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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Showing posts with label fha approval. Show all posts
Showing posts with label fha approval. Show all posts
Monday, October 5, 2009
Thursday, October 1, 2009
The Effects of HUD's Announcement from September 18, 2009
On September 18, 2009, HUD published a press release announcing numerous changes that are either proposed or already implemented, which affect FHA lenders and FHA loans. The most sweeping proposed change is that HUD/FHA will approve only Sponsor (investor, full eagle) lenders. FHA will then have the Sponsors approve the FHA brokers with whom they are willing to do business. Within one year, HUD intends to require an increase in the Sponsor’s net worth of $1,000,000 (increased from the present $250,000).
While the final rules are not yet in effect, it appears they will be implemented after a “notice and comment period.” Although these changes raise many questions which will require upcoming information from HUD/FHA, the following reflects our views on how this will affect lenders and brokers.
It is clear from the language of the press release that HUD is trying to make it easier for brokers to do FHA business, while at the same time putting more responsibility and accountability on both the broker and the Sponsor to make justified loans. HUD stated in the press release that “these lenders must have skin in the game,” which seems a clear indication that brokers and Sponsors will be held more accountable for loans produced than in the past.
Given the apparent intent of this new rule, it seems that the Sponsor will now be responsible to see that brokers are in compliance with the Quality Control expected by FHA, and presumably desired by the Sponsor. These Quality Control programs help ensure loans that comply with all regulations and laws, as well as minimize losses from bad loans. It is likely that even though the net worth requirements for brokers will be reduced or eliminated, Sponsors will continue to require Quality Control Plans and Quality Control audits in order to do business with them.
As HUD/FHA comes out with further announcements, we will keep you updated through our newsletter and social networks. Visit HUD's website to read the entire press release from September 18, 2009.
Keeping up with changing regulations can be a daunting task. Mortgage Compliance Advisors offers lending manuals for FHA, VA, and HECM that are easy to use and updated quarterly. For more information, visit www.MortgageComplianceAdvisors.com or call 877-226-3152.
While the final rules are not yet in effect, it appears they will be implemented after a “notice and comment period.” Although these changes raise many questions which will require upcoming information from HUD/FHA, the following reflects our views on how this will affect lenders and brokers.
It is clear from the language of the press release that HUD is trying to make it easier for brokers to do FHA business, while at the same time putting more responsibility and accountability on both the broker and the Sponsor to make justified loans. HUD stated in the press release that “these lenders must have skin in the game,” which seems a clear indication that brokers and Sponsors will be held more accountable for loans produced than in the past.
Given the apparent intent of this new rule, it seems that the Sponsor will now be responsible to see that brokers are in compliance with the Quality Control expected by FHA, and presumably desired by the Sponsor. These Quality Control programs help ensure loans that comply with all regulations and laws, as well as minimize losses from bad loans. It is likely that even though the net worth requirements for brokers will be reduced or eliminated, Sponsors will continue to require Quality Control Plans and Quality Control audits in order to do business with them.
As HUD/FHA comes out with further announcements, we will keep you updated through our newsletter and social networks. Visit HUD's website to read the entire press release from September 18, 2009.
Keeping up with changing regulations can be a daunting task. Mortgage Compliance Advisors offers lending manuals for FHA, VA, and HECM that are easy to use and updated quarterly. For more information, visit www.MortgageComplianceAdvisors.com or call 877-226-3152.
Tuesday, September 22, 2009
Summary of FHA's guidelines for quality control plans
If you're just starting out with FHA or you'd like to know FHA's guidelines for quality control plans, check out our article summarizing FHA's requirements for QC plans.
Monday, July 13, 2009
FHA Guidelines: How to Become FHA Approved
An easy to understand summary of FHA approval requirements for lenders.
FHA has grown rapidly in the past few years, fueled largely by tightening credit. In fact, over 20% of new home purchases are currently through FHA. As the volume of FHA loans increases, more lenders across the country are becoming FHA approved. However, the FHA approval process and paperwork can appear overwhelming, especially to smaller companies. To help lenders understand the guidelines, below is a brief summary of FHA’s approval requirements. (For a detailed list of all requirements, visit www.hud.gov.)
Organization Requirements
In order to reduce risk, FHA limits its approval to experienced, well-established organizations; the officer in charge of an organization’s FHA operation must have at least three years of mortgage experience. Furthermore, to be considered for FHA approval, an organization cannot be a sole proprietorship. Corporations, partnerships, LLC’s, chartered financial institutions, and government agencies are acceptable. Along the same lines, FHA approved organizations must have at least two full time employees and a commercial office location (not a home office).
Paperwork
Each prospective FHA lender must fill out the HUD 11701 application. FHA also requires certain letters and other documents, depending on the desired type of FHA approval (non-supervised loan correspondent, investing lender, etc.). For example, brokers wanting to become FHA approved must submit a sponsor/funding letter, whereas lenders need a funding program. For a list of all required documents by FHA approval type, see FHA Lender Approval Requirements.
Finances
Excluding “Government Mortgagee,” the application fee for all FHA approval types is $1,000. Additionally, lenders must submit audited financial statements with the application. The lender’s financial statements need to show at least $63,000 net worth with 20% liquid assets.
Quality Control Plan
Finally, FHA approval requires organizations to submit a quality control plan, in order to mitigate fraud and errors. Organizations can create a quality control plan themselves, or purchase one from a third party. As part of the quality control plan, lenders must audit 10% of the FHA loans they originate. These audits need to be performed regularly—within 90 days of the end of the month in which the loan closed.
Quality control audits may be performed in-house, if the lender properly trains and establishes a unit solely for quality control. The staff must not be involved in loan production. Alternatively, lenders may have a third party, such as Mortgage Compliance Advisors, LLC, perform the quality control function, as long as it meets HUD’s requirements.
For more information on FHA approval services or quality control audits, visit www.MortgageComplianceAdvisors.com or call 877-226-3217.
About Mortgage Compliance Advisors (MCA):
MCA has grown to help clients across the country through the FHA approval process, and continues to help them stay compliant with regulations after approval. MCA's principals have a combined sixty years of experience in the mortgage industry, including thirteen years at the Salt Lake City HUD/FHA office. As a former FHA branch chief, MCA’s principal Bob Warnock can advise clients through every step of the FHA approval process.
FHA has grown rapidly in the past few years, fueled largely by tightening credit. In fact, over 20% of new home purchases are currently through FHA. As the volume of FHA loans increases, more lenders across the country are becoming FHA approved. However, the FHA approval process and paperwork can appear overwhelming, especially to smaller companies. To help lenders understand the guidelines, below is a brief summary of FHA’s approval requirements. (For a detailed list of all requirements, visit www.hud.gov.)
Organization Requirements
In order to reduce risk, FHA limits its approval to experienced, well-established organizations; the officer in charge of an organization’s FHA operation must have at least three years of mortgage experience. Furthermore, to be considered for FHA approval, an organization cannot be a sole proprietorship. Corporations, partnerships, LLC’s, chartered financial institutions, and government agencies are acceptable. Along the same lines, FHA approved organizations must have at least two full time employees and a commercial office location (not a home office).
Paperwork
Each prospective FHA lender must fill out the HUD 11701 application. FHA also requires certain letters and other documents, depending on the desired type of FHA approval (non-supervised loan correspondent, investing lender, etc.). For example, brokers wanting to become FHA approved must submit a sponsor/funding letter, whereas lenders need a funding program. For a list of all required documents by FHA approval type, see FHA Lender Approval Requirements.
Finances
Excluding “Government Mortgagee,” the application fee for all FHA approval types is $1,000. Additionally, lenders must submit audited financial statements with the application. The lender’s financial statements need to show at least $63,000 net worth with 20% liquid assets.
Quality Control Plan
Finally, FHA approval requires organizations to submit a quality control plan, in order to mitigate fraud and errors. Organizations can create a quality control plan themselves, or purchase one from a third party. As part of the quality control plan, lenders must audit 10% of the FHA loans they originate. These audits need to be performed regularly—within 90 days of the end of the month in which the loan closed.
Quality control audits may be performed in-house, if the lender properly trains and establishes a unit solely for quality control. The staff must not be involved in loan production. Alternatively, lenders may have a third party, such as Mortgage Compliance Advisors, LLC, perform the quality control function, as long as it meets HUD’s requirements.
For more information on FHA approval services or quality control audits, visit www.MortgageComplianceAdvisors.com or call 877-226-3217.
About Mortgage Compliance Advisors (MCA):
MCA has grown to help clients across the country through the FHA approval process, and continues to help them stay compliant with regulations after approval. MCA's principals have a combined sixty years of experience in the mortgage industry, including thirteen years at the Salt Lake City HUD/FHA office. As a former FHA branch chief, MCA’s principal Bob Warnock can advise clients through every step of the FHA approval process.
Thursday, February 12, 2009
Dropping Interest Rates Boost FHA Mortgages and Need for Quality Control
With mortgage rates at their lowest levels in over 20 years, brokers, retail lenders, wholesale lenders, banks, and credit unions are seeing increased volume in their residential mortgage pipelines. With this increase comes a need for sound quality control practices.
Salt Lake City, UT - February 11, 2009 – Recently, the Associated Press reported that mortgage rates reached 4.96 percent in mid-January. This is the lowest recorded level since Freddie Mac began its rate survey in 1971. With interest rates so low, the volume of residential mortgage loans has steadily increased, particularly in the FHA arena. So that a certain level of quality is maintained, one of HUD’s requirements is that institutions originating FHA loans perform an audit on 10% of the loan files that they have either closed or cancelled. These audits can either be done on a quarterly or monthly basis, depending on volume. In some circumstances, other agencies and investors are adapting this same requirement. According to Craig Christensen, President and COO of Mortgage Compliance Advisors, LLC, “more and more investors are requiring brokers, correspondents, and others to have a quality control plan in place that provides for [quality control] audits, before approval or renewal of contracts.”
Third party firms, such as Mortgage Compliance Advisors, LLC, can perform this 10% quality control file audit function, along with other compliance and quality control functions, for brokers, lenders, banks, and credit unions. These services help organizations remain compliant with FHA, investor, and other agency guidelines and maintain high loan quality. Furthermore, since quality control file audits are required by HUD/FHA, HUD mortgagees will be prepared for the eventuality of an FHA onsite audit, by keeping management reports (a summary of the files audits for a certain period) on file.
Management reports (sometimes referred to as quality control findings reports) are filled with detailed information that will significantly improve quality control. For example, when auditors at Mortgage Compliance Advisors, LLC, perform a file audit, they use a comprehensive audit checklist to check each page for accuracy and then record their findings. After the post-closing or cancelled file audit is complete, management reviews the audit’s findings and summarizes them into a management report that is accurate and easy to understand. Approximately 30 days after the files selected for audit have been received, Mortgage Compliance Advisors sends the report to the client to review. After reviewing the report, management can take any necessary action to ensure continued loan file quality and compliance with HUD/FHA or other conventional guidelines.
About Mortgage Compliance Advisors, LLC (MCA): MCA was founded on the premise of providing mortgage brokers, retail lenders, wholesale lenders, and banking institutions of all sizes with a sound alternative for meeting their mortgage compliance needs. MCA's principals, Bob Warnock and Craig Christensen, have a combined sixty years of experience in the mortgage industry. Thirteen years of Bob Warnock's thirty-five year career in the banking and mortgage industry were spent at the Salt Lake City HUD/FHA office, first as an underwriting specialist, then branch chief over underwriting and insuring, and finally as Field Office Chief with responsibility to oversee lender approval, underwriting, insuring and the assignment program. Much of Craig Christensen's 25 year career has been in senior management positions with national retail and wholesale lenders.
For additional information on FHA file audits or questions about FHA approval, visit www.MortgageComplianceAdvisors.com.
Contact:
Sarah Adams – Director of Marketing
Mortgage Compliance Advisors, LLC
5505 South 900 East, Suite 110
Salt Lake City, UT 84117 Phone: 877-226-3217 Fax: 801-264-0301 sarah@mortgagecomplianceadvisors.com
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Salt Lake City, UT - February 11, 2009 – Recently, the Associated Press reported that mortgage rates reached 4.96 percent in mid-January. This is the lowest recorded level since Freddie Mac began its rate survey in 1971. With interest rates so low, the volume of residential mortgage loans has steadily increased, particularly in the FHA arena. So that a certain level of quality is maintained, one of HUD’s requirements is that institutions originating FHA loans perform an audit on 10% of the loan files that they have either closed or cancelled. These audits can either be done on a quarterly or monthly basis, depending on volume. In some circumstances, other agencies and investors are adapting this same requirement. According to Craig Christensen, President and COO of Mortgage Compliance Advisors, LLC, “more and more investors are requiring brokers, correspondents, and others to have a quality control plan in place that provides for [quality control] audits, before approval or renewal of contracts.”
Third party firms, such as Mortgage Compliance Advisors, LLC, can perform this 10% quality control file audit function, along with other compliance and quality control functions, for brokers, lenders, banks, and credit unions. These services help organizations remain compliant with FHA, investor, and other agency guidelines and maintain high loan quality. Furthermore, since quality control file audits are required by HUD/FHA, HUD mortgagees will be prepared for the eventuality of an FHA onsite audit, by keeping management reports (a summary of the files audits for a certain period) on file.
Management reports (sometimes referred to as quality control findings reports) are filled with detailed information that will significantly improve quality control. For example, when auditors at Mortgage Compliance Advisors, LLC, perform a file audit, they use a comprehensive audit checklist to check each page for accuracy and then record their findings. After the post-closing or cancelled file audit is complete, management reviews the audit’s findings and summarizes them into a management report that is accurate and easy to understand. Approximately 30 days after the files selected for audit have been received, Mortgage Compliance Advisors sends the report to the client to review. After reviewing the report, management can take any necessary action to ensure continued loan file quality and compliance with HUD/FHA or other conventional guidelines.
About Mortgage Compliance Advisors, LLC (MCA): MCA was founded on the premise of providing mortgage brokers, retail lenders, wholesale lenders, and banking institutions of all sizes with a sound alternative for meeting their mortgage compliance needs. MCA's principals, Bob Warnock and Craig Christensen, have a combined sixty years of experience in the mortgage industry. Thirteen years of Bob Warnock's thirty-five year career in the banking and mortgage industry were spent at the Salt Lake City HUD/FHA office, first as an underwriting specialist, then branch chief over underwriting and insuring, and finally as Field Office Chief with responsibility to oversee lender approval, underwriting, insuring and the assignment program. Much of Craig Christensen's 25 year career has been in senior management positions with national retail and wholesale lenders.
For additional information on FHA file audits or questions about FHA approval, visit www.MortgageComplianceAdvisors.com.
Contact:
Sarah Adams – Director of Marketing
Mortgage Compliance Advisors, LLC
5505 South 900 East, Suite 110
Salt Lake City, UT 84117 Phone: 877-226-3217 Fax: 801-264-0301 sarah@mortgagecomplianceadvisors.com
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