Written By: Glenn Michaels, Op-Ed Writer
On September 14, 2015 the Single Family Handbook (SFH) 4000.1 becomes effective.
A change that most will not pick up is the underwriting of HUD REO’s. For those that are not familiar, a HUD REO is a property that was foreclosed by HUD approved mortgage servicer and the property is now owned by HUD. The term REO means Real Estate Owned. These properties are usually sold at auction.
The changes are incorporated in the new handbook so the change takes place September 14, 2015. The changes eliminate four (4) existing mortgagee letters. They are Mortgagee Letter 1995 – 56, Mortgagee Letter 2000 – 27, Mortgagee Letter 2011 – 19 and Mortgagee Letter 2013 – 44.
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The changes are below :
Policy Existing Requirements Revised Requirements
REO Appraisal Used to establish REO list Used to establish list price only.
Used to calculate maximum
Ordering a new Permitted only when: Required for all FHA insured
Appraisal REO appraisal not available or sales transactions.
REO appraisal expired or
REO appraisal has material
Responsibility for REO Asset Manager and Underwriting mortgagee only.
Determination of underwriting mortgagee.
Loan to value ratio 1 unit - 75% 75% for all 1 – 4 unit and
For investment 2 – 4 units – 85% investment properties
Maximum mortgage Based on the lesser of Based on adjusted value.
Amount appraised value or
Sales price or
Original REO list price.
But, a new report from FBR & Co., suggests that the application rollercoaster is mere signal noise, and the reality is that fourth quarter mortgage originations are expected to rise over last year.
About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.