Oct. 23: Ops job; FHA program status, evolution, updates, and lender changes; a decent joke on a Friday

Rob Chrisman

Rob Chrisman began his career in mortgage banking – primarily capital markets – 31 years ago in 1985 with First California Mortgage, assisting in Secondary Marketing until 1988, when he joined Tuttle & Co., a leading mortgage pipeline risk management firm. He was an account manager and partner at Tuttle & Co. until 1996, when he moved to Scotland with his family for 9 months. Read more...

“We developed the most thorough online mortgage assessment, designed to eliminate human error, save time, and get you the best possible loan closing plan.” Plenty of lenders have similar statements on their websites, although when you combine that with the name MortgageHippo (“born out of total disappointment with the mortgage industry) it is a little more memorable. Who says every mortgage company has to have words like united, financial, federal, union, bank…?

 

A 22 year+ Orange County direct lender licensed in over 21 states is seeking a Post-Closing Manager to support the company growth. “The ideal candidate will have diverse post-closing management experience, and be responsible for managing a team of closers and funders through the process of generating loan documents, to be delivered to the closing/settlement agents, through the funding and delivery of the loan to our investor. The candidate should have experience to ensure that associates are fully trained and educated on the Encompass LOS system, doc vendor, branch processes and other tools necessary to be effective in their role, and assist as necessary to effectively manage the work load to meet or exceed established service levels for doc delivery and funding. We are a direct lender and handle the entire loan process in-house from origination to close of escrow. We are a HUD approved FHA direct endorsement lender as well as an approved Fannie Mae Seller Servicer.”  Confidential inquiries should be sent to me.

 

There are reasons why FHA production has skyrocketed in the last year, and why that product was the talk of the MBA conference.

 

It seems that financially-speaking the FHA is doing pretty good. Rumors and chatter suggest an upcoming audit is expected to show the Federal Housing Administration’s finances have improved after it cut fees on new mortgages earlier this year and saw a resulting wave of new business. It’s unknown whether the Obama administration will use any good news from this year’s actuarial report to provide further discounts and boost the housing market ahead of the 2016 elections. The industry is preparing to lobby for the FHA to do more to make home loans less expensive if the report is as rosy as thought, according to officials. It seems FHA is back in the black after requiring a $1.7 billion taxpayer subsidy two years ago in the wake of the housing meltdown.

 

It seems the fee reduction this year allowed the FHA to gain nearly seven percentage points in market share from other Agencies as the FHA’s loans suddenly became a cheaper alternative for some. After previous projections showed FHA could hit the 2 percent buffer at the end of next year, some are now encouraged the agency could be close to that mark when the actuarial report is released next month. HUD recognizes that the January MIP cut was largely successful and made homeownership more affordable by lowering mortgage insurance premiums by 50bp. FHA origination volumes in the six months following the announcement were up 50% year-over-year. In June alone the FHA endorsed 65,000 first-time homebuyers.

 

Of course the MIP reduction alone is not enough, and many believe the tight credit underwriting box has made it difficult for many potential borrowers to obtain a mortgage. HUD is providing lenders certainty and clarity on their representation and warranty liabilities. It has begun doing so by developing a single handbook that takes policies spread out over many documents and putting it all in one online source. It has also provided a new defect taxonomy that not only identifies nine distinct categories of defects but also provides lenders with feedback regarding how to strengthen their processes.

 

A new metric has also been developed that would better gauge the performance of lenders versus their peers. HUD is still working to provide more clarity on what it expects of lenders (i.e., lender and loan certifications) when verifying borrower information. HUD has asked Congress for authority to start charging lenders an administrative fee in order to upgrade their IT systems. But remember last year when HUD requested authority to charge lenders an administrative fee? HUD requested the authority to charge lenders an administrative fee not to exceed 4 basis points of the original balance of the mortgages originated by lenders that was insured during the previous fiscal year. It didn’t pass, as industry groups rallied against it and pointed out that borrowers would see the price of their mortgage go up. But it may happen again.

 

At a hearing before the U.S. House Financial Services Subcommittee on Housing and Insurance, National Association of Realtors President Chris Polychron offered support for H.R. 3700, the “Housing Opportunity Through Modernization Act of 2015.” The legislation includes provisions intended to help expand housing opportunities in the marketplace, including measures that would reform current Federal Housing Administration restrictions on condominium financing. Polychron testified that the reforms are important to ensuring qualified homebuyers have access to financing, and noted that NAR stands ready to work with the committee on the bill’s passage. H.R. 3700 deals with key problem areas facing buyers and sellers of condominiums. For example, the bill addresses FHA’s recertification process, taking steps to make it “substantially less burdensome,” according to the bill text.  Polychron said that the current FHA recertification process is often costly, and noted that condominium developments must repeat this process every 24 months. The legislation would also lower FHA’s current owner-occupancy requirement from 50 percent to 35 percent and require FHA to replace their policy on transfer fees with the Federal Housing Finance Agency’s less-restrictive model.

 

FHA’s Office of Single Family Housing has issued a notice outlining their position on TRID enforcement. In recognizing the lender’s challenges in implementing the new rules, FHA will not include a technical TRID compliance audit when performing their regular quality control reviews (FHA Pass).This moratorium is set to expire on April 16, 2016.

 

HUD has issued new standards for energy efficient homes to allow stretch ratios for homes that are built or retrofitted to the 2000 International Energy Conservation Code (IECC), effective January 25th, 2016. Under the FHA policy for Energy Efficient Homes, the DTI ratios can be increased to 33 percent (front-end) and 45 percent (back-end). To allow for more homeowners to qualify and obtain energy efficient homes, FHA is adding a new threshold for existing construction homes based on the Home Energy Score scale. This index provides a scientifically-based analysis of a home’s energy characteristic and efficiency. The Home Energy Score uses a 10-point scale with a “1” applying to homes likely to use a large amount of energy and a “10” being the most energy efficient. The average home in the U.S would rank as a “5”. Borrowers will be eligible for the EEH stretch ratios for mortgages on new construction homes when their homes meet or exceed the higher of the 2016 IECC or any successor energy code standard that has been adopted for its Minimum Property Standards.

 

Federal Housing Administration (FHA) is reminding its approved mortgagees and servicers of special origination and servicing guidelines for FHA-insured loans in Presidentially-Declared Major Disaster Areas to review its amended Mortgage Letter 2013-11.

 

Effective immediately, for all partial claim documents executed on or after September 1, 2015 to FHA, mortgagees are instructed to remember the procedures for preparing and submitting Partial Claim documents to HUD. There are revisions regarding the required timeframe for mortgagees to submit to HUD the original promissory note associated with a Partial Claim; as well as the description of penalties for a mortgagee’s noncompliance with HUD’s Partial Claim requirements. Details are available by clicking the link Single Family Partial Claim Documentation and Delivery Requirements.

 

Certainly processors and LOs continue to ruminate on the 66 FHA Handbook changes. Charge offs do not have to be included in borrower’s liabilities or debts (not part of debt ratios – do not have to be paid off). All deferred debt must now be included in debt ratios – If student loan payment does not show on credit report, you must use 2% of the outstanding balance in debt ratio (example, $100,000 in student loan debt X 2% = $2000 additional debt payment in debt ratio). On a short sale, if the borrower was not delinquent on the loan for 12 months prior to the short sale, and not delinquent 12 months prior to the loan application, you do not have to wait three years to get a new FHA loan. Self-employed borrowers no longer have to provide a balance sheet, only a profit and loss statement. Any capital gain losses must be deducted from income. Future income no longer requires a pay stub payment. One can close escrow with a copy of offer letter, so long as employment begins prior to the close of escrow. The list goes on.

 

Karen Deis wrote to say that, “www.MortgageCurrentcy.com has spent additional time reviewing the Appraisal Section and the 203(k) section of FHA Handbook 4000.1 and have created new comparison charts. The 203(k) section has 9 significant changes and the appraisal section has 18 of them.  Here’s a list of the 18 appraisal changes that will affect inspections, listings and underwriting of the appraisals: prior sales or transfer of comparable sales, security bars, non-residential use of Property: total floor area, sump pumps, use of the word “inspection”, use of term “Completed in a workmanlike manner”, removal of fall distance requirement for electrical power line towers and other towers, excess and surplus land, legally built if destroyed in a legal, non-confirming zoning designation, prior sales history requirement in a non-disclosure state, roof covering, property requires repairs, properties with individual water and/or sewer systems (Well & Septic), appliances: required analysis and reporting, approaches to value, minimum photograph requirement, ordering a new appraisal on REO properties, and attic spaces.

 

Are you aware pre-closing audit reviews on HUD cases are mandatory as of 9/15/15? Donna from Donnashi Enterprises outlines the new QC requirement that at least 10% of the FHA loans that have been underwritten are to be selected for a full review. In addition, HUD requires a FULL new 3-file Credit Report (post-closing) on loans selected for audit. Interested in more details, helpful links, and tools? Visit the Donnashi website.

 

BB&T suspended its “FHA Streamline with Appraisal” product line.

 

As of October 19th, M&T Bank’s FICO Adjuster changes for FHA loans pricing changes are in effect. Adjustment charges for FICOs between 640 and 659 have changed from .375 to .50 and adjustments for FICOs between 660 and 679 have changed from 0 to .125. These changes affect all FHA products. The Bank reminded clients that HUD has placed limits on 203(k) Consultant Fees with the issuance of the new HUD Handbook 4000.1. (Note: when an independent appraiser conducts an inspection on a 203K Limited transaction, there are no publishes fee caps). Additionally, M&T is adding a clarification to the VA product pages under the Credit Requirements. M&T posted information regarding its confirmation in wring directly from FHA that the lowest acquisition cost does NOT have to be documented on refinance transactions, nor does it have to be used in FHA 203(k) refinance maximum mortgage calculations.

 

U.S. Bank has added additional enhancements to its flood coverage requirements for nonresidential detached structures for portfolio, USDA, FHA, and, VA loans. In addition, as of April 1, 2015, pursuant to the Homeowner Flood Insurance Affordability Act (HFIAA) of 2014, the maximum allowable deductible under a flood insurance policy for single family or 2-4 unit family dwellings is $10,000. U.S. Bank has updated its policy to match HFIAA accordingly effective immediately.

 

Freedom has also introduced a new Freedom First Product: FHA and VA products for Veterans and eligible Borrowers with FICOs from 500 – 549 or with no FICOs scenarios. Similar to the standard FHA and VA programs, the exception resides in Credit Score Requirements and the Buyers obligation to complete a Homebuyer Education course. Product Guideline enhancements were effective on October 5.

 

In order to submit a Standard 203K loan to SunWest, lenders must select an FHA-approved 203(k) Consultant from the FHA 203(k) Consultant Roster in FHAC. The HUD Consultant must be selected from an approved list  that has also been reviewed by Sun West prior to ordering any Consultant services or making any agreements with the Consultant or the borrower.

 

Yesterday we were reminded that there is little correlation between the stock market (the DOW rallied over 300 points) and the bond market (the long end of which was pretty much unchanged on the day). ECB President Mario Draghi said that the European Central Bank’s governing council had discussed cutting the deposit rate from its current level at -0.2%. Draghi said that while the council had previously seen this level as a floor, they have learned from the experiences of other central banks that there may be room for further cuts.

 

There are no scheduled market-moving events here in the US. When the traders headed for the subways yesterday the 10-year was at a yield of 2.03% and this morning we’re at 2.07% with agency MBS prices worse about .250.

 

 

After my prostate exam, the doctor left.

Then the nurse came in. As she shut the door, she whispered the three words that no man wants to hear:

“Who Was That?”

 

 

Rob

 

(Copyright 2015 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)