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.

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.

MCA Quoted in American Banker

On July 2, 2009, Mortgage Compliance Advisors was mentioned in the national publication American Banker, in the article FHA Enforces Fine Print as Its Volume Swells. The article discusses how FHA is more strictly enforcing regulations, because of its rapid growth.

“The Department of Housing and Urban Development, which runs FHA, has stepped up …enforcement actions in the last year. And with FHA now guaranteeing roughly 30% of all originations, raising the agency's public profile and its risk, many in the industry expect a further, and dramatic, increase.”

The article cites specific examples of FHA enforcement actions, and quotes MCA’s principals Bob Warnock and Craig Christensen regarding FHA quality control and a few necessary actions to comply with FHA. To read the full article, click here (Note: American Banker requires a login to view full articles).