure may take place. In many instances, it is determined that the GFE is incorrect due simply to human error and in those cases, the lender not the broker must absorb any losses due to the errors at time of closing. In keeping with this, many of the secondary market investors have adopted a zero tolerance where GFE errors are concerned and regardless of the rules 30 day cure policy, will not purchase a loan when a GFE error is evident. Which brings me to my point which is do these new rules help or hurt a borrower and my vote is with the latter.

As we have moved through the past few months initiating policy and procedure to adapt to the new RESPA rules it appears that most lenders are implementing policies by which they can protect themselves from losses due to incorrect disclosure of the GFE.

As I stated above, secondary market investors will not purchase them and as a result most lenders will not lend on a case where there is a RESPA violation. In keeping with this I have seen many lenders adopt policies by which wholesale or third party originations are audited prior to acceptance by a lender for underwriting. If it has been determined that there is a GFE violation, the loan applications are returned to the broker labeled a declination because lenders are unwilling to absorb the costs associated with closing the loans. One really great example is a case that was submitted to our office this week. The broker in error neglected to disclose the UFMIP premium in block 3 of the GFE which would have resulted in a $9,000 loss to the lender if the case had been closed.

The application was an approvable loan however because there was no changed circumstance which warranted re-disclosure and the lender was unwilling to absorb a $9,000 loss to close the case, the borrower was rejected and unable to obtain financing not because they were unqualified but because of an error by the broker and I have to say people this is not the only case.

I will agree that it was time to make some changes to policy where RESPA was concerned due to the abuse that was prevalent in the mortgage industry over the past few years however I have to say that the new more stringent disclosure rules may be harming the borrowers more than helping them. If I were a borrower who had an option to accept re-disclosure of costs associated with loan closing due to an error or have my loan rejected and have to start the process over, I think I would accept the re-disclosure because quite frankly I would have to pay those fees with whatever lender I choose. If this option should be given to the borrower is another discussion however and as it is not rule, is also not an option. Going forward I would recommend that the mortgage broker be very careful when completing the GFE lest they end up with a reject loan where they started with a qualified borrower.

If it does happen however I am not sure what to tell you to do to cure it so I recommend it be disclosed properly the first time. As always, happy underwriting.

About the Writer. As an NAMP staff writer, Bonnie serves as a senior instructor for FHA Online University as well maintains a full-time job as Senior DE Underwriter for a major banking institution. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

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