Written By: Bonnie Wilt-Hild, Op-Ed Writer
Beginning of the new year in store for use where the FHA mortgage insurance program is concerned. Yes, I am referring to the changes to appraisal requirements per mortgagee letter 2009-30 and changes to how we will process and ultimately underwrite FHA streamline refinance transactions which have been set forth in mortgagee letter 2009-32 and are effective November 18, 2009.
As far as the new appraisal requirements are concerned, things are pretty cut and dry. Simply put beginning with case numbers ordered on or after January 1, 2010, the validity period for all appraisals completed in conjunction with FHA insured mortgage types will now be 120 days and covers appraisals completed for existing properties as well as proposed and under construction. Additionally, FHA issued mortgagee letter 2009-29 which addresses appraisal portability and under what circumstances a second appraisal may be ordered by a lender. Per this mortgagee letter, lenders who have received a particular case via case transfer from another lender may order a second appraisal when the following conditions exist:
1. The first appraisal contains material deficiencies as determined by the Direct Endorsement underwriter for the second lender.
2. The appraiser performing the first appraisal is on the second lender’s exclusionary list of appraisers.
3. Failure of the first lender to provide a copy of the appraisal to the second lender in a timely manner would cause a delay in closing, posing potential harm to the borrower.
Further requirements apply under these circumstances and issues regarding retention of the first appraisal and proper procedures for ordering the second appraisal are further addressed in the mortgage letter provided by HUD for lender clarification.
Mortgagee letter 2009-32 addresses changes in processing and underwriting procedures for streamline refinance transactions and the changes are pretty significant. There have been changes to the allowable maximum mortgage particularly where streamlines without appraisals are concerned, the letter defines tangible net benefit to the borrower which now must be considered as well as increases documentation requirements where employment and asset verification are concerned. Additionally, FHA will now require a 6 month minimum mortgage history to be reported on the credit report and has limited the total number of late payments on a mortgage in the preceding 12 months to 1X30. Pretty important stuff in this mortgagee letter as it really changes the streamline program in its entirety.
With the above mentioned I strongly recommend that underwriters review these changes and have staff on board before they take effective. As always, happy underwriting.
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie has held many mortgage underwriting positions, including Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans".