Loan Processor Blog

Lots of Action on FHA with New Mortgagee Letters and on Capital Hill!

Lots Of Action On FHA With New Mortgagee Letters And On Capitol Hill!

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

It’s been a busy few weeks on the FHA-Front with the release of several Mortgagee Letters as well as movement on the FHA Reform Bill on Capitol Hill in Washington. Let’s review:

Mortgagee Letter 2010-13-Appraisal Update and/or Completion Report (Fannie Mae Form 1004D/Freddie Mac Form 442/March 2005)

It was definitely a positive that HUD issues this communication because the content of this bulletin most certainly clears up confusion on appraisal validity when an existing FHA appraisal is extended by the appraiser with FNMA Form 1004D. HUD communicates one fact in ML 2010-13 that was not so clear in the first communication issued via Mortgagee Letter 2009-51: That the original FHA appraisal may only be extended one time with the use of the Appraisal Update Report.

It was also clarified that the maximum validity of the FHA appraisal is 240 days if the Appraisal Update Report is used to extend the validity of the original appraisal report. In these cases, the DE underwriter may not add an additional 30 days extension to bring validity to 270 days.

The same requirements listed in ML 2009-51 apply in that the property cannot be located in an area of market decline. That in itself wipes out much of the ability to utilize the Appraisal Update to extend the validity of FHA appraisals and in most cases, once the original appraisal ages to 120 days, a new FHA appraisal will be required instead of using the FNMA Form 1004D to extend validity.

Always be sure to check your lender’s guidelines as some lenders are not even honoring the Appraisal Update Report and will always require a new FHA appraisal once the 120 milestone is reached.

Mortgagee Letter 2010-14 Electronic Signatures on Third Party Documents

This bulletin simply clarified what’s already been accepted for a few years as far as I’m aware. FHA simply clarified in writing that they are now accepting electronic signatures on third party documentation such as verification forms and real estate contracts. Note that this does not include their acceptance of electronic signatures on applications documents and disclosures nor closing documents. These all require actual ink signatures from our borrowers.

Mortgagee Letter 2010-15 FHA Case Number and FHA Roster Appraiser Assignments
As we all know, this bulletin was long overdue since Appraiser Independence standards were effective for cases assigned on and after February 15th. This ML simply communicates the changes to FHA Connection Case Assigning data screens in that we are no longer required to enter the appraiser information in the initial stages for case assignment. Instead, we will now be entering the appraiser information with appraisal logging procedures. This is a good change in that it will eliminate the masses of errors that had been created in the past when processors and underwriters logged a different FHA appraiser than the one who was originally assigned to the case.

There is one part of this bulletin I feel is of particular importance to point out, however, and that is point number 3 at the top of the letter:

3. Requires that the effective date of the appraisal be after the case number assignment date except in certain limited circumstances.

This change is especially important for those who have established the bad habit of ordering FHA appraisals before the case has been assigned. I’ve seen this happen way too often. The appraisers should not accept orders without the case assignments but they do and often, they end up completing the appraisal before the case is even assigned. This letter communicates that HUD is no longer accepting those except for the limited circumstances outlined in the bulletin which require lender certification.

Lastly, the H.R. 5072, “The FHA Reform Act” is moving its way through Capitol Hill. It passed the House Financial Services Committee on Tuesday, April 27th and will likely end up passing into law because it has the support of a diverse group of organizations including the National Urban League, the National Council of La Raza, the National Community Reinvestment Coalition, the Mortgage Bankers Association, the National Association of Realtors and the National Association of Home Builders.

This bill proposes increasing FHA annual mortgage insurance premiums from the current .50 and .55 rates to 1.50 and 1.55 which is a substantial increase to monthly mortgage payments for potential FHA homeowners. This is a bit concerning since as we all know, up-front mortgage insurance premiums were just increased from 1.5% and 1.75% to 2.25% effective in early April. If the annual mortgage insurance is increased for FHA, it may make FHA lending more difficult as far as qualifying lower income borrowers in certain areas of the country.

In addition the bill proposes to hold lenders accountable for indemnification of loans with claims paid out whereas a determination is made that fraud was involved. (this one I couldn’t agree with more. It’s about time lenders with poor screening processes be held accountable for the fraud that contributes to bad things for all of us in the industry).

The bill also proposes that HUD has the right to terminate underwriting authority for those lenders whose default rates are determined excessive, in addition to a number of other measures that are presented to preserve and protect the mortgage insurance reserve fund.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Friday, April 23, 2010

FAQ Results from Recent HUD Webinar

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

I was quite impressed with the HUD webinar I listened in on April 20th. I was thrilled to see that a lot of commonly asked questions were addressed and explained. In the past, many of these same questions received different answers from various interpretations of the guidelines over the years. I’m excited to pass on some of the test questions and FAQS from the session! Test your own knowledge by reviewing the questions below. I’ve provided the answers at the bottom of this writing.

QUESTIONS:

1. Borrower currently owns a primary residence secured by FHA financing and wishes to purchase another home with FHA financing to accommodate the needs of a larger yard for Rex, the new family dog. Does this need meet FHA’s requirements for increase in family size which allows for ownership of more than one FHA-insured property?

2. Borrower is purchasing a property in a community property state with a non-purchasing spouse. Review of the borrower’s IRS tax transcript, as required by the lender, indicates a Schedule C business loss for the non-purchasing wife. Does the lender need to take the income losses of the non-purchasing spouse into account for the borrower’s qualifying purposes?

3. Borrower just returned to the work force after a job gap of 4.5 years due to her spouse’s consistent military transfers all over the country. She has been back on the job for 30 days. Can her income be used for qualifying purposes?

4. Review of borrower’s credit report shows obligation for a mortgage rated current with 2 x 30 late payments reflected in the most recent 12 month period. Borrower provides copy of divorce decree with settlement showing that the divorce awarded the prior marital home to the ex-spouse and that the mortgage was to have become the ex-spouse’s responsibility. Is the lender correct in omitting this debt from the borrower’s qualifying requirements?

5. Borrower’s credit report indicates a bankruptcy discharge just two years ago and review of documentation reflects that a home with mortgage liens was included in the bankruptcy. Is the borrower eligible for FHA financing?

6. Borrower’s credit report reflects an individual auto loan currently in repayment but the borrower states his sister makes payments on the auto since she now drives the car. He can provide 12 months cancelled checks to substantiate this. Can this debt be omitted from the borrower’s qualifying ratio?

7. Borrower earns commissions as a Schedule C sales person. The credit report reflects a large auto loan payment but borrower states that her business makes the payments. Is the lender correct in omitting this debt from qualifying if the tax returns demonstrate that the auto expenses are indeed being covered by the business?

8. Borrower’s credit report reflects a disputed account with a zero balance and AUS/TOTAL Scorecard has approved the loan. Does the automated approval require a downgrade to refer and must the loan be manually underwritten?

9. Borrower recently accepted new employment at a higher salary which has been used in qualifying, loan is AUS approved but borrower isn’t set to start the job until 30 days after the loan closes. Is this acceptable if a signed employment offer is obtained from the new employer confirming the salary and that the start date is within 60 days of loan closing?

10. Is a credit report required for a non-purchasing spouse when the non-purchasing spouse is an illegal alien with no valid social security number?

ANSWERS:

1. Unfortunately no. Increase in family size must be documented by the borrower providing documentation of an added dependent or extension of family as well as by an increase to the number of bedrooms when comparing the capacity of the current home to that of the proposed home. The definition of family member does not include pets for FHA’s purposes.

2. No. Business losses for non-purchasing spouses do not need to be accounted for in qualifying the purchasing borrower.

3. Unfortunately no. FHA requires a minimum of six months return to the work force after an extended period of absence as well as documentation that the borrower had a minimum two year employment history prior to the gap.

4. Yes. When documented by a divorce decree or court order, the debts of an ex-spouse may be omitted.

5. Unfortunately no. When a home mortgage is written off in a bankruptcy discharge, it is considered a foreclosure for FHA qualifying purposes and is subject to the minimum three year requirement before the borrower is allowed to purchase a home secured with FHA financing.

6. The auto payment can only be omitted if the sister is on the auto loan with the borrower. If the auto loan was obtained solely in the borrower’s name, the debt cannot be omitted even if another party provides evidence that someone other than the borrower has been repaying the loan.

7. Unfortunately no. A Schedule C Sole Proprietorship business which means the borrower is still solely responsible for all income, expenses and debt. The business would not be considered a co-obligor on the debt and thus, the obligation cannot be omitted from qualifying.

8. Yes. Regardless of the disposition of a disputed account, the loan must be downgraded from AUS Approve or Accept to Refer and must be manually underwritten.

9. It may be acceptable to the FHA guideline requirements but if the AUS findings require review of the most recent or 30 days paystubs, the lender cannot meet the documentation requirements because the borrower hasn’t yet started the new job for which income is being used to qualify. In this situation, the AUS approval must be downgraded to a Refer and the loan must be manually underwritten.

10. The lender must provide evidence of due diligence in attempting to obtain a credit report for the non-purchasing spouse. However, if the non-purchasing spouse does not have a valid SSN, it is unlikely to render a credit report result.

How did you do? I thought these were great questions that HUD addressed on the webinar. Am hoping you find the answers helpful as well!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Friday, April 16, 2010

This Week’s Hot Topics

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

Two items in particular stand out this week. As being the commonly asked questions I’ve had to jump in and answer.

1. Where can I get hard copies of the HUD Settlement Cost Booklet?

2. What will lenders require in regards to tax transcripts after the April 15th filing deadline date?

To answer the first question, HUD Settlement Cost Booklets (recently updated on 3/25/2010) are available for download at the RESPA website at
http://www.hud.gov/offices/hsg/ramh/res/settlement-cost-booklet03252010.cfm.

HUD has not made the booklets available for order from their online distribution center this year. However, I’m told that you may still call and order up to 100 booklets at no charge by calling HUD Customer Service at 1-800-767-7468. Beware however, that shipments may be delayed due to the recent booklet update. Be sure to ask for the approximate shipping time.

In regards to question number two, I don’t know about anyone else but I am just sick to death of even hearing mention of the “T word.” (transcripts). I don’t understand why everyone in mortgage land is having such a difficult time with these new requirements. It all comes down to common sense which should be no different than any other underwriting situation!

Within the past day, I’ve researched and contacted a number of the largest lenders and the consensus among them was this: If the borrower’s 2009 earnings were significantly higher than in previous years and the 2009 income is required for the borrower to qualify for the mortgage, transcripts are expected to accompany all other documentation to substantiate the income. If the borrower’s 2009 income is used to qualify and no transcripts are in the file when it goes to the lender for purchase, the lender may downgrade your income qualifications by tossing out the 2009 figures to go off of 2008 transcript income. This can cause non-saleable loan issues and significant purchasing delays.

So, what’s the trick to making the judgment calls on these situations? Use conservative qualifying, meaning the worst possible case qualifying you can in order to avoid the requirement for the 2009 transcript if it’s not yet available.

For borrower’s, who do not need the 2009 income increase to qualify, simply obtain copies of the 2009 W2s, a copy of the 2009 filed return or extension to file, evidence that IRS transcript is not yet available and substitute the 2008 transcript instead.

For you originators out there - If you send out email alerts or marketing communications to past customers, be sure to inform them of the need for their transcripts in most loan situations. Give them the heads up that they should not delay filing their 2009 returns if their intent is to refinance or purchase a home within the coming months. Make sure they are prepared and can be certain that their transcripts will be available from the IRS at the time of application or shortly thereafter. You’ll be saving them a world of frustration and potential closing date delays but giving them the information ahead of time!

Be sure to inform your realtor, builder and financial planning partners about the tax transcript requirements as well so that they can assist in preparing potential applicants for the tax transcript requirements! Your business partners will appreciate you keeping them informed and up-to-date on the underwriting policies and requirements that can affect your mutual interest clients!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Previous Posts

Archives


Wasn't Commercial Real Estate Supposed to Crash?

FHA WEEKLY UPDATE

Wasn't Commercial Real Estate Supposed To Crash? 

Federal Housing Administration

During the long years of the financial crisis, the American economy has been like a retelling of the Somerset Maugham story "Appointment in Samarra," in which a man unsuccessfully runs from city to city in attempts to avoid a run-in with Death -- who, of course, is one step ahead of him. Similarly, investors have now spent years...Read Full Story >>  

FHA Reform Bill to Allow Smaller Down Payments, Higher Fees   

The Federal Housing Administration reform bill overwhelmingly approved in the U.S. House of Representatives last Thursday will strengthen the housing finance agency, but will likely prove to be...Read Full Story >>

FHA Hits Triple-Deckers 

THE FEDERAL Housing Administration has been busy lately, propping up the housing market. The FHA’s outsized role in real estate has earned it intense scrutiny on Capitol Hill, where legislators...Read Full Story >>

 fha

THE FHA BLOG CAFE

Fees and Charges on 203k’s 
Written By: Bonnie Wilt-Hild, Senior FHA DE Underwriter
 

Bonnie Wildt.JPGI received some pretty interesting news from one of my primary investor for 203k’s this week. It was regarding allowable fees on both streamline and standard 203k’s. Much to my surprise it was regarding what we could not charge which was somewhat of a surprise considering HUD’s removal of the cap on origination fees this year per ML 2009-53 as well as doing away with most of the non allowable closing cost per ML2006-4. According...Read Full Blog >>

Basic Mortgage Application Data 
Written By: Joan Ewing, NAMP-FHA DE Underwriter

Joan-Photo.JPGHello Everybody – Hope everyone is staying busy. In my hunt for a topic every week, sometimes it is easy and other times, I haven’t a clue what I will write about until the last minute. This week was one of those last minute thoughts – so I hope this blog is helpful. This week, I have decided to cover completing a basic Mortgage Application – 1003. While this may seem elementary, I find those persons who do the same job every day may...Read Full Blog >>             

Using the Basics to Determine a Borrower’s Ability to Repay the Mortgage    
Written By: Stacey Sprain, NAMP-CALP

Stacey Sprain.jpg

  You know, the more I’ve thought about things lately the more I have to admit I was wrong on one thing and I’m sure I’m not the only one in this category. For years we all frowned on having to do all of the extra processing and qualifying steps on VA loans. We all liked to gripe and complain about how VA was so far behind the times. Well look who is laughing at us all now, right? I hate to say it but take a look at the direction the rest of the agencies...Read Full Blog >>


FHA Plans to Halve Mortgage Loan's 6% Seller Concession This Summer

We have launched a new association entitled: National Association of Mortgage Underwriters (NAMU)
Click to view our new website >> 

FHA WEEKLY UPDATE

FHA Plans To Halve Mortgage Loan's 6% Seller Concession This Summer 

Federal Housing Administration

One of the key attractions of FHA mortgage financing is going, going -- but not quite gone. Sellers and buyers who move fast can still make the most of it. Sometime this summer, the Federal Housing Administration plans to slash maximum "seller concessions" from 6 percent of the home price to 3 percent. Seller concession rules all...Read Full Story >>  

New FHA condo guidelines could stall housing recovery   

Earlier this year, the Federal Housing Administration (FHA) passed a new set of lending guidelines that removes the long-standing "spot approval" process for FHA-insured condominium loans and...Read Full Story >>

MBA Ranks Top Lenders of 2009 

Wells Fargo, PNC Real Estate, and Deutsche Bank were the top three multifamily lenders in 2009, according to the New York-based Mortgage Bankers Association’s annual rankings. The rankings...Read Full Story >>

 fha

THE FHA BLOG CAFE

The FHA 203k 
Written By: Bonnie Wilt-Hild, Senior FHA DE Underwriter
 

Bonnie Wildt.JPGGiven the current market conditions and that being an environment where foreclosure sales are predominant, I thought today would be a nice day to discuss the FHA 203k program or more particularly the streamline K. I have seen quite of few of these since the implosion of the mortgage market in mid 2007 and as more and more properties hit the action block I am underwriting the streamline 203k’s as regularly as...Read Full Blog >>

First Time Homebuyers - Preparing For The American Dream 
Written By: Joan Ewing, NAMP-FHA DE Underwriter

Joan-Photo.JPGHello Everybody - While I was thinking of a topic for this week’s blog, I could not dismiss in my mind the news reports of how many foreclosed homes are being sold at rock bottom prices. I think it is an absolute tragedy that so many people are losing their homes. And their lender could not help them save their home in the wake of all the stimulus money that has been poured into the system. Having said that and then I reflected back on...Read Full Blog >>             

Three FHA-Related News Pieces    
Written By: Stacey Sprain, NAMP-CALP

Stacey Sprain.jpg

  1. New FHA Mortgagee Letter re: Streamline Refinances
Mortgagee Letter 2009-32 informed lenders that they should not use TOTAL on streamline refinance transactions, and that if they did so the loan must be underwritten and closed as a rate and term (no cash-out) refinance. However, FHA has determined that it is in its and the borrower’s best interest to amend this guidance. Therefore, HUD issued Mortgagee Letter 2010-19...
Read Full Blog >>


REED 


DISCUSSION BOARD

Fannie Mae Selling Guide
Posted By: Laura Sanchez, NAMP Member 
I was told by several people that in order to be a successful...Read Answers>> (8 Comments)
 
Mortgage Fraud Awareness
Posted By: Nancy M, NAMP Member 
Hi everyone, long time no speak. I would love to hear everyone's thoughts on mortgage fraud...Read Answers >> (11 Comments)

 
MORTGAGE CAREER CENTER
          
NAMP-Mortgageboard-Ad.GIF

Featured Job Postings:    

jobposting2.jpg

postajob.jpg


VENDOR SPOTLIGHT

FHA Engineering Firm. Hayman Residential Engineering is the nation's leading FHA Engineering firm, Providing  Engineering & Foundation Certifications for Manufactured/Modular Housing and Site-Built Homes. Now available in 49 States with 3-5 day turn-around!Call Us Today At (605)381-2254. Or, Visit Us Online At:  www.Hayman-Res.com

 


NAMP Adds New Social Networking Site... It's FREE to Join!
In another effort to help connect in-house mortgage processors, contract processors and underwriters, NAMP has launched a new social networking site: Mortgage Processors of America. Registration is FREE, so Join Today!

Are You a Contract Processor? Has business slowed? Need more brokers? Nationwide Loan Processing offers cost-effective lead generation programs designed to help contract processors obtain new broker clients. Learn More >>

__________________________________________________________

IMPORTANT ANNOUNCEMENT

NAMP Announces New FHA Credit Examiner Training & Certification

In today’s challenging mortgage environment, mortgage banks & lenders are scrambling to find certified FHA mortgage credit examiners to help in making critical loan approval decisions. To learn the fundamentals of FHA credit review & analysis NAMP® has put together a comprehensive 6-hour live, instructor-led online training webinar as well as 30-question exam/background check.

The NAMP-CFCE training & certification program will teach students the basics of mortgage credit analysis as well as how to complete a mortgage credit review of FHA insured mortgage types. Students will also gain an understanding of mortgage credit underwriting guidelines, where they relate to FHA insured mortgage types.   Click to Read Full Press Release>>


Lots of Action With FHA Mortgagee Letters

Lots Of Action On FHA With New Mortgagee Letters And On Capitol Hill!

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

It’s been a busy few weeks on the FHA-Front with the release of several Mortgagee Letters as well as movement on the FHA Reform Bill on Capitol Hill in Washington. Let’s review:

Mortgagee Letter 2010-13-Appraisal Update and/or Completion Report (Fannie Mae Form 1004D/Freddie Mac Form 442/March 2005)

It was definitely a positive that HUD issues this communication because the content of this bulletin most certainly clears up confusion on appraisal validity when an existing FHA appraisal is extended by the appraiser with FNMA Form 1004D. HUD communicates one fact in ML 2010-13 that was not so clear in the first communication issued via Mortgagee Letter 2009-51: That the original FHA appraisal may only be extended one time with the use of the Appraisal Update Report.

It was also clarified that the maximum validity of the FHA appraisal is 240 days if the Appraisal Update Report is used to extend the validity of the original appraisal report. In these cases, the DE underwriter may not add an additional 30 days extension to bring validity to 270 days.

The same requirements listed in ML 2009-51 apply in that the property cannot be located in an area of market decline. That in itself wipes out much of the ability to utilize the Appraisal Update to extend the validity of FHA appraisals and in most cases, once the original appraisal ages to 120 days, a new FHA appraisal will be required instead of using the FNMA Form 1004D to extend validity.

Always be sure to check your lender’s guidelines as some lenders are not even honoring the Appraisal Update Report and will always require a new FHA appraisal once the 120 milestone is reached.

Mortgagee Letter 2010-14 Electronic Signatures on Third Party Documents

This bulletin simply clarified what’s already been accepted for a few years as far as I’m aware. FHA simply clarified in writing that they are now accepting electronic signatures on third party documentation such as verification forms and real estate contracts. Note that this does not include their acceptance of electronic signatures on applications documents and disclosures nor closing documents. These all require actual ink signatures from our borrowers.

Mortgagee Letter 2010-15 FHA Case Number and FHA Roster Appraiser Assignments
As we all know, this bulletin was long overdue since Appraiser Independence standards were effective for cases assigned on and after February 15th. This ML simply communicates the changes to FHA Connection Case Assigning data screens in that we are no longer required to enter the appraiser information in the initial stages for case assignment. Instead, we will now be entering the appraiser information with appraisal logging procedures. This is a good change in that it will eliminate the masses of errors that had been created in the past when processors and underwriters logged a different FHA appraiser than the one who was originally assigned to the case.

There is one part of this bulletin I feel is of particular importance to point out, however, and that is point number 3 at the top of the letter:

3. Requires that the effective date of the appraisal be after the case number assignment date except in certain limited circumstances.

This change is especially important for those who have established the bad habit of ordering FHA appraisals before the case has been assigned. I’ve seen this happen way too often. The appraisers should not accept orders without the case assignments but they do and often, they end up completing the appraisal before the case is even assigned. This letter communicates that HUD is no longer accepting those except for the limited circumstances outlined in the bulletin which require lender certification.

Lastly, the H.R. 5072, “The FHA Reform Act” is moving its way through Capitol Hill. It passed the House Financial Services Committee on Tuesday, April 27th and will likely end up passing into law because it has the support of a diverse group of organizations including the National Urban League, the National Council of La Raza, the National Community Reinvestment Coalition, the Mortgage Bankers Association, the National Association of Realtors and the National Association of Home Builders.

This bill proposes increasing FHA annual mortgage insurance premiums from the current .50 and .55 rates to 1.50 and 1.55 which is a substantial increase to monthly mortgage payments for potential FHA homeowners. This is a bit concerning since as we all know, up-front mortgage insurance premiums were just increased from 1.5% and 1.75% to 2.25% effective in early April. If the annual mortgage insurance is increased for FHA, it may make FHA lending more difficult as far as qualifying lower income borrowers in certain areas of the country.

In addition the bill proposes to hold lenders accountable for indemnification of loans with claims paid out whereas a determination is made that fraud was involved. (this one I couldn’t agree with more. It’s about time lenders with poor screening processes be held accountable for the fraud that contributes to bad things for all of us in the industry).

The bill also proposes that HUD has the right to terminate underwriting authority for those lenders whose default rates are determined excessive, in addition to a number of other measures that are presented to preserve and protect the mortgage insurance reserve fund.

HUD's S.A.F.E Act Guidelines for the Mortgage Industry

Friday, March 26, 2010

Processor and Underwriter Licensing Requirements Under HUD’s S.A.F.E. Act

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

I’ve noticed a few recent questions and comments listed in chat rooms and blogs in regards to confusion and questions on HUD’s S.A.F.E. Act licensing requirements as they relate to the capacity of loan processors and underwriters. Because of my own curiosity, I’ve “dug in” and started doing a little reading up on the topic and here is the information I’ve found that may provide answers to the licensing question- “required to be licensed or not required to be licensed.”

What exactly is the S.A.F.E. Act?

According to HUD’s explanation, the SAFE Act is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators and for the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to establish and maintain a nationwide mortgage licensing system and registry for the residential mortgage industry for the purpose of achieving the following objectives:

(1) Providing uniform license applications and reporting requirements for state licensed-loan originators;
(2) Providing a comprehensive licensing and supervisory database;
(3) Aggregating and improving the flow of information to and between regulators;
(4) Providing increased accountability and tracking of loan originators;
(5) Streamlining the licensing process and reducing regulatory burden;
(6) Enhancing consumer protections and supporting anti-fraud measures;
(7) Providing consumers with easily accessible information, offered at no charge, utilizing electronic media, including the Internet, regarding the employment history of, and publicly adjudicated disciplinary and enforcement actions against, loan originators;
(8) Establishing a means by which residential mortgage loan originators would, to the greatest extent possible, be required to act in the best interests of the consumer;
(9) Facilitating responsible behavior in the subprime mortgage market place and providing comprehensive training and examination requirements related to subprime mortgage lending;
(10) Facilitating the collection and disbursement of consumer complaints on behalf of state mortgage regulators.

When does the Act become effective?


The SAFE Act encourages states to participate in the Nationwide Mortgage Licensing System and Registry, and requires states to have in place, by law or regulation, a system for licensing and registering loan originators that meets the requirements of sections 1505, 1506, and 1508(d) of the SAFE Act. The SAFE Act requires the states to have the licensing and registration system in place by: (1) July 31, 2009, for states whose legislatures meet annually; and (2) July 31, 2010, for states whose legislatures meet biennially. For both this 1-year period and 2-year period, HUD may extend the deadline, by not more than 24 months, if HUD determines that a state is making a good faith effort to establish a state licensing law that meets the minimum requirements of the SAFE Act.

While states are charged with enacting licensing standards that meet the requirements of the SAFE Act, overall responsibility for interpretation, implementation, and compliance with the SAFE Act rests with HUD. In this regard, CSBS and AARMR requested that HUD review the model legislation, and advise of its sufficiency in meeting applicable minimum requirements of the SAFE Act. State legislation that follows the provisions of the model legislation, whether by statute or regulation, will be determined to have met the applicable minimum requirements of the SAFE Act. You may review the Safe Act Model State Law by visiting http://www.hud.gov/offices/hsg/ramh/mps/modellaw.pdf.

Based on the review of the model, it would seem that HUD’s intention is for licensing requirements to apply to those persons who serve in the capacity of a loan originator, according to their extremely complex and complicated definition of “loan originator.”

It appears that HUD’s model definitions of a Loan Processor, Underwriter or Mortgage Loan Originator are as follows:

MSL XX.XXX.030 DEFINITIONS—For purposes of this Act, the following definitions shall apply:


(5) LOAN PROCESSOR OR UNDERWRITER

(a) IN GENERAL—The term ‘‘loan processor or underwriter’’ means an individual who performs clerical or support duties as an employee at the direction of and subject to the supervision and instruction of a person licensed, or exempt from licensing under [reference appropriate state mortgage licensing laws here.

(b) CLERICAL OR SUPPORT DUTIES—For purposes of subsection (a), the term ‘‘clerical or support duties’’ may include subsequent to the receipt of an application—
(i) The receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; and
(ii) Communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.

(c) REPRESENTATIONS TO THE PUBLIC—An individual engaging solely in loan processor or underwriter activities, shall not represent to the public, through advertising or other means of communicating or providing information including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that such individual can or will perform any of the activities of a mortgage loan originator.

(6) MORTGAGE LOAN ORIGINATOR

(a) IN GENERAL—The term ‘‘mortgage loan originator’’—
(i) Means an individual who for compensation or gain or in the expectation of compensation or gain—
(A) Takes a residential mortgage loan application; or
(B) Offers or negotiates terms of a residential mortgage loan;
(ii) Does not include an individual engaged solely as a loan processor or
underwriter except as otherwise provided in MSL XX.XXX.040(4)
;
(iii) Does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with [State] law, unless the person or entity is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator; and
(iv) Does not include a person or entity solely involved in extensions of credit relating to timeshare plans, as that term is defined in section 101(53D) of title 11, United States Code.…

(10) REGISTERED MORTGAGE LOAN ORIGINATOR

The term ‘‘registered mortgage loan originator’’ means any individual who—

(a) Meets the definition of mortgage loan originator and is an employee of—
(i) A depository institution;
(ii) A subsidiary that is—
(A) Owned and controlled by a depository institution; and
(B) Regulated by a Federal banking agency; or
(iii) An institution regulated by the Farm Credit Administration; and

(b) Is registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System and Registry.

As referenced above in (6)(B)(ii)… In the definition of MORTGAGE LOAN ORIGINATOR: (ii) Does not include an individual engaged solely as a loan processor or underwriter except as otherwise provided in MSL XX.XXX.040(4). Here is the verbiage of importance in XX.XXX.040(4);

(4) INDEPENDENT CONTRACTOR LOAN PROCESSORS OR UNDERWRITERS

A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless such independent contractor loan processor or underwriter obtains and maintains a license under MSL XX.XXX.040(1). Each independent contractor loan processor or underwriter licensed as a mortgage loan originator must have and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry.

The following verbiage pertains to MSL XX.XXX.040(1) referenced above:

(1) IN GENERAL—An individual, unless specifically exempted from this Act
under subsection (3) of this section, shall not engage in the business of a mortgage loan originator with respect to any dwelling located in this State without first obtaining and maintaining annually a license under this Act. Each licensed mortgage loan originator must register with and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry.

The following verbiage pertains to subsection (3) as referenced above:

(3) EXEMPTION FROM THIS ACT

http://www.hud.gov/offices/hsg/ramh/mps/modellaw.pdf

(a) Registered Mortgage Loan Originators, when acting for an entity described in MSL XX.XXX.030(10)(a)(i),(ii) or (iii) are exempt from this Act.

(b) Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual.

(c) Any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence.

(d) A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker,
or other mortgage loan originator.

The following verbiage pertains to MSL XX.XXX.030(10)(a)(i),(ii) or (iii) as referenced above:

(10) REGISTERED MORTGAGE LOAN ORIGINATOR

The term ‘‘registered mortgage loan originator’’ means any individual who—

(a) Meets the definition of mortgage loan originator and is an employee of—
(i) A depository institution;
(ii) A subsidiary that is—
(iii) An institution regulated by the Farm Credit Administration.

Now based on how I personally read all of the above, I drew the conclusion that HUD’s intent is to allow exemption of processors and underwriters if they are reporting to a licensed or registered person or entity. However, I also drew the conclusion that licensing is to be required of independent contracting processors and underwriters who are not W2 employees of an exempted entity. Though there is some conflicting language between HUD’s explanations given on their SAFE Act home page versus the model language, based on reading through the detailed back and forth referencing between all sections, it would certainly seem to me that non-W2 employed processors and underwriters are not considered to be under the direct supervision or reporting under a licensed or registered person or entity.

Whether or not my conclusions are 100% correct is simply another question. I am most definitely not an attorney nor do I wish to represent myself as a licensing expert by any means. But based on additional reading out on the web it would certainly seem as though my conclusions are shared with a number of high-ranking state agencies as well. I would certainly value any feedback from others of you out there who have had opportunity to research these licensing requirements and any added information you feel might be valuable to our dedicated readers.

Here are a few resources from which I gathered the information contained herein:

- HUD SAFE Mortgage Licensing Act Home Page: http://www.hud.gov/offices/hsg/ramh/safe/smlicact.cfm
- Safe Act Model State Law: http://www.hud.gov/offices/hsg/ramh/mps/modellaw.pdf
- HUD Safe Act FAQ: http://www.hud.gov/offices/hsg/ramh/safe/safeactfaq.pdf

For further information, Contact:
HUD
Office of Regulatory Affairs and Manufactured Housing
Department of Housing and Urban Development
451 Seventh Street, SW
Rm. 9162
Washington, DC 20410-8000
Telephone: (202) 708-6401
FAX: (202) 708-2678
Email: safeprogram@hud.gov

FHA Phone Support

Friday, February 12, 2010

Helpful Tips on Calling the FHA Resource Center

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

FHA offers a number of resources that I utilize on a regular basis to help find answers to questions that often come up on FHA lending. Most often I refer to FAQ sites because in the past, I haven’t been a big fan of calling 1-800-CALLFHA and sitting on hold forever with the depressing background music only to propose my question to a body who could only answer based on searching for something I’d already searched for. But I must admit, it sure seems like FHA has stepped up their customer service capacity and training because the last two times I’ve called I didn’t have to hold at all and the person at the end of the line was actually quite knowledgeable and able to really help with my question. How refreshing! I no longer hesitate to call with questions when needed.

Here is something I just learned about calls to FHA that I think you’ll find helpful: Each time you call 1-800-CALLFHA with a question, you are asked for your name, company and phone number. Behind the scenes, that information is used to develop tracking and a tracking number. The call center does not provide that tracking number as a normal course of business but you can ask for it. It’s in your best interest to always get the tracking number so that if you have to call again with additional questions on the same topic, you can provide the reference number to the call center associate who can then simply pull up the record(s) of your previous call(s) on said topic. This can save you time from having to re-explain the question or situation all over again. How handy is that?!

The FAQ sites that I refer to regularly are listed at HUD’s Frequently Asked Questions website at http://www.hud.gov/offices/hsg/sfh/faqs/faqsmenu.cfm. There you’ll find FAQ lists broken down in categories.

I also like to go directly to the FHA Resource Center FAQs at http://www.fhaoutreach.gov/FHAFAQ/ to search by topic because I know that questions that come through 1-800-CALLFHA are all eventually listed there. It’s pretty likely that someone else may have already asked the same question I have. Just choose the “Solutions” tab and click to “Search By Keyword.” Then simply enter the key word and scroll through the questions listed to see if you can find the answer you’re looking for.

You can also choose the tab “Contact FHA” which provides data fields for you to complete so you can send off your question directly to the FHA Resource Center. If you prefer, you can even email the Resource Center directly with your question by sending it to info@fhaoutreach.com.

FHA Resource Center Contact Information:

Website: http://www.fhaoutreach.gov/FHAFAQ/
Email: info@fhaoutreach.com
Ph: 800-CALL FHA (800-225-5342)

IRS 4506T

Friday, February 05, 2010

Important Information about IRS Tax Transcripts for Income Verification

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

This is always a confusing time of year as we all scramble to figure out who filed their taxes when and how, how soon we can get copies of transcripts, how to verify someone really did file and what exact documentation our lenders will require and accept in various qualifying situations.

I’d compiled a growing list of questions on this topic myself since the beginning of the year so I thought it important to take time out of my day to get answers straight from the Internal Revenue Service. I think you may find the following list of Q&A helpful to you as you review your loan situations and direct your borrowers on how to get you the information you need for their application as efficiently as painlessly as possible.

1. Once a taxpayer electronically files his/her 2009 tax return, approximately how long does it take before the taxpayer can obtain copies of his/her tax transcripts directly from the IRS?

3 Weeks. The consumer can call 1-800-829-0922 to check to see if their transcript is available and request it directly from IRS at no cost. However, they must allow 10 days to receive it.

2. If the taxpayer mails their return, approximately how long should they expect to need to wait until they can obtain a copy of their transcript directly from the IRS?

6-8 weeks and times may extend longer after April 15th. The consumer can call 1-800-829-0922 to check to see if their transcript is available and request it directly from IRS at no cost. However, they must allow 10 days to receive it.

3. Can taxpayer file their tax returns by visiting a local IRS office? And if so, will they get some sort of receipt as evidence they’ve filed their return with the IRS?

Yes and Yes.

4. Can taxpayers get copies of their tax transcripts by visiting their local IRS office in person?

Yes but only IF their return has been processed through the system (meaning still subject to the 3 week average expected turn time from date of electronic filing or 6-8 week turn time for mailed filings). However, once the transcript is available, keep in mind that if the borrower can get it at the local IRS office, it will save the added 10 day waiting period for mail time from requesting from the IRS 800 number.

5. How can we direct taxpayers to find their local IRS office location information?


Go to http://www.irs.gov/localcontacts/index.html, scroll down the page to the U.S. map and click on the state.

6. How does the taxpayer go about requesting copies of transcripts directly from the IRS? Is there a charge?

They can request their transcripts directly from IRS at no charge by calling one of the following numbers:

- 1-800-829-0922
- 1-800-829-1040 and listen to menu to select prompts to get to proper menu
- Visit local IRS office to request directly on site
The IRS does charge $57 if the consumer requests a copy of his/her actual return (not the same as a transcript).

7. Can you explain the different types of “products” that can be requested using the 4506-T and what purpose each might be used for?

- Return Transcript: includes most of the line items of a tax return as filed with the IRS. A tax return transcript does not reflect changes made to the account after the return is processed. Transcripts are only available for the following returns: Form 1040 series, Form 1065, Form 1120, Form 1120A, Form 1120H, Form 1120L, and Form 1120S. Return transcripts are available for the current year and returns processed during the prior 3 processing years. Note: Transcripts will not show amount of tax owed or paid, outstanding balance or IF an amended return has been filed.

- Account Transcript: contains information on the financial status of the account, such as payments made on the account, penalty assessments, and adjustments made by you or the IRS after the return was filed. Return information is limited to items such as tax liability and estimated tax payments. Account transcripts are available for most returns. Note: Verifies outstanding taxes owed, account status, payments made, penalties, interest and fees etc. This is what you may need if there is any concern that a borrower may have a large amount of outstanding tax liability with IRS

- Record of Account, which is a combination of line item information and later adjustments to the account. Note: Ideally THIS is what we should require rather than just transcripts because this actually shows line item filing information PLUS includes information on amendment filings. THIS is what we would want to require in any case where the tax return copy provided by the borrower doesn’t match up to the transcript we receive.

- Verification of Non-Filing: Proof from the IRS that the borrower did not file a return for the year. Current year requests are only available after June 15th. There are no availability restrictions on prior year requests. Note: We would need to require this product to verify that a particular individual was perhaps not required to file and therefore did not.

- Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. A transcript that includes data from these information returns. State or local information is not included with the Form W-2 information. The IRS may be able to provide this transcript information for up to 10 years. Information for the current year is generally not available until the year after it is filed with the IRS. For example, W-2 information for 2007, filed in 2008, will not be available from the IRS until 2009.

So ideally, for a borrower who has recently filed tax returns for 2009 income that is for instance, required for qualifying such as may be a the case for some self-employed borrower situations, the most efficient way to obtain transcripts right now is to direct the borrower to check with the IRS periodically to determine when transcripts are indeed available. Then, if possible, have the borrower go to the local IRS office in person to request and obtain the transcripts on site. This will help avoid the additional 10 day or so waiting period for the IRS mailing process. This method also costs the borrower no fee for obtaining the transcripts.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

HUD / FHA Changes Coming Soon

Friday, January 22, 2010

Big News- Big Changes from HUD for FHA Lending!

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

It’s been a BIG news week for FHA and is about to get even bigger with the anticipation of a number of Mortgagee Letters to be issued January 21st which will communicate further significant tightening of FHA qualifying calculations and guideline requirements.

Temporary Flipping Waiver


On Friday, January 15th, HUD released their most recent Waiver of Requirements of 24 CFR 203.37a(b)2. The waiver, which is in regards to time restrictions for property sales, applies only to FHA forward mortgages, not HECMs, and is effective 02/01/2010-02/01/2011.

As copied from the Code of Federal Regulations, here is that exact portion of the Code that is being waived:

a(b) Time restrictions on re-sales—(1) General. The eligibility of a property for a mortgage insured by FHA is dependent on the time that has elapsed between the date the seller acquired the property (based upon the date of settlement) and the date of execution of the sales contract that will result in the FHA mortgage insurance (the re-sale date). The mortgagee shall obtain documentation verifying compliance with the time restrictions described in this paragraph and must submit this documentation to HUD as part of the application for mortgage insurance, in accordance with §203.255(b).

(2) Re-sales occurring 90 days or less following acquisition. If the re-sale date is 90 days or less following the date of acquisition by the seller, the property is not eligible for a mortgage to be insured by FHA.

However, to summarize, the HUD announcement goes on to state the following conditions for the 90 day time-restraint waiver to be effective on a specific transaction:

- The transaction must be at arms length; meaning there cannot be any identity of interest between any of the interested parties to the transaction. This means that the lender must perform due-diligence to determine there are no undisclosed relations of interest which should include the following:

- LLCs, partnerships, corporations, etc. must be fully investigated to determine exactly who holds interest in the business. No party with interest in the business should be related to any other party participating in the transaction.

- 12-24 month minimum chain of title from the title company should be reviewed carefully to establish that there are no patterns of flipping between interested parties, that the owner of record listed in title is the same seller represented as the seller on the sales contract and is also the same owner of record listed in any public property tax record. You should never rely on the transfer records based on the prior 36 month history listed in the appraisal alone but should rather obtain the chain of title directly from the title company.

- Marketing history in regards to the sale of the property should be carefully reviewed to determine that it was marketed for sale openly via MLS, Sheriff Sale, Auction, FSBO, etc. If the marketing of the property cannot be determined through public means, be cautious!

- Sales prices for recent transfers of the subject property must be verified and if the proposed transaction contains a sales price that represents a 20% or greater increase from the prior sale price of the property, the lender must justify the increase in price/value using any of the following methods:

- Obtain specific documentation from the seller for improvements made to the property between the seller’s acquisition date and proposed sale of the property. This would include copies of paid invoices or receipts from contractors, builders, suppliers etc. with a complete list of the upgrades, repairs and/or improvements made

- Obtain a 2nd appraisal to justify the property sale price/value and recent improvements/repairs/upgrades made to the property

- Obtain a property inspection report from a state-licensed/certified inspector that is to be given to the buyer prior to closing and which must include:

- Inspection of the foundation, floor, ceiling, walls and roof;
- Inspection of the exterior siding, doors, windows, balconies, decks, walkways, driveway
- Inspection of the roofing, plumbing, electric, heating and air systems;
- Inspection of the interior of the property including insulation and ventilation systems, fireplaces, fuel-burning appliances

The waiver ONLY waives the 90 day timing restraint requirement IF the conditions listed above are met. Don’t forget that all other requirements set forth in Mortgagee Letter 2006-14 apply for all other properties acquired for up to one year from the seller’s acquisition date. In those situations, when the sales price increases 100% or greater, 2nd appraisal and other potential documentation requirements must be applied.

I will pass on more information next week in regards to the upcoming MIP rate hikes, minimum fico score requirements, minimum downpayment requirements and reduction to maximum allowed seller concessions. Those changes will have major affects on FHA qualifying in the near future!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

HUD Cracking Down On Lenders

Friday, January 15, 2010

Beware- HUD Isn’t Messing Around!

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

As a person in the Mortgage Industry who works in a position that involves business and credit analysis and writing credit policies to protect the interests of the company, one particular article got my attention this week when it crossed my desk. It was an article released in Market Watch, part of the Wall Street Journal digital network. The article stated that HUD issued subpoenas to 15 mortgage companies on Tuesday in regards to higher-than-average default rates on FHA loans and an overabundance of mortgage insurance claims.

When I took a looked through the list I immediately recognized a number of pretty big players; mortgage brokers we have all likely dealt with at some point in our mortgage careers for one reason or another. But I can’t say I’m surprised to see a couple of them. I clearly recall that they were accepting what I considered “bottom of the barrel” FHA borrowers back in 2006 and 2007 before the market started its downward spiral due to foreclosures and market declines. In fact, I see two of them that I know flat out drug their feet implementing minimum credit score requirements in order to corner the market while other FHA lenders starting cracking down on their own qualifying requirements in anticipation of what was to come.

What always bothers me most when I see these things is the lack or moral judgment and integrity that was used by all of those involved. The unfortunate result of so many bad decisions made by bad companies is that the good companies are now subject to the consequences of the bad. One of our originators made a statement this week I found humorous though very valid. He said “I feel like things have gotten so out of control we can’t even get loans done anymore. I mean, what more documentation can I request from my borrowers short of them providing a sample of their DNA?” It’s unfortunate that so many of us have begun to feel this way.

I am still outraged that those responsible for the sub-prime market crisis aren’t rotting in prison somewhere. It still blows my mind to think that anyone in their right mind could sleep at night knowing they’d just agreed to grant a $200000 mortgage to borrowers with credit scores in the 400s, unstable employment and no verified history of housing expense. And it’s not just the lending part that concerns me but more importantly, the burden of knowing you’d put such borrowers in that position having to realize full well that they were headed toward disaster. They were guaranteed to fail but somebody lent them the money anyway. It doesn’t get more wrong than that.

So, what kinds of things can we all do to make sure our companies don’t end up being investigated for higher-than-average default rates? It’s really as simple as diverting back to the days of full loan documentation requirements in partnership with utilization of modern tools and technologies.

Even if your lenders aren’t requiring tax transcripts for underwriting, most companies are pulling them pre-purchase or post purchase so you may as well simply obtain them for all of your loan files and make sure qualifying income is tight and right from the beginning. Transcripts can be used as a great resource for more than just income verification. They can also be used to validate identity, occupancy and marital status. Transcripts validate most importantly that the person listed on your loan application filed taxes under the social security number and residence address listed on the loan application.

They also verify whether or not the returns were filed on time. Transcripts also confirm whether each borrower filed individually or jointly and will confirm the number of dependents so you can compare with loan application data. In addition, transcripts may verify undisclosed businesses potentially uncovering business losses that can negatively affect future financial stability and the borrower’s ability to make timely mortgage payments. In my opinion, any company that hasn’t incorporated transcript requirements into originating and underwriting procedures is a “sitting duck” for potential fraud and early defaults.

Transcripts have become much less expensive in recent months also. A year ago we may have been paying $20 and more for two years but with the IRS lowering their processing fee by $4 effective October 1, 2009, many companies became more cost-friendly. Now obtaining two years transcripts can cost as little as $15 and even lower for those companies that have the luxury of offering volume discount rates.

Other tools to be taken advantage of in today’s market are the fraud detection tools and services offered by credit bureaus and third party vendors like First American CoreLogic and Interthinx. Most credit vendors now have the ability to offer a full suite of fraud detection and risk analysis options that are available right as you pull your standard credit reports. These services have the ability to analyze a minimum data set in order to render risk scoring based on data combinations and public record searches. Vendors like CoreLogic and Interthinx take risk analysis even further by evaluation all of the loan parties as well as the property in order to render a full report that analyzes the overall loan risk by category to give red flags of potential loan fraud. Tools like this are invaluable in today’s world.

When researching vendor options for things like transcripts and fraud detection services, be sure to ask questions about volume discounts, support resources, systems integration and training abilities.

The sooner you implement tools and resources like those I’ve mentioned above, the less likely your company will be to end up subpoenaed by HUD for excessive defaults and claims like these lenders did:

- First Tennessee Bank N.A., Memphis, Tenn.
- Alethes LLC, Lakeway, Texas
- Security Atlantic Mortgage Co., Edison, N.J.
- Pine State Mortgage Corporation, Atlanta.
- Birmingham Bancorp Mortgage Corporation, West Bloomfield, Mich.
- Alacrity Financial Services, LLC, Southlake, Texas
- Assurity Financial Services, LLC, Englewood, Colo.
- D and R Mortgage Corporation, Farmington, Mich.
- Webster Bank, Cheshire, Conn.
- Mac-Clair Mortgage Corporation, Flint, Mich.
- Americare Investment Group, Inc., Arlington, Texas
- 1st Advantage Mortgage, Lombard, Ill.
- American Sterling Bank, Independence, Mo.
- Sterling National Mortgage Company Inc., Great Neck, N.Y.
- Dell Franklin Financial LLC, Columbia, Md.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

HUD Allows Appraisal Form 1004D

BIG News! HUD Announces Acceptance of Appraisal Form 1004D for Value Recertifications!

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

Mortgagee Letter 2009-51 communicates HUD’s acceptance of FNMA Form 1004D effective for cases assigned on and after January 1st.

The form is actually designed to serve two purposes:

1. To extend the validity period of an existing appraisal that is due to expire or has expired

2. To report the completion of a repair and/or the satisfaction of requirements and conditions noted in the original appraisal report referenced in the header of the Summary Appraisal Update and/or Completion Report.

You may recall that appraisal validity periods change effective January 1 for all property types to 120 days from the current validity periods of 180 days for existing construction and 12 months for all proposed and under construction cases. With the ability to have the appraiser recertify value with use of form 1004D when the original appraisal validity period expires, it will save the borrowers the expense of having to pay for a second appraisal and will save us lenders time from having to wait for a whole new appraisal to be completed when the original appraisal expires.

There are however, circumstances that render form 1004D invalid or not useable for purposes of re-certifying appraised value and such include the following:

- Property value has declined since original value effective date

- Building improvements that must be acknowledged to contribute to value cannot be seen from the street view

- Exterior of the property reflects deficiencies or other significant changes that were not in existence at the time of the original appraisal report.

When Form 1004D is utilized to re-validate the original appraised value of a property, the FHA Roster Appraiser who completed the initial appraisal must be the same person to complete the value recertification. The appraiser is responsible to complete the following actions in relation to appraisal updates:

1. Adhere to the Scope of Work and Appraiser’s Certification listed on the form, which includes an exterior inspection of the subject property from, at least, the street.

2. Research, analyze and verify current market data to determine if the property has declined in value since the effective date of the appraisal report being updated.

3. Assure compliance with development and reporting requirements of the Uniform Standards of Professional Appraisal Practice (USPAP), and specifically Advisory Opinion

4. Retain all supporting documentation in the work file.

5. Check the box applicable to Part A.

6. Concur with the original appraisal report and update the appraisal by incorporating the original appraisal report if the market value of the subject property has not declined since the effective date of the original appraisal.

7. Provide a photo of the street scene and photos from as many angles of the home that are visible from a public way.

The second part of form 1004D, Part B, can be used to report the completion of a repair and/or the satisfaction of requirements and conditions noted in the original appraisal report referenced in the header of the Summary Appraisal Update and/or Completion Report. Part B of the form, however, may not be used in lieu of HUD-92051 Compliance Inspection Report, if the case involves new construction or manufactured housing.

For Part B, the original FHA Roster Appraiser or any other FHA appraiser currently in good standing is allowed to complete the report. The appraiser is responsible to:

1. Review the requirements and/or conditions noted in the appraisal report referenced in the header of the Summary Appraisal Update and/or Completion Report.

2. Check the box applicable to Part B.

3. Perform a thorough inspection of the items noted in appraisal referenced in the Summary Appraisal Report and confirm completion/satisfaction of requirements and/or conditions.

4. Describe the impact on the value of the property if requirements and/or conditions are not completed in accordance with the original appraisal report.

The validity period of Form 1004D Appraisal Update and/or Completion Report is 120 days, which begins with the effective date of the appraisal report. The initial or underlying appraisal that has been subsequently updated with form 1004D cannot exceed 12 months old at the time of loan closing.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

FHA Mortgage Limits for 2010

FHA Mortgage Limits for 2010

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

As they do about this same time each year, HUD has announced FHA mortgage limits for 2010 with Mortgagee Letter 2009-50.

First, we all know by now that the conforming loan limit will remain at $417000. That in itself means little change for maximum mortgage limits. However, HUD allows any interested party to submit a request for a higher county limit to the Homeownership Center that serves jurisdiction over the area in question if one is under the opinion that the mortgage limit set forth doesn’t serve the area’s true market. The request must be accompanied by reliable housing price data provided by a local taxing authority, title company, or real estate data company. Specific details on the data requirements can be found within Mortgagee Letter 2007-01. Upon receipt of the request, the HOC will review the request for compliance within Departmental requirements, will verify the housing sales data and if revise the limit if it is deemed appropriate.

In most cases, maximum mortgage limits are determined by county. But there are also mortgage limits assigned to metropolitan statistical areas (MSA) and micropolitan areas. A metropolitan area has at least one urban area with a population of 50,000 or greater and an urban core that exerts economic influence on the surrounding territory as measured by commuting patterns. A micropolitan area contains a small urban center population between 10,000 and 49,999 where commuting patterns are also taken into account to determine overall economic influence. Micropolitan areas can be populated regions without large cores but metropolitan areas generally consist of large cores and may or may not be surrounded by additional population.

Metropolitan statistical areas (MSA) and micropolitan areas often overlap into more than one county. The mortgage limits in these areas are set based on the county with the highest median price within the metropolitan or micropolitan area.

The FHA maximum mortgage limits for 2010 consist of the higher of the loan limit established under the Economic Stimulus Act of 2008 (ESA) or the regular limits established under section 203(b) which was amended by the Housing and Economic Recovery Act (HERA).

Floor Limits-Low Cost Areas

These area loan limits are calculated at 65 percent of the conforming loan limit according to both ESA-2008 and HERA-2010 and since the conforming loan limit remains the same, so do the FHA floor limits for low cost areas:

- One Unit $271,050
- Two Unit $347,000
- Three Unit $419,400
- Four Unit $521.250

Ceiling Limits-High Cost Areas

Because the calculation of maximum mortgage is higher with The Economic Stimulus Act of 2008 (ESA) than it was in the Housing and Economic Recovery Act (HERA), ESA calculations prevail for high cost areas where the loan limits exceed the floor limit.

- One Unit $729,750
- Two Unit $934,200
- Three Unit $1.129.250
- Four Unit $1,403,400

However, if the area did not have loan limits as high as stated by ESA in 2008, the area will not be eligible for the highest ESA loan limits.

Loan Limits for AL, HI, Guam and U.S. Virgin Islands

The National Housing Act permits these areas to adjust up to 150 percent of the regular national ceiling limits so loan limits in these areas can be as high as:

- One Unit $1,094,625
- Two Unit $1,401,300
- Three Unit $1,693,875
- Four Unit $2,105,100

Between the Floor and Ceiling

Dependent upon the median home price calculations in the area, many area loan limits fall between the floor and ceiling limits as determined by the higher of the calculation allowed by Esa-2008 or HERA-2010. These areas reflect single unit loan limits ranging from 271,400 to as high as 716,250.

If you are like me, much of this doesn’t make much sense at first read but I highly recommend referring to the following additional resources which will explain further to help you become more comfortable in understanding federal max mortgage limits and their determinations:

- OMB Bulletin No. 09-01- Update of Statistical Area Definitions and Guidance on Their Uses
- FHA Mortgage Limits Website: https://entp.hud.gov/idapp/html/hicostlook.cfm
- HUD Mortgagee Letter 2009-50
- HUD Mortgagee Letter 2007-01
- HUD FAQ-Mortgage Limit Increases
- Metropolitan Median Prices-Quarterly Reports from National Association of Realtors (NAR)
- Various Housing Market Data from Federal Housing Finance Agency (FHFA)

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

HUD Eliminates Need for Second Appraisals in Some Areas

HUD Lightens Up on FHA Second Appraisal Requirements

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

Mortgagee Letter 2009-48 which was issued November 18, 2009 communicates the immediate elimination of requirements for second appraisals on high balance loans in declining market areas. Second appraisals are no longer required effective for cases pulled on and after November 19th.

As you may recall, second appraisal requirements were originally added for high balance loans in declining market areas with the issuance of Mortgagee Letter 2008-09 which HUD now rescinds in its entirety.

HUD has also rescinded the second appraisal requirements listed in Mortgagee Letter 2009-08 which originally implemented second appraisal requirements for cash-out refinances exceeding $417000 loan amounts when the subject property was considered in an area of market decline.

The only remaining second appraisal requirements apply for situations that fall under HUD’s Property Flipping Prohibition. These requirements were communicated in Mortgagee Letter 2006-14 which states the following second appraisal requirements:

• If the resale date is between 91 and 180 days following acquisition by the seller, the lender is required to obtain a second appraisal made by another appraiser if the resale price is 100 percent or more over the price paid by the seller when the property was acquired.

• If the resale date is more than 90 days after the date of acquisition by the seller but before the end of the twelfth month following the date of acquisition, FHA reserves the right to require additional documentation from the lender to support the resale value if the resale price is 5 percent or greater than the lowest sales price of the property during the preceding 12 months. At FHA’s discretion, such documentation may include, but is not limited to, an appraisal from another appraiser.

Underwriters are also allowed to use discretion and may require review appraisals to justify questionable value in certain circumstances. The important thing I always remind people in these situations is to always request an interior/exterior inspection with the second appraisal. HUD states that the second appraisal requirement is limited to a 2055 exterior only appraisal but in many situations, recent interior upgrades have contributed to the value assigned by the first FHA appraiser and need to be taken into consideration by the second appraiser. When the second appraiser isn’t allowed access to the interior of the property, most often property values will differ by far more than the accepted tolerance levels and you will be stuck with requirement to use the lower of the two appraised values. That is often a “deal killer.”

Third Quarter Delinquency Reports Reflect Trends of Concern

Mortgage Bankers Association recently released third quarter delinquency and trend reports and I’ll be honest, based on what I read I don’t think we’ve bottomed out in the housing market quite yet. In certain areas of the country, delinquency rates are still extremely high.

For serious VA mortgage delinquencies, the states of Florida, Indiana, Michigan, New Jersey, and Ohio stand out with the North Central region having the highest overall serious delinquency rates.

The states of Florida and Nevada take the lead by far in the category of prime fixed rate mortgage delinquencies with the South region having the highest overall serious delinquency rates.

It’s amazing how much the delinquency rates jump when comparing fixed programs to adjustable rate programs in the prime sector. It’s fair to state that nearly all states entertain delinquency rates close to 10% and greater with just a few exhibiting lower percentages. Florida, as example is showing a 28.93% serious delinquency rate in this category. Arizona, California and Nevada also display higher than average delinquency rates with West region averaging highest.

For FHA delinquency trends, the states of New Jersey, the entire East North Central region, and the South Atlantic region (includes Florida), display higher delinquency rates in comparison to other states and regions. The North Central Region is out in front in this category. And once again, the delinquency trend is much higher when comparing the delinquency rate of FHA fixed rate loans versus FHA adjustable rate loans.

Based on these statistics I can derive a few main facts worth mentioning:

• It’s clear where the most severely declining market areas are within the U.S. The states of Arizona, California, Florida, Georgia, Illinois, Indiana, Michigan, and Nevada appear to consistently display the highest delinquency rates across the board for nearly all program statistics.

• These tend to be areas where questions of artificially inflated values cropped up in the recent past in combination with areas of secondary residence ownership and also areas where the employment sector has been severely affected by the financial state of the country.

• Collateral value will continue to be a major area of concern for lenders who are accepting loans in these areas. The appraisals for properties in these states have to be strong and I suspect lenders will continue issuing conservative lending guidelines to cover the risk concerns for loan applications in a number of these areas- Florida and Arizona in particular.

Next week will bring forth more information on FHA Condominium Policy Changes.

Have a wonderful Thanksgiving with family and friends! May your tables be blessed with turkey!

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)

Congratulations!

General — Posted by loanprocessor @ 11:21
Congratulations on completing the required steps to join RealestateloanS.com. We have been building our name and reputation since 1997 and now you are able to promote yourself to thousands of clients each month.

Please take the necessary steps at this moment to include the following information into your blog: Full name, company name, company address, photo, telephone and email address. Blogs that remain incomplete will be deleted. You will soon find that clients from all over the nation and the world are looking for service representatives in your region. Please take a moment to present yourself in the most professional manner possible so that you can capitalize on this opportunity.

RealestateloanS.com prioritizes promotion of members that routinely and professionally blog about their specialty. Those that blog more will experience higher viewership and search engine promotion. We recommend that you blog two to three times a week with blog articles consisting of 200-600 words. Please pick up to ten keywords and write about those topics regularly.

Thank you for joining us.

Service provided by RealestateloanS.com | Powered by LifeType