MCA Monthly Update - December 2009

Read our December newsletter, with tips for underwriting and processing, as well as compliance updates for FHA, Fannie Mae, and Freddie Mac.

MCA Monthly Update - November 2009

MCA Monthly Update November 2009

Welcome to the MCA Monthly Update. To help you stay compliant and up-to-date, our newsletters contain underwriting tips, processing tips, and compliance updates. We hope that you find the content informative and useful. As always, your feedback is appreciated. If you have any questions, simply reply to this email or call us at 877-226-3216. For real time compliance news, you can now follow us on Twitter and Facebook. Update: The FTC recently extended the enforcement date for the Red Flags Rule to June 1, 2010.* Implement your Red Flag Policy to comply. *(See http://www.ftc.gov/opa/2009/10/redflags.shtm.)

Underwriting & Processing Tips

Based on some common findings from quality control audits, we have compiled a list of four tips from the month of October. 1. If the final TIL APR varies from the intial TIL by more than .125%, it must be redisclosed (as of July 30, 2009). 2. One of our most common problems is the duplication of documents throughout the file, which can make the file much larger than it should be. Please make sure to review your files to prevent excessive duplication. 3. The underwriting approval is required in your package. Make sure to retain and include a copy of the underwriting decision in your file. 4. For quality control audits, be sure to include only final AUS findings in the file.

FHA Update

ML 09-38: Update on Eligibility Requirements for Nonprofit Instrumentalities (115 Waiver). - "Expand[s] eligibility requirements for nonprofit instrumentalities of government to include entities the income of which is excluded from Federal taxation under § 115 of the Internal Revenue Code of 1986 (IRC). - [They can be approved] for placement on the FHA Nonprofit Organization Roster (Roster) and ...participate in single-family housing programs as providers of secondary financing." (View the entire letter.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ML 09-39: Updated Claim Filing and Delinquency/Default Reporting Requirements For FHA's Making Home Affordable Modification Program (FHA-HAMP). - "Updated claim filing and delinquency/default reporting requirements for the FHA Home Affordable Modification Program (FHA-HAMP). - Mortgagees must begin reporting the updated status codes beginning with the January 2010 reporting cycle." (View the entire letter.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ML 09-40: Policy and Procedures on Multifamily Mortgage Insurance Applications Involving Master Lease Structuring to facilitate the use of Tax Credits. - "Represents the Department's final policy and procedures for Master Lease applications... - A Master Lease, also known as a Sandwich Lease or Credit Pass Through, is used by developers of multifamily projects to maximize the realization of tax credit equity and distribute benefits among various investors." (View the entire letter.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ML 09-41: Appraisal performance standards and sanctions. - "Reminds mortgagees and appraisers of [FHA] appraisal performance standards... and FHA enforcement standards and sanctions that can be imposed by the Department upon appraisers who do not comply." (View the entire letter.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ML 09-42: Sub-Servicing of FHA-insured Mortgages. - "To meet the increased need for loss mitigation, the Department has no objection to mortgagees entering into subservicing agreements with other FHA-approved servicers to perform loss mitigation functions." (View the entire letter.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ML 09-43: HOPE for Homeowners Program - Comprehensive Guidance. "Key changes to the HOPE for Homeowners (H4H) Program: - Borrowers are ineligible if their net worth exceeds one million dollars, - Borrowers must not have defaulted on any substantial debt in the last 5 years, - The age of appraisal now follows standard FHA guidance, - Reduced mortgage insurance premiums, - Revised loan-to-value and debt-to-income ratios, - Maximum loan-to-value excludes the Upfront Mortgage Insurance Premium, - Eliminated requirement for obtaining most recent two year tax returns, - Eliminated special lender and underwriter certification, - Exit Premium replaces Shared Equity, - Shared Appreciation feature eliminated, - New note and mortgage replaces previous shared equity and shared appreciation notes and mortgages, and - Lenders must submit 5 test cases for pre-closing review by FHA." (View the entire letter.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ML 09-44: Home Equity Conversion Mortgage (HECM) Program -- Clarification of Debenture Interest Calculation for HECM Claim Type 21; Claim Filing Instructions for HECM Claim Types 21 and 24. "Items addressed in this Mortgagee Letter: - Clarification of the term "due date" as it relates to HECM Claim Type 21. - Identification of the additional information that must be provided for Claim Type 21, to ensure the proper calculation of debenture interest. (View the entire letter.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ML 09-45: Introduction of HUD's Web-Based Training Application: Electronic Class (EClass) on Loss Mitigation and Servicing System. - Announces that HUD's on-line, web-based training application, EClass, is now available. It will provide additional training on FHA's Loss Mitigation Programs, including FHA-HAMP, and other industry questions. - The web-based application may be accessed at the following address: https://eclass.hud-nsctraining.com. (View the entire letter.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - To view all HUD Mortgagee Letters for the year, visit the official website. *We offer FHA, VA, and HECM reference manuals with regulations and policies updated quarterly. For more information, visit our website or call 877-226-3216.

Fannie Mae Update

Update, dated 10/6/09: Mortgage Loan Data Requirements - "Effective date for the requirement to deliver the loan origination identifiers and appraiser data elements has been extended to July 1, 2010. - For mortgage loan applications taken on or after July 1, 2010, Fannie Mae will require the use of the updated Form 1003." (View the entire notice.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Announcement 09-30: Retirement of the HomeSaver Forbearance™ and Conversion to the Payment Reduction Plan™. - "Payment Reduction Plan™ (PRP) will replace the HomeSaver Forbearance™ (HSF) program. - The purpose of a PRP is to provide a borrower with temporary payment relief while the servicer and the borrower work together to find the appropriate permanent foreclosure prevention solution." (View the entire announcement.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Announcement 09-31: Updates and Clarifications to the Home Affordable Modification Program. Contains updates and clarifications to the following topics: - Updates to Standard HAMP Documents - Changes to Eligibility Determination Based on Net Present Value Evaluation - Principal Forbearance Thresholds - Verifying Borrower Income and Occupancy Status - Modification Process - Reporting - Clarification of Reimbursement of Administrative Costs (View the entire announcement.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Announcement 09-32: Selling Guide Update - October 2009. - Announces the release of the first update to the April 2009 Selling Guide, which will replace the April 2009 Selling Guide. (View the entire announcement.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Selling Notice, dated 11/4/09: Electronic Appraisal Delivery Update. - Announces deadline change from March 1, 2010 to July 1, 2010 for requirement to submit electronic appraisal reports in an acceptable XML format. (View the entire notice.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Announcement 09-33: New Deed-for-Lease Program. - Introduces Deed-for-Lease Program (D4L), designed to minimize bad effects caused by vandalism and theft to vacant homes. - "D4L allows qualifying borrowers of properties transferred through deed-in-lieu of foreclosure (DIL) to remain in their home and community by executing a lease of up to 12 months in conjunction with a DIL." (View the entire announcement.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - To view all Fannie Mae Announcements and Letters for the year, visit Fannie Mae's website.

Freddie Mac Update

Bulletin 2009-24: Credit and Property Eligibility. - Revises certain credit and property eligibility requirements, including changes to requirements for Freddie Mac-owned streamlined refinance mortgages and Freddie Mac Relief Refinance Mortgages. - Also announces that certain higher-risk mortgages will no longer be eligible for purchase. (View the entire bulletin.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Bulletin 2009-25: Multiple Subjects. - Makes multiple changes to selling and servicing requirements, such as document custodial operations, uniform instruments, attorney fees and title expenses, etc. (View the entire bulletin.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Bulletin 2009-26: Home Affordable Modification Program. - Reminds of changes to HAMP made in Supplemental Directive 09-07. - Revises partial principal forbearance and NPV requirements - Reminds of new HAMP tool available soon - Imminent Default Indicator (IDI) - Reminds that Data Collector is being retired and replaced with the new HAMP Reporting Tool (View the entire bulletin.) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - To view Freddie Mac news, visit Freddie Mac's website.

MCA Monthly Update - October 2009

Welcome to the MCA Monthly Update. To help you stay compliant and up-to-date, our newsletters contain underwriting tips, processing tips, and compliance updates. For this month’s newsletter, our focus is on compliance updates because HUD has came out with several announcements since our last newsletter. We hope that you find the content informative and useful. As always, your feedback is appreciated. If you have any questions, simply reply to this email or call us at 877-226-3216.

For real time compliance news, you can now follow us on Twitter and Facebook.


Reminder: 3rd Quarter ended September 30. Remember to get your quality control file audits done for FHA, Fannie Mae, Freddie Mac, etc.


EFFECTS OF HUD’S ANNOUNCEMENT FROM SEPTEMBER 18, 2009

HUD announced several changes on September 18. These changes affect FHA lenders and loans, including the FHA approval process for brokers. Visit our blog to read how HUD’s announcement affects sponsors and brokers.


FHA UPDATE: NEW MORTGAGEE LETTERS

• Multifamily Housing Accelerated Processing Guide: Chapter 9, Environmental Review: Letter 09-27

- Announces the release of a revised and updated Multifamily Housing Accelerated Processing Guide, Chapter 9, with new environmental requirements. (View the entire letter.)


• Appraiser Independence: Letter 09-28

Announces New Requirements, effective January 1, 2010:

- Prohibition of mortgage brokers and commission based lender staff from the appraisal process
- Appraiser selection in FHA Connection must be the appraiser who actually performs the appraisal
- Clarifies and expands their policy regarding Appraisal and Appraisal Management Companies’ (AMC) third party origination fees

Re-affirms Existing Requirements:

- Prevention of Improper Influences on Appraisers
- Appraiser Independence Safeguards
- Mortgagees are reminded that they are they are responsible (along with the appraiser) for the integrity, quality, and thoroughness of the appraisal. (View the entire letter.)


• Appraiser Portability: Letter 09-29

- Addresses the portability of appraisals when a borrower switches the lender during loan processing-- effective for all case numbers assigned on or after January 1, 2010.

- “Appraiser shopping” is prohibited. In this case, the first lender must, at the borrower’s request, transfer the case to the second lender. FHA does not require that the appraisal be changed to reflect the new lender, but FHA Connection must reflect the correct lender. (View the entire letter.)


• Appraiser Validity Periods: Letter 09-30

- Announces a change to the validity period for appraisals--reduced from 12 months for proposed construction and 6 months for existing construction to 4 months (120 days) for all appraisals. Effective for all case numbers assigned on or after January 1, 2010. (View the entire letter.)


• Strengthening Counterparty Risk Management: Letter 09-31

Provides notice of several FHA program changes as a result of the enactment of the “Helping Families Save Their Homes Act of 2009” (the HFSH Act):

- It provides limitations on those eligible for the program. Ineligible participants are identified as currently suspended, debarred, under a LDP, under indictment, subject to unresolved findings in a HUD or other government audit, investigation, or review, etc. It is important that you read these specifications in depth.

- Change of lender’s fiscal year end date must be reported to HUD 90 days before change.

- Effective January 1, 2010, all supervised mortgagees (banks and credit unions) must now submit an annual audited financial statement within 90 days of their fiscal year end.

- Mortgagees must use their name as registered with HUD in all advertising and promotional materials related to FHA. Lenders must retain a copy of all advertising for two years.

- Approved lenders are required to notify FHA if individual employees are subject to any sanction or any other administrative action, or if there is a revocation of a State-issued mortgage origination license.

- The HFSH Act expands FHA’s ability to seek civil money penalties against any owners, officers, or directors, for violations of program requirements. (View the entire letter.)


• Revised Streamline Refinance Transactions: Letter 09-32

Announces revised procedures and re-affirms existing procedures regarding Streamline Refinance transactions, to be effective in 60 days or November 18, 2009.

Key Revisions:

- Seasoning set at 6 months

- Minimum payment history standards established

- Net tangible benefit for the borrower at a 5% lower payment with additional provisions pertaining to changing from fixed rate to ARM, and ARM to fixed rate. Investors and second home borrowers are prohibited from refinancing to an ARM.

- Transactions that include a reduction in mortgage term must now be processed and closed as a rate/term refinance.

- If subordinate financing is in place, the maximum combined loan-to-value is set at 125% with or without an appraisal. If there is no new appraisal, the CLTV is based on the original appraisal.

- New maximum mortgage amount for streamline refinances without an appraisal cannot exceed the outstanding principal balance, minus any applicable UFMIP plus the new UFMIP that will be charged on the refinance. A streamline with an appraisal is the lower of outstanding principal balance or 97.75% of the appraised value plus the new UFMIP. Discount points may not be included in the new mortgage.

- If borrower agrees to pay the discount in cash, the lender must verify the availability of funds.

- Certification that borrower is employed and has income.

- If credit score(s) is/are available, the lender must enter the credit score(s) into FHA Connection.

- Lenders should not use TOTAL on streamline refinance transactions. If a lender uses TOTAL, that loan must be underwritten and closed as a rate and term (no cash-out) refinance transaction.

- Mortgagees may no longer use an abbreviated version of the Uniform Residential Loan Application (URLA). The completed application must be dated and signed prior to underwriting of the loan. (View the entire letter.)

- It is our opinion at MCA that FHA is moving toward changing the streamlined rate reduction refinances as we have known them to correspond with other refinance transactions.


• Annual Base City High Cost Percentage Revisions effective January 1, 2009: Letter 09-33

- Announces the annual base city high cost percentage revisions for multi-family mortgages. (View the entire letter.)


• Home Equity Conversion Mortgage (HECM) – Principal Limit Factors: Letter 09-34

- Announces a change in calculating the maximum HECM loans, effective October 1, 2009. The new factors to be used result in a 10% reduced maximum loan. (View the entire letter.)


• Loan Modification: Letter 09-35

- Mandates that the interest rate on loan modifications be reduced to not more than 50 basis points above the FHA and FHLMC current weekly primary rounded to the nearest .125%, as of date of modification. The modified loan amount is then amortized over a 30-year period. (View the entire letter.)


• Revised Eligibility: Letter 09-36

- Reminds appraisers and lenders that as of October 1, 2009, appraisers listed on FHA’s Appraisal Roster who are not state certified will be removed from the roster. (View the entire letter.)


• Flood Zone Requirements and Responsibilities of FHA Mortgagees and Appraisers: Letter 09-37

- Reminds mortgagees and FHA Roster appraisers of their “responsibility to determine if a property is located within a Special Flood Hazard Area…[and reiterates FHA’s] eligibility requirements for properties located in such zones.” (View the entire letter.)


To view all HUD Mortgagee Letters for the year, visit the official website http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm.

*We offer FHA, VA, and HECM reference manuals with regulations and policies updated quarterly. For more information, visit our website or call 877-226-3216.


FANNIE MAE UPDATE

• Notice: Refi Plus – Update: MBA Delivery Date for Loans with LTVs above 105 Percent, dated 9/4/09

- “The effective date for MBS delivery of Refi Plus loans with LTVs above 105 percent under the CQ prefix…[is] October 1, 2009.” (View the entire announcement.)


• Energy Loan Tax Assessment Programs: Lender Letter 07-2009

- “This Lender Letter is intended to alert lenders to issues concerning ELTAPs [Energy Loan Tax Assessment Programs] in the underwriting and servicing of Fannie Mae mortgages. …Typically, homeowners repay ELTAP loans via their property tax bill, and in the event of non-payment, the ELTAPs have priority over Fannie Mae’s mortgage lien.” (View the entire announcement.)


• Updates to Minimum Credit Scores, Mortgage Insurance, Pricing for Certain Desktop Underwriter Loans, Biweekly Loans, and Special Feature Codes: Announcement 09-29

“Following is a brief summary of the changes:

- Changes to minimum credit score requirements;
- A number of changes to mortgage insurance coverage requirements, including a new minimum level of coverage and corresponding loan-level price adjustment (LLPA), retirement of Lower-Cost and Reduced MI options, and changes to financed mortgage insurance;
- Changes to pricing for Flexible mortgages and improved pricing for Expanded Approval® (EA) recommendations, and changes to EA special feature codes (SFC);
- Retirement of biweekly mortgage loans; and
- Changes to SFC requirements for MyCommunityMortgage® (MCM®) and other transactions.” (View the entire announcement.)


To view all Fannie Mae Announcements and Letters for the year, visit https://www.efanniemae.com/sf/guides/ssg/2009annlenltr.jsp.


FREDDIE MAC UPDATE

• Home Affordable Modification Program: Bulletin 2009-23

“Makes the following changes to the Home Affordable Modification Program (HAMP) requirements:

- Evaluate and process Mortgages for HAMP in Workout Prospector [effective November 1, 2009]
- Use the property value provided in Workout Prospector
- Collection and reporting of Government Monitoring Data
- Incorporating requirements for first-lien Servicers
- Revising our program activity reporting requirements
- Recordation of the Modification Agreement
- Capitalization and reimbursement of property inspection fees
- Permits Servicers to utilize temporary waivers” (View the entire bulletin.)


• September 25 Bulletin 2009-18 Single-Family Advisory E-mail

- Freddie Mac announced a one month extension for effective dates for underwriting requirements published in the July 10 Single-Family Seller/Servicer Guide (Guide) Bulletin 2009-18 (which “revised…underwriting requirements with respect to borrower income, capacity, assets, and required documentation.”)

- The changes “will now be effective for all mortgages with application dates on or after November 1, 2009, and Freddie Mac settlement dates on or after February 1, 2010.” (View the entire announcement.)


To view Freddie Mac news, visit http://www.freddiemac.com/singlefamily/.


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MCA Monthly Update - September 2009

Welcome to the MCA Monthly Update. To help you stay compliant and up-to-date, each newsletter we send contains underwriting tips, processing tips, and compliance updates. We hope that you find the content informative and useful. As always, your feedback is appreciated. If you have any questions, simply reply to this email or call us at 877-226-3216.

Additionally, for real time compliance news, you can now follow us on Twitter and Facebook.


UNDERWRITING & PROCESSING TIPS

Based on some common findings from quality control audits, we have compiled a list of three tips from the month of August.

1. We are seeing TIL Disclosures on FHA loan files with conventional parameters. Remember on the initial TIL disclosure, the FHA late fee is 4% (not 5%) and the loan is assumable with conditions.

2. The Servicing Disclosure dated January 16, 2009, is now mandatory--any older version is unacceptable. Make sure it is properly completed with appropriate boxes checked.

3. We continually have problems determining compliance with the advance disclosures for TIL and RESPA. Remember, if the application and all disclosures are not completed in a face-to-face interview with signatures, use a date stamp showing “documents mailed to applicant(s) on September 3, 2009.” The date stamp should be on both the original as mailed and the file copy. When the original is returned by the applicant, the processor should remove the file copies to eliminate duplicate copies in the file.

FHA UPDATE

• Electronic Annual Certification to Replace Title II Yearly Verification Report: Letter 09-25. “Effective September 1, 2009, all program participants seeking renewal as an FHA-approved mortgagee must complete the electronic Annual Certification as a component of the renewal process [which replaces the paper Yearly Verification Report].” (View the entire letter.)

• Eligibility of Projects for Mortgage Insurance where Construction has Started: Letter 09-26.. This letter “temporarily authorizes and establishes policy for Section 220, 221(d) and 231 mortgage insurance programs for multi-family proposals that were unable to complete construction due to a loss of funding..” (View the entire letter.)

To view all HUD Mortgagee Letters for the year, visit the official website http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm.

For information about our FHA, VA, or HECM reference manuals with regulations and policies updated quarterly, visit our website.


FANNIE MAE UPDATE

• Retirement of HomeStyle® Construction-to-Permanent: Announcement 09-28.. “Fannie Mae will be retiring the HomeStyle Construction-to-Permanent mortgage product… Effective immediately, lender applications for HomeStyle Construction-to-Permanent approval will no longer be accepted. Closed HomeStyle Construction-to-Permanent loans must be purchased by Fannie Mae from existing approved lenders by November 30, 2009.” (View the entire announcement.)

• Reminder: From Announcement 09-19, dated June 8, 2009: “Form 4506-T Lender Tips.”. On or after September 1, 2009, “Fannie Mae’s updated policy regarding use of IRS Form 4506-T to validate borrower income documentation (Announcement 09-19) requires the lender to:

- have all borrowers (regardless of income source) complete and sign Form 4506-T at both application and closing

- add the execution of Form 4506-T with the IRS (directly or through an authorized vendor) to their written quality control (QC) plan (refer to the Selling Guide, Subpart D1, Lender QC Process, for details about lender QC requirements)” (View the entire announcement.) If you need help complying with this rule, give us a call.

To view all Fannie Mae Announcements and Letters for the year, visit https://www.efanniemae.com/sf/guides/ssg/2009annlenltr.jsp?referrer=frpromo.


FREDDIE MAC UPDATE

• Single-Family Seller/Servicer Guide: Bulletin 2009-22.. This bulletin makes several changes to selling requirements, including guidance regarding area median income changes, amending appraisal requirements for super conforming mortgages, and updates for several forms and exhibits. (View the entire bulletin.)

• Off-cycle Update to Exclusionary List: Industry Letter dated August 21, 2009.. The Freddie Mac Exclusionary List has been updated and may now be accessed via the Freddie Mac Selling System, MIDANET, MultiSuite, and Loan Prospector.

“As a reminder…Seller/Servicers [are required] to represent and warrant that they have not employed and will not employ any person listed on the Freddie Mac Exclusionary List as a Principal in connection with any Mortgage sold to Freddie Mac or in connection with any function related to such a sale.” (View the entire industry letter.)

To view Freddie Mac news, visit http://www.freddiemac.com/singlefamily/.