Written By: Glenn Michaels, Op-Ed Writer
Last week’s article was a glimpse of over 100 changes to the underwriting guidelines. In 2002 HUD – 4155.1 was written and now it is being replaced by the Single Family Handbook (SFH) 4000.1.
The SFH -4000.1 contains a section pertaining to e – signatures. Tis technology did not exist when HUD – 4155.1 came out. HUD allows e – signatures. This section gives all the rules behind e – signatures such as identification, verifying the individual(s) involved and how to work with e – signatures.
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Verification Information: The Single Family Handbook changes the wording slightly. Under the current guidelines a lender may obtain a borrower’s authorization to verify information needed to proceed with the loan application. The new handbook requires lenders to obtain authorization to verify information. A blanket authorization will generally satisfy this.
Eligibility Requirements: The Single Family Handbook added a new verification for borrowers with delinquent federal obligations. Lenders must verify the validity of the federal debt, the federal agency that has the account open or unpaid, the amount owed and the monthly payment Lenders cannot deny a borrower based on CAIVRS without doing a verification of the federal debt.
Program Specific Requirements – Refinances: The Single Family Handbook contains origination requirements specific to certain programs, such as refinances, energy efficient mortgages, adjustable rate mortgages, weatherization, and mortgage insurance for properties in a presidentially declared federal disaster area will be discussed further.
1. No skipped payment has been eliminated. Under current guidelines a borrower must be current on the loan being refinanced and for the month that the borrower is closing. Under current guidelines a refinance closing June 9, the borrower is required to make his May and June payment. Under the new Single Family Handbook the borrower is required to pay only the month due prior to a disbursement. Based on the changes, the borrower refinancing an closing June 9th would only have to prove that May’s payment was made.
2. New Net Tangible Standard: is now in the new handbook. Currently a “net tangible benefit” is defined for streamline refinance transactions when the borrower monthly payment is decreasing 5% in dollars(principal, interest and monthly mortgage insurance) or the loan being refinanced is going from an adjustable rate mortgage to a fixed rate mortgage. The new handbook identifies the required net tangible benefit for the following streamline transactions:
a. Fixed rate to fixed rate.
b. 1 year ARM or hybrid ARM
c. Any ARM with less than 15 months to the next payment change date to a fixed rate.
d. Any ARM with d greater than or equal to 15 months to next payment change date to a fixed rate loan.
e. A reduction in term only will now be considered a net tangible benefit if the new interest rate does not exceed the current interest rate and the payment does not increase by more than $50.00.
My next article will cover more changes between the existing handbook and the new handbook effective September 14, 2015.
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.