Written By: Glenn Michaels, Op-Ed Writer
I have spent a lot of time reading the new Single Family Handbook (SFH) 4000.1 over the last several weeks to primarily pick up the changes from the HUD – 4155.1 and HUD – 4155.2 and the many mortgagee letters (ML) in use. In my opinion there are about one hundred (100) changes going to take place and effective September 14, 2015. All Mortgage Loan Originators (MLOS), mortgage processors and Direct Endorsed underwriters need to know the changes.
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One or so changes are too many to list in a page or two so what I plan to do is list some of the changes over several weeks of columns. This will enhance the integration of the new Single Family Handbook for everyone.
1. Background: In the 81 years that FHA has existed they have insured they have insured over 40 million single family homes. Although the FHA started in 1934 during the United States Great Depression the program keeps on changing as the United States has economic gyrations and wars. These changes take place by Mortgagee Letters and new handbooks for lenders to follow and to obtain the Mortgage Insurance Certificate (MIC) for the loan.
2. The first section of the Single Family Handbook is called Origination through Post Closing. This is a very large section and most of the changes take place in over 300 pages of Origination through Post Closing. The Origination section addresses The TOTAL SCORECARD which is HUD’s automated underwriting program used in conjunction with an Automated Underwriting System (AUS). The TOTAL SCORECARD did not exist when the HUD handbook 4155.1 became effective. This is the first major change to the FHA.
3. The next area of the Single Family Handbook goes over all of the previous handbooks and mortgagee letters being replaced by this new handbook. The list is very large and no one in their right mind can figure out what is being replaced or changed. In my opinion when underwriting, processing, or originating a FHA loan the best way to handle the changes is to utilize www.hud.gov web site and use their search engine found on the top right side of the page. All questions and/or searches typed in the search box is directed in seconds to the appropriate section of the HUD guidelines for reading. I know the current manual almost by heart since I have been an active FHA Direct Endorsed Underwriter for more than twenty five (25) years. Now to learn a new handbook with some differences from the existing manual.
4. Origination: Every lender unless they only service mortgage loans is involved in the origination of mortgage loans. Throughout the manual there are changes. Some are very minor and some are changes that could result in an indemnification if not picked up and followed as a rule change. If you are not familiar with the term indemnification, it means HUD’s FHA is removing the insurance of the loan and the mortgage company is now responsible for any losses associated with a defaulted loan. If and when FHA requests a company to “indemnify against loss” you the originator have the right to dispute or rebut FHA’s request to indemnify against loss.
5. Do not waste your paper and ink to print the Single Family Handbook (SFH) 4000.1: The handbook is best if used online ss HUD is adding Mortgagee Letters to the SFH as appropriate. The SFH at release included all mortgagees through Mortgagee Letter 2015 – 01.
Future articles will address specific changes from HUD – 4155.1, HUD – 4155.2 and Mortgagee Letters that are being replaced by the Single Family Handbook 4000.1.
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.