philadelphia home ownership center

PHILADELPHIA HOME OWNERSHIP PHILADELPHIA HOME OWNERSHIP CENTERCENTER

WELCOME TO FHA’S WELCOME TO FHA’S LENDER UPDATELENDER UPDATE

August 4, 2009August 4, 2009

18/4/2009

It’s Our Anniversary!It’s Our Anniversary!

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Is FHA getting bailed out by the Is FHA getting bailed out by the taxpayers? taxpayers?

No.No.8/4/2009 5

About this presentation…About this presentation…

If you find a discrepancy between the If you find a discrepancy between the presentation and mortgagee letters, presentation and mortgagee letters, handbooks, etc., the official policies rule.handbooks, etc., the official policies rule.

EverythingEverything is subject to change. is subject to change. All of the links on the PowerPoint work, All of the links on the PowerPoint work,

but you have to be in but you have to be in Slide Show Slide Show view.view. If you want an e-copy of the If you want an e-copy of the

presentation, send an e-mail to presentation, send an e-mail to [email protected]

8/4/2009 6

About this presentation…About this presentation… ML 09-14ML 09-14. .

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm

New on-line versions of basic credit New on-line versions of basic credit underwriting and loan processing underwriting and loan processing handbooks.handbooks.

As of 05/10/09, these handbooks As of 05/10/09, these handbooks should be used as the official should be used as the official reference source.reference source.

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4155.1 4155.1 Mortgage Credit Analysis for Mortgage Credit Analysis for Mortgage Insurance Mortgage Insurance replaces replaces Handbook 4155.1 REV-5 Handbook 4155.1 REV-5 Mortgage Mortgage Credit Analysis for Mortgage Credit Analysis for Mortgage Insurance Insurance (10/20/03).(10/20/03).

Incorporates mortgagee letters Incorporates mortgagee letters issued through 09-09 (03/23/09).issued through 09-09 (03/23/09).

No new material or policy.No new material or policy.

8/4/2009 8


4155.2 4155.2 Lender’s Guide to the Single Family Lender’s Guide to the Single Family Mortgage Insurance ProcessMortgage Insurance Process replaces:replaces:-- 4000.2 REV-3 4000.2 REV-3 Mortgagees Handbook –Mortgagees Handbook –

Application Through Insurance Application Through Insurance (05/20/04).(05/20/04).-- 4000.4 REV-1 CHG 2 4000.4 REV-1 CHG 2 Single Family DirectSingle Family Direct

Endorsement ProcessEndorsement Process (07/13/94). (07/13/94).-- 4165.1 REV-2 4165.1 REV-2 Endorsement for InsuranceEndorsement for Insurance

for Home Mortgage Programs for Home Mortgage Programs (04/06/05).(04/06/05).

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New handbooks may be found at New handbooks may be found at http://www.fhaoutreach.gov/FHAHandbook/prod/index.asp

Look for handbook references Look for handbook references throughout this presentation like throughout this presentation like http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.3.A.1.d

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On-line handbooks were taken down On-line handbooks were taken down from the site on fha.gov on July 9 for from the site on fha.gov on July 9 for updating. As of August 4 they were updating. As of August 4 they were still not up again.still not up again.

Until they return, pdf. versions of Until they return, pdf. versions of the handbooks are available at the handbooks are available at http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.1/index.cfm and and http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.2/index.cfm

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FHA TodayFHA Today FHA’s programs are authorized by laws FHA’s programs are authorized by laws

passed by Congress and signed by the passed by Congress and signed by the President.President.

The Economic Growth Act of 2008 (The The Economic Growth Act of 2008 (The Stimulus Bill) provided temporary, higher Stimulus Bill) provided temporary, higher mortgage limits.mortgage limits.

The Housing and Recovery Act of 2008 The Housing and Recovery Act of 2008 (HERA) significantly changed FHA down (HERA) significantly changed FHA down payments, MIP, and LTV criteria, and payments, MIP, and LTV criteria, and introduced HOPE for Homeowners introduced HOPE for Homeowners program.program.

8/4/2009

FHA TodayFHA Today The Emergency Economic Stabilization The Emergency Economic Stabilization

Act of 2008 (EESA) revised some Act of 2008 (EESA) revised some provisions of H4H.provisions of H4H.

The American Recovery and The American Recovery and Revitalization Act (ARRA) provided Revitalization Act (ARRA) provided temporary higher income limits.temporary higher income limits.

The Helping Families Save Their Homes The Helping Families Save Their Homes Act of 2009 revised lender approval Act of 2009 revised lender approval requirements, expanded loss mitigation requirements, expanded loss mitigation tools, and revised H4H.tools, and revised H4H.

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FHA TodayFHA Today

FHA’s book of business is boomingFHA’s book of business is booming

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FHA TodayFHA TodayFHA-Insured Loans in the United StatesFHA-Insured Loans in the United States

By Calendar YearBy Calendar YearYearYear Total Purchase Refi Non-FHA HECM Total Purchase Refi Non-FHA HECM

to FHA to FHA20052005 522,884 332,778 141,716 33,936 48,390 522,884 332,778 141,716 33,936 48,39020062006 501,587 302,690 113,383 71,987 85,514 501,587 302,690 113,383 71,987 85,51420072007 580,813 293,444 179,289 138,677 108,080 580,813 293,444 179,289 138,677 108,08020082008 1,467,305 810,592 541,735 431,149 114,978 1,467,305 810,592 541,735 431,149 114,97820092009 * * 957,149 414,789 482,992 240,225 59,368957,149 414,789 482,992 240,225 59,368* Through June 30* Through June 30

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FHA TodayFHA Today

8/4/2009

FHA TodayFHA Today

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FHA TodayFHA Today

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FHA Business UpdateFHA Business UpdateFHA-Insured Loans in MichiganFHA-Insured Loans in Michigan

By Calendar YearBy Calendar YearYearYear Total Purchase Refi Non-FHA HECM Total Purchase Refi Non-FHA HECM

to FHA to FHA20052005 20,865 11,751 7,310 2,228 1,804 20,865 11,751 7,310 2,228 1,80420062006 19,635 10,163 7,282 4,972 2,190 19,635 10,163 7,282 4,972 2,19020072007 23,654 9,668 10,870 7,894 3,116 23,654 9,668 10,870 7,894 3,11620082008 51,149 26,561 21,660 14,704 2,928 51,149 26,561 21,660 14,704 2,92820092009 * * 29,737 11,771 16,833 5,060 1,133 29,737 11,771 16,833 5,060 1,133* Through 6/30* Through 6/30

6/8/2009

FHA Business UpdateFHA Business Update

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6/8/2009 23

FHA TodayFHA Today

248/4/2009

FHA TodayFHA Today

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FHA TodayFHA Today

7/23/2009 26

FHA TodayFHA Today

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Who Can Originate an FHA Who Can Originate an FHA Loan?Loan?

28

Not just anyone can make an FHA Not just anyone can make an FHA loan.loan.

You need ourYou need our

approval.approval.

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Two Types of LendersTwo Types of Lenders Supervised LendersSupervised Lenders. Depository . Depository

institutions supervised by FDIC or institutions supervised by FDIC or FCUA (banks and credit unions).FCUA (banks and credit unions).

Non-Supervised LendersNon-Supervised Lenders. Non-. Non-depository institutions primarily depository institutions primarily engaged in the mortgage business engaged in the mortgage business (mortgage companies). (mortgage companies).

308/4/2009


Two Categories of Originating LendersTwo Categories of Originating Lenders May be either supervised or non-May be either supervised or non-

supervised.supervised. Loan Correspondents Loan Correspondents (“Mini Eagle”). (“Mini Eagle”).

Primary activity is the origination of Primary activity is the origination of mortgages. Loans must be underwritten mortgages. Loans must be underwritten by an FHA-approved sponsor lender. by an FHA-approved sponsor lender.

MortgageesMortgagees (“Full Eagle”). May (“Full Eagle”). May originate and underwrite its own loans, originate and underwrite its own loans, and underwrite those originated by loan and underwrite those originated by loan correspondents it sponsors.correspondents it sponsors.

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Principal/Authorized Agent Principal/Authorized Agent RelationshipsRelationships

Relationships between two mortgagees Relationships between two mortgagees (“Full Eagles”).(“Full Eagles”).

Loan must close in the name of the Loan must close in the name of the principal.principal.

Otherwise, principal and authorized Otherwise, principal and authorized agent may share duties and fees based agent may share duties and fees based on mutual agreement.on mutual agreement.

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Where can a lender originate FHA Where can a lender originate FHA loans?loans?

Each branch or home office has a Each branch or home office has a Lending Area in which it may originate Lending Area in which it may originate loans.loans.

Lending areas include multiple states.Lending areas include multiple states. Non-supervised lenders must be licensed Non-supervised lenders must be licensed

in the states in which they do business. in the states in which they do business. http://www.fhaoutreach.gov/FHAHandbook/pro

d/infomap.asp?address=4155-2.12.E.2

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Here’s some examples…Here’s some examples…

A branch office located in A branch office located in MIMI may may originate loans in IL, IN, MI, OHoriginate loans in IL, IN, MI, OH

A branch office located in A branch office located in OHOH may may originate loans in IN, KY, MI, NY, originate loans in IN, KY, MI, NY, OH, PA, WV.OH, PA, WV.

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Special provision for Streamline Special provision for Streamline Refinance loans.Refinance loans.

Any mortgagee (not loan Any mortgagee (not loan correspondent) with Unconditional correspondent) with Unconditional Direct Endorsement authority may Direct Endorsement authority may originate a Streamline Refinance originate a Streamline Refinance anywhere in the U.S.anywhere in the U.S.

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.6.C.1.b

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Do the lending areas apply to Do the lending areas apply to underwriting and other processing underwriting and other processing functions?functions?

No. Lending areas apply to loan No. Lending areas apply to loan origination only. Lenders are free to origination only. Lenders are free to consolidate underwriting and other consolidate underwriting and other business functions in the home or branch business functions in the home or branch office of their choosing.office of their choosing.

http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/index.cfm

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How can a lender originate loans How can a lender originate loans nationally?nationally?

By opening and registering enough By opening and registering enough branches to cover all states. A minimum branches to cover all states. A minimum of 13 branches would be required.of 13 branches would be required.

By establishing a Direct Lending branch By establishing a Direct Lending branch using the internet, direct mail or using the internet, direct mail or telemarketing originations. telemarketing originations. ML 05-40ML 05-40. . http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2005ml.cfm

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Direct Lending BranchesDirect Lending Branches Must have separate manager and staff Must have separate manager and staff

located in a single geographic location.located in a single geographic location. Non-Supervised lenders must be licensed Non-Supervised lenders must be licensed

in all states in which they will do business.in all states in which they will do business. Branch may only originate loans through Branch may only originate loans through

internet, direct mail or telemarketing. internet, direct mail or telemarketing. May not order case numbers for other May not order case numbers for other branches.branches.

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Loan origination services may be provided Loan origination services may be provided onlyonly by FHA-approved loan correspondents by FHA-approved loan correspondents or FHA-approved mortgagees.or FHA-approved mortgagees.

Non-approved brokers cannot perform loan Non-approved brokers cannot perform loan origination services such as taking origination services such as taking applications.applications.

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.1.A.3.a

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Services That Services That MustMust Be Provided By Be Provided By An FHA-Approved lenderAn FHA-Approved lender

Taking loan applications and Taking loan applications and ordering appraisals.ordering appraisals.

Providing required disclosures.Providing required disclosures. Collecting financial and other Collecting financial and other

documentationdocumentation http://www.fhaoutreach.gov/FHAHa

ndbook/prod/infomap.asp?address=4155-2.1.A.3.c8/4/2009 40


Services That Services That MayMay be Provided By be Provided By Non-Approved BrokersNon-Approved Brokers

Educating prospective borrowers in the Educating prospective borrowers in the home buying and financing process.home buying and financing process.

The fee charged must be paid from the The fee charged must be paid from the mortgagor's own available assets and mortgagor's own available assets and must be disclosed on the HUD-1 at must be disclosed on the HUD-1 at closing.closing.

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.1.A.3.d

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Under no circumstances may a borrower Under no circumstances may a borrower be charged a fee by a non-approved be charged a fee by a non-approved broker that is not commensurate with broker that is not commensurate with the amount normally charged for similar the amount normally charged for similar services. services.

The payment to an unapproved broker The payment to an unapproved broker for duplicated services amounts to an for duplicated services amounts to an unearned fee in violation of Section 8(b) unearned fee in violation of Section 8(b) of RESPA.of RESPA.

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.1.A.3.b 428/4/2009


Helping Families Save Their Homes Act Helping Families Save Their Homes Act Signed by President Obama on 05/21/09.Signed by President Obama on 05/21/09. Contains a number of provisions aimed at Contains a number of provisions aimed at

increasing the level of FHA’s review of increasing the level of FHA’s review of participating lenders and their principals.participating lenders and their principals.

Authorizes FHA to assess civil money Authorizes FHA to assess civil money penalties against lenders who are not penalties against lenders who are not FHA-approved, but who nevertheless FHA-approved, but who nevertheless participate in FHA programs.participate in FHA programs.

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Not all lenders participate in all FHA Not all lenders participate in all FHA programs.programs.

Lenders may not establish lower eligibility Lenders may not establish lower eligibility and underwriting criteria than FHA.and underwriting criteria than FHA.

Lenders may establish higher eligibility Lenders may establish higher eligibility and underwriting criteria than FHA.and underwriting criteria than FHA.

Lenders may establish different criteria Lenders may establish different criteria for loans they originate themselves, and for loans they originate themselves, and loans they sponsor or purchase.loans they sponsor or purchase.

8/4/2009


Lender Approval ResourcesLender Approval Resources Lender Approval FHA Connection Lender Approval FHA Connection

User Guide. User Guide. https://entp.hud.gov/pdf/mp_lndapp.pdf

Lender Approval FAQs. Lender Approval FAQs. https://entp.hud.gov/clas\faq-la.cfm

How To Become An Approved How To Become An Approved Lender.Lender.http://www.hud.gov/offices/hsg/sfh/lender/lendappr.cfm

458/4/2009


What Does FHA Expect Of Its What Does FHA Expect Of Its Lenders?Lenders?

FHA expects each mortgagee to exercise FHA expects each mortgagee to exercise the same level of care in originating, the same level of care in originating, underwriting and servicing an FHA-underwriting and servicing an FHA-insured mortgage as it would for a insured mortgage as it would for a loan in which the mortgagee would be loan in which the mortgagee would be entirely dependent on the property as entirely dependent on the property as security to protect its investment. security to protect its investment.

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FHA Mortgage LimitsFHA Mortgage Limits

Lately, it’s been a roller coaster Lately, it’s been a roller coaster ride….ride….

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Maximum FHA mortgage limits are Maximum FHA mortgage limits are established for every county in the established for every county in the United States and territories.United States and territories.

Separate limits established for 1, 2, 3 Separate limits established for 1, 2, 3 and 4 unit properties.and 4 unit properties.

The FHA-insured mortgage, not The FHA-insured mortgage, not including any UFMIP financed into including any UFMIP financed into the loan, may not exceed these the loan, may not exceed these maximums. maximums.

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Under previous legislation, Under previous legislation, mortgage limits based on lesser of mortgage limits based on lesser of 95% of area median or 87% of GSE 95% of area median or 87% of GSE conforming loan limit, but not less conforming loan limit, but not less than 48% of GSE conforming loan than 48% of GSE conforming loan limit.limit.

ML 08-02ML 08-02. Effective 1/1/08. . Effective 1/1/08. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2008ml.cfm

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FHA Mortgage LimitsFHA Mortgage Limits Temporary mortgage limits passed under Temporary mortgage limits passed under

provisions of the Economic Growth Act of provisions of the Economic Growth Act of 2008 (The Stimulus Bill).2008 (The Stimulus Bill).

Mortgage limits based on lesser of 125% Mortgage limits based on lesser of 125% of area median or 175% of conforming of area median or 175% of conforming loan limit, but not less than 65% of loan limit, but not less than 65% of conforming loan limit.conforming loan limit.

ML 08-06ML 08-06. Effective 3/6/08 – 12/31/2008. . Effective 3/6/08 – 12/31/2008. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2008ml.cfm

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FHA Mortgage LimitsFHA Mortgage Limits Permanent mortgage limits passed Permanent mortgage limits passed

under provisions of Housing and under provisions of Housing and Economic Recovery Act of 2008 Economic Recovery Act of 2008 (HERA).(HERA).

Mortgage limits based on lesser of Mortgage limits based on lesser of 115% of area median or 150% of 115% of area median or 150% of conforming loan limit, but not less than conforming loan limit, but not less than 65% of conforming loan limit.65% of conforming loan limit.

ML 08-36ML 08-36. Effective 1/1/09. . Effective 1/1/09. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2008ml.cfm

8/4/2009


Temporary mortgage limits passed under Temporary mortgage limits passed under provisions of the American Recovery and provisions of the American Recovery and Revitalization Act (ARRA). Revitalization Act (ARRA).

Mortgage limits based on lesser of 125% Mortgage limits based on lesser of 125% of area median or 175% of conforming of area median or 175% of conforming loan limit, but not less than 65% of loan limit, but not less than 65% of conforming loan limit.conforming loan limit.

ML 09-07ML 09-07. Effective 2/24/09 – . Effective 2/24/09 – 12/31/2009. 12/31/2009. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm

528/4/2009


Appeals for Higher LimitsAppeals for Higher Limits Appeals may be made for a higher Appeals may be made for a higher

loan limit for a county within a loan limit for a county within a metropolitan area or for a non-metro metropolitan area or for a non-metro county. county.

Appeals must be accompanied by Appeals must be accompanied by sufficient housing sales price data to sufficient housing sales price data to justify higher limits.justify higher limits.

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.3.A.1.d8/4/2009 53


Appeals for Higher LimitsAppeals for Higher Limits HUD allowed appeals to both the 2008 HUD allowed appeals to both the 2008

ESA limits and the 2009 HERA limits at ESA limits and the 2009 HERA limits at the time that those limits were made the time that those limits were made public. public.

Because ARRA requires only that HUD Because ARRA requires only that HUD compare those two sets of limits in setting compare those two sets of limits in setting the new 2009 limits, there is no need for the new 2009 limits, there is no need for any appeals period as a part of this any appeals period as a part of this process.process.

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1 Unit Mortgage Limits1 Unit Mortgage LimitsEvery county in MI is currently at a one Every county in MI is currently at a one unit limit of $271,050 except for counties in unit limit of $271,050 except for counties in the following metro areas:the following metro areas:

-- Niles-Benton HarborNiles-Benton Harbor $298,750$298,750-- KalamazooKalamazoo $286,200$286,200-- Detroit-Warren-TroyDetroit-Warren-Troy $297,500$297,500-- MonroeMonroe $297,000$297,000-- Ann ArborAnn Arbor $345,000 $345,000

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Where can I find FHA’s mortgage Where can I find FHA’s mortgage limits for my area?limits for my area?

FHA Connection. Click on FHA Connection. Click on Single Single FamilyFamily, then , then Single Family Single Family OriginationOrigination, then , then FHA Approval FHA Approval ListsLists, then , then Mortgage LimitsMortgage Limits..

www.fha.gov at www.fha.gov at https://entp.hud.gov/idapp/html/hicostlook.cfm

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Mortgage Insurance Mortgage Insurance PremiumsPremiums

Like mortgage limits, we’ve seen a Like mortgage limits, we’ve seen a lot of changes in MIP recently.lot of changes in MIP recently.

598/4/2009


ML 08-16ML 08-16. FHA adopted risk-based . FHA adopted risk-based premium pricing effective July 14, 2008.premium pricing effective July 14, 2008.

HERA barred FHA from implementing risk-HERA barred FHA from implementing risk-based premium pricing until October 1, based premium pricing until October 1, 2009.2009.

HERA increased maximum allowable UFMIP HERA increased maximum allowable UFMIP to 3.0% from 2.25%. Maximum annual to 3.0% from 2.25%. Maximum annual maximum of 0.55% not changed.maximum of 0.55% not changed.

FHA may set premiums lower, but not FHA may set premiums lower, but not higher.higher.

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Up Front PremiumsUp Front Premiums Purchases Purchases 1.75%1.75%

Credit-Qualifying RefisCredit-Qualifying Refis 1.75%1.75%Streamline RefisStreamline Refis 1.50%1.50%

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.7.2.a

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Annual PremiumsAnnual Premiums Terms > 15 Years Terms > 15 Years

-- LTV LTV << 95.00% 95.00% -- 0.50%0.50%-- LTV > 95.00%LTV > 95.00% -- 0.55%0.55%

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.7.3.e

8/4/2009


Annual PremiumsAnnual Premiums Terms Terms <<15 Years 15 Years

-- LTV LTV << 90.00% 90.00% -- 0.00%0.00%-- LTV > 90.00%LTV > 90.00% -- 0.25%0.25%

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.7.3.f

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Annual premium will be cancelled Annual premium will be cancelled when…when…

Term > 15 years: When payments Term > 15 years: When payments have been made for at least 5 years have been made for at least 5 years and until LTV = 78% (e.g., even if and until LTV = 78% (e.g., even if initial LTV is below 78%, MIP must initial LTV is below 78%, MIP must be paid for 5 years).be paid for 5 years).

Term Term << 15 years and LTV > 90%: 15 years and LTV > 90%: when LTV = 78%. when LTV = 78%.

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.7.3.c

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LTV for cancellation purposes will LTV for cancellation purposes will be based on …be based on …

The lesser of the sales price or the The lesser of the sales price or the appraised value at loan origination.appraised value at loan origination.

New appraisals will not be New appraisals will not be considered. considered.

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.7.3.d

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Impact of Premium ChangesImpact of Premium Changes Assume $120,000 loan @6.0% for 30 YearsAssume $120,000 loan @6.0% for 30 Years

Monthly ChargesMonthly ChargesCase # Case # Case # Case # Case # Case #< 7/14< 7/14 7/14-9/307/14-9/30 >9/30>9/30

UFMIPUFMIP $ 10.80 $ 10.80 $ 16.20 $ 12.60 $ 16.20 $ 12.60AnnualAnnual $ 50.00$ 50.00 $ 55.00$ 55.00 $ 55.00$ 55.00 TotalTotal $ 61.80 $ 61.80 $ 71.20 $ 71.20 $ 67.60 $ 67.60

8/4/2009


Doesn’t FHA Refund A Portion of the Doesn’t FHA Refund A Portion of the UFMIP When A Borrower Refinances?UFMIP When A Borrower Refinances?

Refunds ended for loans insured after Refunds ended for loans insured after 12/08/04.12/08/04.

For FHA to FHA refinances within the For FHA to FHA refinances within the first 3 years, a credit is given on the new first 3 years, a credit is given on the new loan for a portion of the UFMIP.loan for a portion of the UFMIP.

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.7.2.i

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UFMIP and EndorsementUFMIP and Endorsement

Effective March 13, 2009Effective March 13, 2009 A loan may not be endorsed until A loan may not be endorsed until

seven business days have passed seven business days have passed since FHA’s receipt of the UFMIP.since FHA’s receipt of the UFMIP.

Loans where this time period has not Loans where this time period has not elapsed will be NORed.elapsed will be NORed.

688/4/2009

FHA Loan To Value RatioFHA Loan To Value Ratio

698/4/2009


Previously…Previously… 98.75 %98.75 %: All values/sales prices $50,000 or : All values/sales prices $50,000 or

less.less. 97.75 %: 97.75 %: High closing cost state, value/price High closing cost state, value/price

>$50,000>$50,000 97.65 %97.65 %: Low closing cost state, values/sales : Low closing cost state, values/sales

prices $50,001 to $125,000 prices $50,001 to $125,000 97.15 %97.15 %: Low closing cost state, values/sales : Low closing cost state, values/sales

prices in excess of $125,000.prices in excess of $125,000.

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Under HERA, maximum LTV Under HERA, maximum LTV simplified.simplified.

Previous low closing cost/high closing Previous low closing cost/high closing cost state and value/price distinctions cost state and value/price distinctions eliminated.eliminated.

Maximum LTV not to exceed 100 percent Maximum LTV not to exceed 100 percent of the appraised value of the property.of the appraised value of the property.

Maximum LTV may not be increased for Maximum LTV may not be increased for the UFMIP. the UFMIP.

8/4/2009


Maximum LTVs Maximum LTVs Not Including Not Including UFMIPUFMIP

PurchasePurchase 96.50%96.50% http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.2.A.2.b

Rate and Term RefiRate and Term Refi 97.75%97.75% http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.3.B.1.a

728/4/2009


Maximum LTVs Maximum LTVs Not Including Not Including UFMIPUFMIP

Streamline Refi w/app Streamline Refi w/app 97.75%97.75% http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.3.C.3.a

Cash-Out RefiCash-Out Refi 85.00%85.00%http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.3.B.2.f

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Interest RatesInterest Rates

Who knows the current FHA rate?Who knows the current FHA rate?

748/4/2009


It’s a trick question, isn’t it. It’s a trick question, isn’t it.

758/4/2009


FHA does not regulate interest rates FHA does not regulate interest rates or points.or points.

Under all currently active FHA single Under all currently active FHA single family mortgage insurance programs, family mortgage insurance programs, the interest rate and any discount the interest rate and any discount points are negotiated between the points are negotiated between the borrower and the lenderborrower and the lender


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Commitment fees are permitted to Commitment fees are permitted to guarantee, guarantee, in writingin writing, the interest , the interest rate and discount points.rate and discount points.

The minimum time for lock ins or rate The minimum time for lock ins or rate locks is locks is 15 days15 days. The loan may close . The loan may close in less than 15 days at the in less than 15 days at the convenience of the borrower, and the convenience of the borrower, and the lock in fees may still be earned.lock in fees may still be earned.

http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.3.A.2.b

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Of Insured FHA loans in the Of Insured FHA loans in the Philadelphia HOC that closed in Philadelphia HOC that closed in April, 2009…April, 2009…

19.2%19.2% had interest rates below 5%. had interest rates below 5%. 79.4%79.4% had interest rates between had interest rates between

5% and 6%.5% and 6%. 1.4%1.4% had interest rates over 6%. had interest rates over 6%.

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Closing CostsClosing Costs

79

What can you charge?What can you charge?

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80

Closing CostsClosing CostsClosing CostsClosing Costs Lenders may charge and collect from Lenders may charge and collect from

borrowers those customary and reasonable borrowers those customary and reasonable costs necessary to close the mortgage loan. costs necessary to close the mortgage loan.

Borrowers may not pay a tax service fee or Borrowers may not pay a tax service fee or be charged a loan origination fee greater be charged a loan origination fee greater than 1 percent.than 1 percent.


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Closing CostsClosing Costs

Federal and state disclosure laws apply.Federal and state disclosure laws apply. Borrower may be charged any Borrower may be charged any

“customary and reasonable” fee “customary and reasonable” fee necessary to close the loan.necessary to close the loan.

Point of policy is not to allow unlimited Point of policy is not to allow unlimited charges to borrower.charges to borrower.

Amount of charges to FHA borrowers Amount of charges to FHA borrowers has been growing. Look for some new has been growing. Look for some new policy on this in the future.policy on this in the future.

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82

Borrower EligibilityBorrower Eligibility

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Borrower Eligibility Borrower Eligibility

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First, let’s have a little quiz.First, let’s have a little quiz.

Which of the following Which of the following statements is true?statements is true?


A.A. FHA will accept either an Individual FHA will accept either an Individual Tax Identification Number (ITIN) or Tax Identification Number (ITIN) or a Social Security Number (SSN).a Social Security Number (SSN).

B.B. Only an occupying borrower is Only an occupying borrower is required to have a SSN.required to have a SSN.

C.C. All borrowers must have a SSN. An All borrowers must have a SSN. An ITIN is never acceptable.ITIN is never acceptable.

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And the And the answer is…answer is…

C. All borrowers must have a SSN. C. All borrowers must have a SSN. An ITIN is never acceptable. An ITIN is never acceptable.


True or false?True or false?

FHA borrowers must be U.S. FHA borrowers must be U.S. citizens.citizens.

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False. Citizenship is not a False. Citizenship is not a requirement.requirement.

But, they must be legal residents of But, they must be legal residents of the U.Sthe U.S..

88

Borrower Eligibility Borrower Eligibility Must be legal resident of U.S. Must be legal resident of U.S.

Citizenship is not a requirement. Citizenship is not a requirement. Permanent and non-permanent Permanent and non-permanent resident aliens are eligible. resident aliens are eligible. http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.4.A.3

Borrowers may be occupants, non-Borrowers may be occupants, non-occupying co-borrowers or co-signers occupying co-borrowers or co-signers but but mustmust have a valid SSN. An ITIN have a valid SSN. An ITIN is not acceptable. is not acceptable. http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.4.A.1.a8/4/2009


Occupying and Non-Occupying Co-Occupying and Non-Occupying Co-BorrowersBorrowers

Take title to the property at Take title to the property at settlement .settlement .

Are obligated on the mortgage note.Are obligated on the mortgage note. Must sign all security instruments. Must sign all security instruments. http://www.fhaoutreach.gov/http://www.fhaoutreach.gov/

FHAHandbook/prod/infomap.asp?FHAHandbook/prod/infomap.asp?address=4155-1.4.A.1.daddress=4155-1.4.A.1.d

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Co-SignersCo-Signers Do Do notnot hold ownership interest in a hold ownership interest in a

property property AreAre obligated on the mortgage note and obligated on the mortgage note and

liable for repaying the obligation.liable for repaying the obligation. Must complete and sign all loan Must complete and sign all loan

documents except the security documents except the security instruments.instruments.

http://www.fhaoutreach.gov/FHAHandbook/http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.4.A.1.eprod/infomap.asp?address=4155-1.4.A.1.e

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Borrower Eligibility Borrower Eligibility Non-Occupying Borrowers and Co-Non-Occupying Borrowers and Co-

Signers must be…Signers must be… Related by blood or marriage; orRelated by blood or marriage; or Have a longstanding relationship not Have a longstanding relationship not

arising out of the loan transaction.arising out of the loan transaction. Otherwise, maximum LTV is limited to Otherwise, maximum LTV is limited to

75% of value.75% of value. http://www.fhaoutreach.gov/FHAHandbook/http://www.fhaoutreach.gov/FHAHandbook/

prod/infomap.asp?address=4155-1.2.B.3.bprod/infomap.asp?address=4155-1.2.B.3.b

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Loan Applicants Not On TitleLoan Applicants Not On Title 4155.14155.1 4.A.1.d4.A.1.d states that FHA does states that FHA does notnot

permit any individual to take an permit any individual to take an ownership interest in the property at ownership interest in the property at settlement without signing the mortgage settlement without signing the mortgage note and all security instruments.note and all security instruments.

ML 08-40 ML 08-40 rescinded that requirement. rescinded that requirement. Until further notice, this policy remains in Until further notice, this policy remains in effect. Handbook should be updated effect. Handbook should be updated soon.soon.

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93

Borrower EligibilityBorrower Eligibility At least one borrower must be an At least one borrower must be an

occupant. Borrower expected to take occupant. Borrower expected to take occupancy within 60 days and reside occupancy within 60 days and reside there for at least 1 year.there for at least 1 year.http://www.fhaoutreach.gov/FHAHandbook/prodhttp://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.4.B.2.b/infomap.asp?address=4155-1.4.B.2.b

No maximum age for borrower.No maximum age for borrower. Minimum Minimum age is minimum legal age in that state at age is minimum legal age in that state at which a Note can be enforced. which a Note can be enforced. http://www.fhaoutreach.gov/FHAHandbook/prodhttp://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.4.A.1.b/infomap.asp?address=4155-1.4.A.1.b

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94


The property must be the primary The property must be the primary borrower’s principal residence that borrower’s principal residence that is occupied by the borrower for the is occupied by the borrower for the majority of the year. majority of the year. http://www.fhaoutreach.gov/FHAHandboohttp://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-k/prod/infomap.asp?address=4155-1.4.B.2.a1.4.B.2.a

Borrowers may have only one FHA Borrowers may have only one FHA mortgage at a time unless…mortgage at a time unless…

8/4/2009

Borrower EligibilityBorrower EligibilityExceptions to one FHA loan at a time Exceptions to one FHA loan at a time

policypolicy Borrower is relocating outside the Borrower is relocating outside the

reasonable commuting area; reasonable commuting area; oror Borrower’s family increases in size; Borrower’s family increases in size; oror Borrower is vacating a jointly-owned Borrower is vacating a jointly-owned

home; home; oror Borrower is a non-occupying co-borrower.Borrower is a non-occupying co-borrower. http://www.fhaoutreach.gov/FHAHandbook/http://www.fhaoutreach.gov/FHAHandbook/

prod/infomap.asp?address=4155-1.4.B.2.dprod/infomap.asp?address=4155-1.4.B.2.d

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A borrower is ineligible if he or she is A borrower is ineligible if he or she is appears on either appears on either

HUD Limited Denial of Participation HUD Limited Denial of Participation (LDP) list; or (LDP) list; or

General Services Administration's General Services Administration's (GSA's) " (GSA's) " List of Parties Excluded from List of Parties Excluded from Federal Procurement or Federal Procurement or Nonprocurement ProgramsNonprocurement Programs

http://www.fhaoutreach.gov/FHAHandbook/http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.4.A.2.aprod/infomap.asp?address=4155-1.4.A.2.a

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Borrower Borrower EligibilityEligibilityDo you check yes or No?Do you check yes or No?

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Beats us. Beats us.

We only get concerned if you don’t We only get concerned if you don’t check either.check either.

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99


A borrower is ineligible if he or she…A borrower is ineligible if he or she… Is presently delinquent on any Federal debt Is presently delinquent on any Federal debt

or has a lien placed against his/her property or has a lien placed against his/her property for a debt owed to the United States for a debt owed to the United States Government,Government,

But may become eligible once he/she brings But may become eligible once he/she brings the account current or enters into a the account current or enters into a satisfactory repayment plan with the Federal satisfactory repayment plan with the Federal agency. agency.

http://www.fhaoutreach.gov/FHAHandbook/prod/http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.4.A.7.finfomap.asp?address=4155-1.4.A.7.f

8/4/2009


A borrower is ineligible if he or she…A borrower is ineligible if he or she… Is delinquent on, or has had a claim paid on Is delinquent on, or has had a claim paid on

an FHA-insured loan within the last three an FHA-insured loan within the last three years. years.

The three-year waiting period begins when The three-year waiting period begins when FHA pays the initial claim to the lender. This FHA pays the initial claim to the lender. This includes deed-in-lieu of foreclosure, as well includes deed-in-lieu of foreclosure, as well as judicial and other forms of foreclosures.as judicial and other forms of foreclosures.

http://www.fhaoutreach.gov/FHAHandbook/prod/http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.4.A.2.binfomap.asp?address=4155-1.4.A.2.b

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Unless…Unless… He/she sold the property to an individual who He/she sold the property to an individual who

assumed the mortgage and subsequently assumed the mortgage and subsequently defaulted.defaulted.

He/she was not responsible for payment under He/she was not responsible for payment under a divorce decree or legal separation agreement.a divorce decree or legal separation agreement.

The property was included in a bankruptcy The property was included in a bankruptcy caused by circumstances beyond his/her caused by circumstances beyond his/her control.control.

http://www.fhaoutreach.gov/FHAHandbook/prod/http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.4.A.8.einfomap.asp?address=4155-1.4.A.8.e

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Automated UnderwritingAutomated Underwriting

Most FHA loans must be scored.Most FHA loans must be scored.

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Automated UnderwritingAutomated UnderwritingWhat Is The TOTAL Scorecard?What Is The TOTAL Scorecard? TTechnology echnology OOpen pen TTo o AApproved pproved LLenders. enders.

http://www.fhaoutreach.gov/FHAHandbook/prod/infohttp://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.6.A.1.amap.asp?address=4155-1.6.A.1.a

TOTAL is not an Automated Underwriting TOTAL is not an Automated Underwriting System (AUS) like DU or LP. It is a scorecard System (AUS) like DU or LP. It is a scorecard that is used that is used withinwithin an AUS. TOTAL operates an AUS. TOTAL operates as a system-to-system connection to an AUS.as a system-to-system connection to an AUS.http://www.fhaoutreach.gov/FHAHandbook/prod/infohttp://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.6.A.1.bmap.asp?address=4155-1.6.A.1.b

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TOTAL scoring recommendation based TOTAL scoring recommendation based on …on …

Credit Score.Credit Score. Monthly Housing Expense.Monthly Housing Expense. Loan To Value ratio.Loan To Value ratio. Mortgage Term. Mortgage Term. Number of monthly payments in reserve. Number of monthly payments in reserve. FAQs at FAQs at

http://www.hud.gov/utilities/intercept.cfm?/offichttp://www.hud.gov/utilities/intercept.cfm?/offices/hsg/sfh/lender/total_faqs.pdfes/hsg/sfh/lender/total_faqs.pdf

8/4/2009


Exceptions to scoring through Exceptions to scoring through TOTALTOTAL

Borrowers without a credit score.Borrowers without a credit score. Borrowers applying for a Streamline Borrowers applying for a Streamline

refinance.refinance. ML 08-22ML 08-22. .

http://www.hud.gov/offices/adm/hudclips/lhttp://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2008ml.cfmetters/mortgagee/2008ml.cfm

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Question:Question:

Is a refer score is a valid basis for Is a refer score is a valid basis for rejecting a borrower.rejecting a borrower.

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No. No.

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What Do The Recommendations Mean?What Do The Recommendations Mean? Accept/ApproveAccept/Approve means that, based on means that, based on

the analysis of the credit and capacity to the analysis of the credit and capacity to repay, the loan is eligible for FHA repay, the loan is eligible for FHA insurance.insurance.

ReferRefer means that the lender must means that the lender must conduct a manual underwriting review, conduct a manual underwriting review, according to FHA requirements.according to FHA requirements.

http://www.fhaoutreach.gov/FHAHandbook/http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.6.A.1.cprod/infomap.asp?address=4155-1.6.A.1.c

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What about Approve/Ineligible? What about Approve/Ineligible? Can these loans be approved?Can these loans be approved?

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Where feedback is Where feedback is “Approve/Ineligible” underwriter “Approve/Ineligible” underwriter must determine that conditions that must determine that conditions that resulted in “ineligible” finding are resulted in “ineligible” finding are addressed (Page 9 of TOTAL User addressed (Page 9 of TOTAL User Guide).Guide).

Provided file is appropriately Provided file is appropriately documented, loans receive all documented, loans receive all benefits of an Approve score.benefits of an Approve score.

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Reduced documentation Reduced documentation requirements for loans receiving an requirements for loans receiving an Accept or Approve score.Accept or Approve score.

Fewer explanations required for Fewer explanations required for negative credit incidents.negative credit incidents.

Reduced documentation for Reduced documentation for employment history.employment history.

8/4/2009


Review Rules. System override of an Review Rules. System override of an Approve/Accept decision requiring Approve/Accept decision requiring manual underwriting.manual underwriting.

Manual Downgrades. When Manual Downgrades. When additional information not additional information not considered by TOTAL could affect considered by TOTAL could affect the loan decision and the the loan decision and the underwriter determines that manual underwriter determines that manual underwriting is required. underwriting is required.

1138/4/2009


When information changes beyond When information changes beyond allowable tolerances, borrower should allowable tolerances, borrower should be re-scored with new information.be re-scored with new information.

No limit on how many times a loan may No limit on how many times a loan may be scored.be scored.

When insurance application is When insurance application is completed FHAC will compare that data completed FHAC will compare that data to data last scored through TOTAL.to data last scored through TOTAL.

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Automated UnderwritingAutomated UnderwritingRescoring is not required if …Rescoring is not required if … Cash reserves verified are not more Cash reserves verified are not more

than 10 percent less than on the than 10 percent less than on the application.application.

Verified income is not more than 5 Verified income is not more than 5 percent less than on the application.percent less than on the application.

Tax and insurance escrows used do not Tax and insurance escrows used do not result in more than a 2 percentage result in more than a 2 percentage point increase in the ratios.point increase in the ratios.

http://www.fhaoutreach.gov/FHAHandbook/http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.6.A.1.dprod/infomap.asp?address=4155-1.6.A.1.d

8/4/2009

philadelphia home ownership center

Documents

fha today842009fha

fha todayfhas programs

mortgage credit analysis

fha todayfhainsured

fha todayfhas book of

higher mortgage limits

home mortgage programs

recovery act