Ppt0000004.ppt [Read-Only]Title: Ppt0000004.ppt [Read-Only] Author: Debbie Created Date: 10/16/2009 3:30:33 PM

PHILADELPHIA HOME OWNERSHIP CENTERPHILADELPHIA HOME OWNERSHIP CENTER

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

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What is FHA?What is FHA?

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nn The programs operate through FHAThe programs operate through FHA--approved approved banks, mortgage companies, and other lending banks, mortgage companies, and other lending institutions.institutions.

nn Lenders process and fund the mortgages, which Lenders process and fund the mortgages, which FHA then insures.FHA then insures.

nn FHA does not directly make loans to help FHA does not directly make loans to help people buy homes or refinance mortgages.people buy homes or refinance mortgages.

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nn In the event of foreclosure, FHA pays the In the event of foreclosure, FHA pays the lenderlender’’s claim for the unpaid principal balance, s claim for the unpaid principal balance, accrued interest, advances for taxes and accrued interest, advances for taxes and insurance, and foreclosure and maintenance insurance, and foreclosure and maintenance costs.costs.

nn Funded through selfFunded through self--sustaining insurance fund.sustaining insurance fund.nn Insurance fund supported by Up Front and Insurance fund supported by Up Front and

Annual Mortgage Insurance Premiums paid by Annual Mortgage Insurance Premiums paid by FHA borrowers.FHA borrowers.

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

No.No.

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What is FHA?What is FHA?nn FHAFHA’’s programs are authorized by laws passed s programs are authorized by laws passed

by Congress and signed by the President.by Congress and signed by the President.nn The Housing and Recovery Act of 2008 The Housing and Recovery Act of 2008

(HERA) significantly changed FHA programs.(HERA) significantly changed FHA programs.nn Also affected by the Economic Growth Act of Also affected by the Economic Growth Act of

2008 (The Stimulus Bill), the Emergency 2008 (The Stimulus Bill), the Emergency Economic Stabilization Act of 2008 (EESA) and Economic Stabilization Act of 2008 (EESA) and the American Recovery and Revitalization Act the American Recovery and Revitalization Act (The Recovery Act). (The Recovery Act).

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

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Not just anyone can make an FHA loan.Not just anyone can make an FHA loan.You need ourYou need our

approval.approval.

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

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

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

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Two Categories of LendersTwo Categories of Lendersnn May be either supervised or nonMay be either supervised or non--supervised.supervised.nn Loan Correspondents Loan Correspondents ((““Mini EagleMini Eagle””). Primary ). Primary

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

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

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Principal/Authorized Agent RelationshipsPrincipal/Authorized Agent Relationshipsnn Relationships between two mortgagees (Relationships between two mortgagees (““Full Full

EaglesEagles””).).nn Loan must close in the name of the principal.Loan must close in the name of the principal.nn Otherwise, principal and authorized agent may Otherwise, principal and authorized agent may

share duties and fees based on mutual share duties and fees based on mutual agreement.agreement.

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FHA Business UpdateFHA Business Update

FHAFHA’’s book of business is boomings book of business is booming

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FHA Business UpdateFHA Business Update

FHAFHA--Insured Loans in the United StatesInsured Loans in the United StatesBy Calendar YearBy Calendar Year

YearYear Total Purchase Total Purchase RefiRefi NonNon--FHA HECMFHA HECMto FHAto FHA

20052005 522,884 332,778 141,716 33,936 48,390522,884 332,778 141,716 33,936 48,39020062006 501,587 302,690 113,383 71,987 85,514501,587 302,690 113,383 71,987 85,51420072007 580,813 293,444 179,289 138,677 108,080580,813 293,444 179,289 138,677 108,08020082008 1,467,305 810,592 541,735 431,149 114,9781,467,305 810,592 541,735 431,149 114,978

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FHA Mortgage LimitsFHA Mortgage Limits

Maximum One Unit Limits (Maximum One Unit Limits (““the ceilingthe ceiling””))01/01/0801/01/08 03/06/0803/06/08 01/01/0901/01/09 02/24/0902/24/09$362,790$362,790 $729,750$729,750 $625,500$625,500 $729,750$729,750

Minimum One Unit Limits (Minimum One Unit Limits (““the floorthe floor””))01/01/0801/01/08 03/06/0803/06/08 01/01/0901/01/09 02/24/0902/24/09

$200,160$200,160 $271,050 $271,050 $271,050$271,050 $271,050$271,050

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FHA Mortgage LimitsFHA Mortgage Limits

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

nn FHA Connection. Click on FHA Connection. Click on Single FamilySingle Family, then , then Single Family OriginationSingle Family Origination, then , then FHA Approval ListsFHA Approval Lists, , then then Mortgage LimitsMortgage Limits..

nn fha.govfha.gov at at https://https://entp.hud.gov/idapp/html/hicostlook.cfmentp.hud.gov/idapp/html/hicostlook.cfm

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Mortgage Insurance PremiumsMortgage Insurance Premiums

Up Front PremiumsUp Front Premiumsnn ML 08ML 08--2222..nn Purchases Purchases 1.75%1.75%

CreditCredit--Qualifying Qualifying RefisRefis 1.75%1.75%Streamline Streamline RefisRefis 1.50%1.50%

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Annual PremiumsAnnual Premiumsnn ML 08ML 08--2222..nn 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%

nn 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%

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UFMIP and EndorsementUFMIP and EndorsementEffective March 13, 2009Effective March 13, 2009nn A loan may not be endorsed until seven business A loan may not be endorsed until seven business

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

nn Loans where this time period has not elapsed Loans where this time period has not elapsed will be will be NORedNORed..

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FHA Loan To Value RatioFHA Loan To Value Ratio

Maximum Maximum LTVsLTVs Not Including UFMIPNot Including UFMIPnn PurchasePurchase 96.50%96.50%nn Rate and Term RefinanceRate and Term Refinance 97.75%97.75%nn Streamline RefinanceStreamline Refinance 97.75%97.75%nn CashCash--Out RefinanceOut Refinance 85.00%85.00%nn ML 08ML 08--2323,, 0808--4040..

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Borrower EligibilityBorrower Eligibility

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Borrower Eligibility Borrower Eligibility

nn HUD Handbook 4155.1 REVHUD Handbook 4155.1 REV--55..nn Must be legal resident of U.S. Citizenship is not Must be legal resident of U.S. Citizenship is not

a requirement. Permanent and nona requirement. Permanent and non--permanent permanent resident aliens are eligible.resident aliens are eligible.

nn All borrowers All borrowers mustmust have a SSN. An ITIN is not have a SSN. An ITIN is not acceptable.acceptable.

nn Borrowers may be occupants or nonBorrowers may be occupants or non--occupants occupants (co(co--signers).signers).

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nn At least one borrower must be an occupant.At least one borrower must be an occupant.nn No maximum age for borrower.No maximum age for borrower.nn Minimum age is minimum legal age in that state Minimum age is minimum legal age in that state

at which a Note can be enforced.at which a Note can be enforced.nn No income limits. Minimum income required is No income limits. Minimum income required is

that necessary to qualify for payments. that necessary to qualify for payments.

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nn The property must be the primary borrowerThe property must be the primary borrower’’s s principal residence that is occupied by the principal residence that is occupied by the borrower for the majority of the year.borrower for the majority of the year.

nn Borrower expected to take occupancy within 60 Borrower expected to take occupancy within 60 days and reside there for at least 1 year.days and reside there for at least 1 year.

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

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Exceptions to one FHA loan at a time policyExceptions to one FHA loan at a time policynn Borrower is relocating outside the commuting Borrower is relocating outside the commuting

area.area.nn BorrowerBorrower’’s family increases in size.s family increases in size.nn One borrower is vacating a jointlyOne borrower is vacating a jointly--owned owned

property. property. nn NonNon--occupying cooccupying co--borrowers.borrowers.

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Automated UnderwritingAutomated Underwriting

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

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nn FHA does not have its own AUS. Lenders use FHA does not have its own AUS. Lenders use Fannie MaeFannie Mae’’s DU, Freddie Macs DU, Freddie Mac’’s LP, or other s LP, or other systems.systems.

nn Within AUS, FHA loans are scored against Within AUS, FHA loans are scored against FHAFHA’’s scorecard (an algorithm developed to s scorecard (an algorithm developed to predict risk) called TOTAL.predict risk) called TOTAL.

nn All FHA loans except streamline refinances All FHA loans except streamline refinances must be scored through an Automated must be scored through an Automated Underwriting System (AUS).Underwriting System (AUS).

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nn Except for FICO score (pulled directly from Except for FICO score (pulled directly from credit report), data entered in AUS is calculated credit report), data entered in AUS is calculated as it would be under manual underwriting.as it would be under manual underwriting.

nn TOTAL will provide a scoring recommendation TOTAL will provide a scoring recommendation on borrower.on borrower.

nn Score is Accept/Approve or Refer.Score is Accept/Approve or Refer.nn AUS may provide further feedback on other AUS may provide further feedback on other

aspects of loan.aspects of loan.

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Manual UnderwritingManual Underwriting

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nn For loans receiving a Refer score from an AUS For loans receiving a Refer score from an AUS or where borrower has no credit score (required or where borrower has no credit score (required to score through AUS).to score through AUS).

nn In Fiscal Year 2008 in the Philadelphia HOC In Fiscal Year 2008 in the Philadelphia HOC 24%24% of endorsed purchase loans and of endorsed purchase loans and 39%39% of of endorsed creditendorsed credit--qualifying refinance loans were qualifying refinance loans were manually underwritten. manually underwritten.

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Manual UnderwritingManual UnderwritingCreditCreditnn No minimum credit score.No minimum credit score.nn Credit pattern more important than single Credit pattern more important than single

incidents. Payment history for previous incidents. Payment history for previous mortgage or rent most important.mortgage or rent most important.

nn Explanations required for significant credit Explanations required for significant credit problems, late payments, inquiries within the last problems, late payments, inquiries within the last 90 days.90 days.

nn NonNon--traditional credit okay.traditional credit okay.10/16/2009

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CreditCreditIf bankruptcy on record, must have reIf bankruptcy on record, must have re--established established

credit credit andandnn Chapter 7Chapter 7 –– 2 years must have passed 2 years must have passed since since

discharge, 1 year if bankruptcy due to discharge, 1 year if bankruptcy due to circumstances beyond borrowercircumstances beyond borrower’’s control.s control.

nn Chapter 13Chapter 13 –– 1 year successful payments under 1 year successful payments under plan and permission of court.plan and permission of court.

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CreditCreditIf a foreclosure is on record, borrower is not If a foreclosure is on record, borrower is not

eligible for three years unless eligible for three years unless nn NonNon--FHA ForeclosureFHA Foreclosure. There are documented . There are documented

extenuating circumstances.extenuating circumstances.nn FHA ForeclosureFHA Foreclosure. Property was included in . Property was included in

bankruptcy, or divorce with ex responsible for bankruptcy, or divorce with ex responsible for payments, or assumption.payments, or assumption.

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Employment/IncomeEmployment/Incomenn Income reasonably expected to continue for 3 Income reasonably expected to continue for 3

years.years.nn Must be documented.Must be documented.nn Must verify employment, income for 2 full years. Must verify employment, income for 2 full years.

Allowances for school, maternity.Allowances for school, maternity.nn Overtime, bonus can be used if documented for Overtime, bonus can be used if documented for

2 years and likely to continue.2 years and likely to continue.

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Employment/IncomeEmployment/Incomenn Retirement, Social Security, alimony, child Retirement, Social Security, alimony, child

support can be used.support can be used.nn NonNon--taxable income can be taxable income can be ““grossed up.grossed up.””nn SelfSelf--employment okay. employment okay.

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Grossing Up NonGrossing Up Non--Taxable IncomeTaxable Incomenn Percentage of grossPercentage of gross--up may not exceed up may not exceed

borrowerborrower’’s actual tax rate.s actual tax rate.nn No additional allowances for dependents.No additional allowances for dependents.nn Lender must document the percentage used.Lender must document the percentage used.nn If the borrower is not required to file a tax If the borrower is not required to file a tax

return, use a 25% tax rate. return, use a 25% tax rate.

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How about another test?How about another test?

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““Off the booksOff the books”” or or ““under the counterunder the counter””income can be usedincome can be used……

A.A. For selfFor self--employed borrowers only.employed borrowers only.B.B. Only as a compensating factor.Only as a compensating factor.C.C. Never.Never.

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The answer is C. Never.The answer is C. Never.

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Manual UnderwritingManual UnderwritingRental IncomeRental Incomenn Concerns have arisen about borrowers seeking Concerns have arisen about borrowers seeking

FHA loans to purchase a home when they FHA loans to purchase a home when they already own another home. already own another home.

nn Borrower claims that current home will be Borrower claims that current home will be rented. Counts rent as income to qualify for rented. Counts rent as income to qualify for new loan.new loan.

nn Borrower closes on new loan and abandons Borrower closes on new loan and abandons former property.former property.

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Rental IncomeRental Incomenn ML 08ML 08--2525..nn Effective for case numbers issued on or after Effective for case numbers issued on or after

September 16, 2008.September 16, 2008.nn Remains in effect until further notice.Remains in effect until further notice.nn Revised criteria for counting rental income.Revised criteria for counting rental income.nn Applies only to situations where borrower Applies only to situations where borrower

intends to rent current principal residence.intends to rent current principal residence.

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Manual UnderwritingManual UnderwritingRental income from former residence may be Rental income from former residence may be

counted only wherecounted only where……nn Borrower is relocating to an area not within Borrower is relocating to an area not within

commuting distance. Rental income may be commuting distance. Rental income may be counted provided there is an executed lease of at counted provided there is an executed lease of at least one year. least one year. OROR

nn LTV on current home does not exceed 75%.LTV on current home does not exceed 75%.nn Philadelphia HOC vacancy factor of 15% must Philadelphia HOC vacancy factor of 15% must

be applied to rental income.be applied to rental income.10/16/2009


Just a reminderJust a reminder……nn Self Sufficiency test for 3 and 4 unit properties.Self Sufficiency test for 3 and 4 unit properties.nn Monthly PITI / Net Monthly Income Monthly PITI / Net Monthly Income << 100%.100%.nn Net Monthly Income = market rent for all units Net Monthly Income = market rent for all units

(including unit occupied by borrower) less the (including unit occupied by borrower) less the greater of:greater of:-- appraiserappraiser’’s vacancy allowance , ors vacancy allowance , or-- HOC vacancy allowance (15%). HOC vacancy allowance (15%).

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Employment/Income DocumentationEmployment/Income Documentationnn Written Verification of Employment (VOE) Written Verification of Employment (VOE)

from current employer and most recent pay from current employer and most recent pay stub.stub.

nn Additional Additional VOEsVOEs if necessary to document two if necessary to document two year employment history.year employment history.

nn Alternatively, borrower can provide pay stubs Alternatively, borrower can provide pay stubs covering most recent 30 day period, Wcovering most recent 30 day period, W--2s from 2s from the previous two years, and an oral VOE.the previous two years, and an oral VOE.

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Employment/Income DocumentationEmployment/Income Documentationnn To document selfTo document self--employment, borrower must employment, borrower must

submit tax returns for last two years.submit tax returns for last two years.nn Where borrower has been selfWhere borrower has been self--employed less employed less

than two years, borrower must document that than two years, borrower must document that selfself--employment is in the same field as previous employment is in the same field as previous employment.employment.

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Qualifying RatiosQualifying Ratiosnn ““FrontFront”” ratio ratio –– Housing payment (PITI) / Housing payment (PITI) /

monthly income. Standard is 31%, higher with monthly income. Standard is 31%, higher with compensating factors.compensating factors.

nn ““BackBack”” ratio ratio –– Housing payment plus other Housing payment plus other installment debt / monthly income. Standard is installment debt / monthly income. Standard is 43%, higher with compensating factors.43%, higher with compensating factors.

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Qualifying RatiosQualifying Ratiosnn 31% and 43% ratios are guidelines only, not 31% and 43% ratios are guidelines only, not

maximum ratios.maximum ratios.nn Where exceeded, underwriter must cite at least Where exceeded, underwriter must cite at least

one compensating factor.one compensating factor.nn Compensating factors include reserves, large Compensating factors include reserves, large

down payment, minimal increase in housing down payment, minimal increase in housing expense, potential for higher income and others. expense, potential for higher income and others.

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ReservesReservesnn Reserves are an important factor in the TOTAL Reserves are an important factor in the TOTAL

Scorecard and may be used as a compensating Scorecard and may be used as a compensating factor on manually underwritten cases.factor on manually underwritten cases.

nn Reserves are not required except for ...Reserves are not required except for ...33--4 unit properties 4 unit properties (3 months PITI).(3 months PITI).Insufficient credit borrowers Insufficient credit borrowers (2 months PITI).(2 months PITI).

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Closing CostsClosing Costs

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What can you charge?What can you charge?

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nn ML 06ML 06--0404..nn As of January, 2006, list of allowable and As of January, 2006, list of allowable and

unallowable closing costs eliminated.unallowable closing costs eliminated.nn Charges must be incurred, and/or limited to Charges must be incurred, and/or limited to

actual cost.actual cost.nn Surcharges on third party charges are not Surcharges on third party charges are not

permitted. permitted.

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

reasonablereasonable”” fee necessary to close the loan.fee necessary to close the loan.nn Point of policy is not to allow unlimited charges Point of policy is not to allow unlimited charges

to borrower.to borrower.

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Unallowable ChargesUnallowable Chargesnn Origination fee may not exceed 1%.Origination fee may not exceed 1%.nn Tax service fees are not permitted.Tax service fees are not permitted.

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Interest RatesInterest Rates

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

nn Lenders may not violate the tiered pricing rule: Lenders may not violate the tiered pricing rule: disparities of more than two points for the same disparities of more than two points for the same kind of loans within the same geographic area.kind of loans within the same geographic area.

nn Premium pricing to pay for closing costs and Premium pricing to pay for closing costs and prepaidsprepaids, but not down payment, is permissible., but not down payment, is permissible.

nn ML 94ML 94--1616. . ML 94ML 94--4343..

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Property EligibilityProperty Eligibility

Most kinds of homes qualify.Most kinds of homes qualify.

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nn Property must consist of 1Property must consist of 1--4 units.4 units.nn Detached, semiDetached, semi--detached, attached, condo are detached, attached, condo are

eligible.eligible.nn Existing and new construction (stickExisting and new construction (stick--built and built and

modular) are eligible.modular) are eligible.nn Manufactured homes are eligible.Manufactured homes are eligible.nn CoCo--ops restricted to developments where HUD ops restricted to developments where HUD

insures master mortgage. insures master mortgage.

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Question: Question: Are mixedAre mixed--use use properties acceptable?properties acceptable?

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Yes they areYes they are..

So long as the commercial space does not exceed So long as the commercial space does not exceed

25% 25% of the gross square footage.of the gross square footage.

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Property EligibilityProperty EligibilityCondominiumsCondominiumsnn Generally, the condo project must be preGenerally, the condo project must be pre--

approved by FHA. approved by FHA. nn Lender can use Lender can use ““spotspot”” loan procedure for units loan procedure for units

in nonin non--approved projects. approved projects. ML 96ML 96--4141. (Oct.1 . (Oct.1 changes)changes)

nn Must be at least 51% ownerMust be at least 51% owner--occupied.occupied.nn Condo maintenance fee included in housing Condo maintenance fee included in housing

payment calculation for qualifying.payment calculation for qualifying.

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CondominiumsCondominiumsList of approved condos available through List of approved condos available through nn FHA Connection. Click on FHA Connection. Click on Single FamilySingle Family, then , then

Single Family OriginationSingle Family Origination, then , then FHA Approval ListsFHA Approval Lists, , then then CondominiumsCondominiums. .

nn hud.govhud.gov at at https://https://entp.hud.gov/idapp/html/condlook.cfmentp.hud.gov/idapp/html/condlook.cfm

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Getting a condo project approved.Getting a condo project approved.nn Handbook 4150.1 REVHandbook 4150.1 REV--1, Chapter 111, Chapter 11nn Four basic situations:Four basic situations:

-- Existing Existing –– NonNon--Operating Association.Operating Association.-- Existing Existing –– Operating Association.Operating Association.-- Proposed Construction.Proposed Construction.-- Under Construction.Under Construction.

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Manufactured HomesManufactured Homesnn At least 400 square feet.At least 400 square feet.nn Certification label as to compliance with Federal Certification label as to compliance with Federal

standards.standards.nn Classified and subject to taxation as real estate.Classified and subject to taxation as real estate.nn Mortgage covers both unit and site.Mortgage covers both unit and site.

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Manufactured HomesManufactured Homesnn Built and remains on a permanent chassis.Built and remains on a permanent chassis.nn Must be affixed to a permanent foundation that Must be affixed to a permanent foundation that

has been certified by an engineer.has been certified by an engineer.nn Elevation at or above 100 year flood plain.Elevation at or above 100 year flood plain.nn Must be on original site.Must be on original site.

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CooperativesCooperativesnn Under current regulations not eligible for Direct Under current regulations not eligible for Direct

Endorsement processing.Endorsement processing.nn Eligibility and maximum mortgage calculation Eligibility and maximum mortgage calculation

affected by status of master mortgage.affected by status of master mortgage.nn HERA provides for changes. FHA is working HERA provides for changes. FHA is working

on mortgagee letter to implement legislation.on mortgagee letter to implement legislation.

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Property EligibilityProperty EligibilityFlipping RuleFlipping Rulenn ML 06ML 06--1414..nn Seller must be legal owner of property.Seller must be legal owner of property.nn Seller must have owned property at least 91 days Seller must have owned property at least 91 days

at the time the borrower signs the sales contract.at the time the borrower signs the sales contract.nn If seller owns 91If seller owns 91--180 days 180 days andand new price is new price is

double previous price, 2double previous price, 2ndnd appraisal required.appraisal required.

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Flipping RuleFlipping Rulenn Exceptions for HUD, VA, USDA REO, Fannie Exceptions for HUD, VA, USDA REO, Fannie

Mae, Freddie Mac, nonprofits, estate sales, and Mae, Freddie Mac, nonprofits, estate sales, and corporate relocations.corporate relocations.

nn Waiver applicable until 6/9/2009 also exempts Waiver applicable until 6/9/2009 also exempts sales by lenders of foreclosed properties, or sales sales by lenders of foreclosed properties, or sales by property disposition firms they hire.by property disposition firms they hire.

nn http://http://portal.hud.gov/portal/page?_pageidportal.hud.gov/portal/page?_pageid=73,3912104&_dad=73,3912104&_dad==portal&_schemaportal&_schema=PORTAL=PORTAL

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Flipping RuleFlipping Rulenn Does it matter how much the seller spent on Does it matter how much the seller spent on

repairs?repairs?NONO

nn Does it matter how much profit the seller is Does it matter how much profit the seller is earning?earning?NONO

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AppraisalsAppraisals

Who can perform an FHA Appraisal?Who can perform an FHA Appraisal?nn ML 08ML 08--3939. Implements provision of HERA . Implements provision of HERA

regarding certification of appraisers.regarding certification of appraisers.nn Until 10/01/09, any licensed appraiser who was Until 10/01/09, any licensed appraiser who was

on FHAon FHA’’s Appraiser Roster as of 09/31/08 can s Appraiser Roster as of 09/31/08 can perform an FHA appraisal.perform an FHA appraisal.

nn After 09/31/09, all appraisers must be certified After 09/31/09, all appraisers must be certified residential or certified general.residential or certified general.

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Who can perform an FHA Appraisal?Who can perform an FHA Appraisal?nn After 09/31/09, only certified residential or After 09/31/09, only certified residential or

certified general appraisers who meet the certified general appraisers who meet the minimum certification criteria issued by the minimum certification criteria issued by the Appraiser Qualifications Board (AQB) of the Appraiser Qualifications Board (AQB) of the Appraisal Foundation may be selected. Appraisal Foundation may be selected.

nn Lender responsible for selecting only certified Lender responsible for selecting only certified appraisers.appraisers.

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nn HUD Handbook 4150.2 CHGHUD Handbook 4150.2 CHG--11nn Determines the value of the property.Determines the value of the property.nn Determines the marketability of the property.Determines the marketability of the property.nn Identifies observable health and safety Identifies observable health and safety

deficiencies.deficiencies.nn Is performed by an FHA Roster Appraiser, Is performed by an FHA Roster Appraiser,

selected by the lender.selected by the lender.

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nn Not a home inspection. Conducted primarily to Not a home inspection. Conducted primarily to determine value for mortgage insurance determine value for mortgage insurance purposes.purposes.

nn Conducted for benefit of lender, not borrower.Conducted for benefit of lender, not borrower.nn Does not guarantee property condition.Does not guarantee property condition.

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One of the following Fannie Mae forms must One of the following Fannie Mae forms must be usedbe used……

nn 1004C1004C Manufactured homes.Manufactured homes.nn 10731073 Individual condominium unitsIndividual condominium unitsnn 10251025 22--4 unit properties.4 unit properties.nn 10041004 All one unit other properties.All one unit other properties.nn PlusPlus……

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RepairsRepairsnn No repairs required for minor items or deferred No repairs required for minor items or deferred

maintenance.maintenance.nn Standard tests not automatically required.Standard tests not automatically required.nn Appraiser reports all property conditions, even Appraiser reports all property conditions, even

minor ones.minor ones.

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RepairsRepairsnn Repairs required only for:Repairs required only for:

-- Major health and safety itemsMajor health and safety items-- Structural problemsStructural problems-- Cracked, peeling paint on preCracked, peeling paint on pre--19781978

homes.homes.nn Repairs must be normally completed before Repairs must be normally completed before

closing.closing.

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Examples of Conditions That Would Not Examples of Conditions That Would Not Normally Require RepairsNormally Require Repairs

nn Missing handrailsMissing handrailsnn Cracked windowsCracked windowsnn Minor plumbing leaksMinor plumbing leaksnn Worn flooring or carpetWorn flooring or carpetnn Cracked sidewalksCracked sidewalks

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Examples of Conditions That Would Normally Examples of Conditions That Would Normally Require RepairsRequire Repairs

nn Inadequate ingress/egress from bedrooms to Inadequate ingress/egress from bedrooms to exterior of home.exterior of home.

nn Leaking, wornLeaking, worn--out roofs.out roofs.nn Obvious evidence of structural problems.Obvious evidence of structural problems.nn Obvious evidence of termite infestation.Obvious evidence of termite infestation.

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Examples of tests that are no longer Examples of tests that are no longer mandatory.mandatory.

nn WoodWood--destroying insects/organisms.destroying insects/organisms.nn Well water.Well water.nn Septic systems.Septic systems.nn Flat or unobservable roof.Flat or unobservable roof.

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AppraisalsAppraisalsExamples of conditions warranting further Examples of conditions warranting further

inspection.inspection.nn Standing water against the foundation and/or Standing water against the foundation and/or

excessively damp basements.excessively damp basements.nn Hazardous materials on site or within the Hazardous materials on site or within the

improvements.improvements.nn Faulty , defective or inoperative systems.Faulty , defective or inoperative systems.nn Evidence of possible structural problems Evidence of possible structural problems

(settlement, bulging walls, etc.(settlement, bulging walls, etc.10/16/2009 75

76


Other Property RequirementsOther Property Requirementsnn Certain FHA requirements regarding well and Certain FHA requirements regarding well and

septic distances and other requirements remain septic distances and other requirements remain applicable.applicable.

nn See Valuation Protocol in Revised Appendix D See Valuation Protocol in Revised Appendix D issued with ML 05issued with ML 05--48 and Revised Appendices 48 and Revised Appendices A and C issued in ML 06A and C issued in ML 06--09 for further 09 for further guidance.guidance.

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Declining MarketsDeclining Marketsnn ML 07ML 07--11, ML 0811, ML 08--09, ML 0909, ML 09--08, ML 0908, ML 09--0909..nn FHA does not define this term.FHA does not define this term.nn FHA has not established a list of areas that it FHA has not established a list of areas that it

considers to be declining.considers to be declining.nn FHA has no special down payment, mortgage FHA has no special down payment, mortgage

insurance, or underwriting requirements for insurance, or underwriting requirements for properties in an areas with declining values. properties in an areas with declining values.

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Declining MarketsDeclining Marketsnn Determined by appraiser on a caseDetermined by appraiser on a case--byby--case basis;case basis;

OROR

nn Determined by lender based on data services or Determined by lender based on data services or feedback from LP or DU.feedback from LP or DU.

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Declining MarketsDeclining Marketsnn Appraiser determination.Appraiser determination.nn Recorded by appraiser in Recorded by appraiser in OneOne--Unit Housing TrendsUnit Housing Trends

portion of portion of NeighborhoodNeighborhood section on appraisal.section on appraisal.nn Where the appraiser checks the Where the appraiser checks the Declining Declining box for box for

Property Values, he or she must provide an Property Values, he or she must provide an explanation in the explanation in the Market ConditionsMarket Conditions section.section.

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Declining MarketsDeclining MarketsAppraiser DeterminationAppraiser Determinationnn ML 09ML 09--0909. Appraisals must also include. Appraisals must also include……nn At least 2 comparables that closed within 90 At least 2 comparables that closed within 90

days prior to the appraisal.days prior to the appraisal.nn At least 2 active listings or pending sales.At least 2 active listings or pending sales.nn An absorption rate analysis.An absorption rate analysis.

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81


Declining MarketsDeclining MarketsWhen is a second appraisal required?When is a second appraisal required?nn Loan amountLoan amount excludingexcluding UFMIP will exceed UFMIP will exceed

$417,000; $417,000; andandnn The LTV equals or exceeds 95% (or loan is The LTV equals or exceeds 95% (or loan is

cashcash--out); out); andandnn Property is determined to be in a declining Property is determined to be in a declining

market.market.

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Declining MarketsDeclining MarketsSecond AppraisalsSecond Appraisalsnn Do not order a new case number.Do not order a new case number.nn Second appraisal must be performed by an FHA Second appraisal must be performed by an FHA

roster appraiser.roster appraiser.nn Must conform with HUD Minimum Property Must conform with HUD Minimum Property

Requirements.Requirements.

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Declining MarketsDeclining MarketsSecond AppraisalsSecond Appraisalsnn If property is a one unit single family home, If property is a one unit single family home,

appraiser may perform exteriorappraiser may perform exterior--only appraisal only appraisal using Fannie Mae Form 2055. using Fannie Mae Form 2055.

nn For 2For 2--4 unit properties, appraiser must perform 4 unit properties, appraiser must perform full appraisal using the appropriate Fannie Mae full appraisal using the appropriate Fannie Mae form.form.

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Declining MarketsDeclining MarketsSecond AppraisalsSecond Appraisalsnn Cost of second appraisal may be passed on to Cost of second appraisal may be passed on to

the borrower only when property is in declining the borrower only when property is in declining area area andand LTV is 95% or more (or loan is cashLTV is 95% or more (or loan is cash--out) out) andand when mortgage amount exceeds when mortgage amount exceeds $417,000.$417,000.

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Declining MarketsDeclining MarketsUsing the Second AppraisalUsing the Second Appraisalnn Use the second appraisal to calculate the Use the second appraisal to calculate the

mortgage amount where the second appraised mortgage amount where the second appraised value is more than 5 per cent below the first value is more than 5 per cent below the first appraised value.appraised value.

nn If second appraisal is used, enter that appraisal If second appraisal is used, enter that appraisal data into FHA Connectiondata into FHA Connection

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Underwriting the AppraisalUnderwriting the AppraisalRules of thumbRules of thumbnn Individual adjustments should not exceed 10%.Individual adjustments should not exceed 10%.nn Net adjustments should not exceed 15%.Net adjustments should not exceed 15%.nn Sum of adjustments should not exceed 25%.Sum of adjustments should not exceed 25%.

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Purchase LoansPurchase Loans

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Purchase LoansPurchase Loans

Minimum Cash InvestmentMinimum Cash Investmentnn ML 08ML 08--2323..nn Under HERA, minimum cash investment = Under HERA, minimum cash investment =

3.5% of 3.5% of lesser of sales price or appraised valuelesser of sales price or appraised value..nn Minimum cash investment is down payment Minimum cash investment is down payment

only. Neither closing costs nor prepaids paid by only. Neither closing costs nor prepaids paid by borrower count towards 3.5% minimum cash borrower count towards 3.5% minimum cash investment.investment.

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FHA Purchase LoansFHA Purchase Loans

RememberRemember……nn There is no minimum cash investment There is no minimum cash investment

requirement on refinance loans. It applies only requirement on refinance loans. It applies only to purchases.to purchases.

nn On REO properties being financed with FHA On REO properties being financed with FHA mortgage insurance, special financing provisions mortgage insurance, special financing provisions may apply, such as $100 down. Where these may apply, such as $100 down. Where these provisions are offered, they supersede the 3.5% provisions are offered, they supersede the 3.5% minimum cash investment requirement. minimum cash investment requirement.

89

90


Seller ContributionsSeller Contributionsnn Seller (or other Seller (or other ““interested partyinterested party””) may ) may

contribute up to 6% of sales price toward contribute up to 6% of sales price toward borrowerborrower’’s closing costs and prepaids.s closing costs and prepaids.

nn Seller may Seller may notnot contribute to borrowercontribute to borrower’’s s minimum cash investment. minimum cash investment.

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Acceptable Sources of BorrowerAcceptable Sources of Borrower’’s Cash s Cash InvestmentInvestment

nn BorrowerBorrower’’s own savingss own savingsnn A gift from a relative, employer or union.A gift from a relative, employer or union.nn A gift, grant or secondary financing from state A gift, grant or secondary financing from state

and local government programs.and local government programs.nn A gift from nonA gift from non--profit organizations not profit organizations not

connected to an interested party.connected to an interested party.

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FHA Purchase LoansFHA Purchase LoansUnacceptable Source of BorrowerUnacceptable Source of Borrower’’s Cash s Cash

InvestmentInvestmentIn no case shall the funds requiredIn no case shall the funds required……consist, in whole or in consist, in whole or in

part, of funds provided by any of the following parties part, of funds provided by any of the following parties before, during, or after closing of the property sale:before, during, or after closing of the property sale:(i) The seller or any other person or entity that financially(i) The seller or any other person or entity that financiallybenefits from the transaction.benefits from the transaction.(ii) Any third party or entity that is reimbursed, directly(ii) Any third party or entity that is reimbursed, directlyor indirectly, by any of the parties described in clause (i).or indirectly, by any of the parties described in clause (i).

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Unacceptable Source of BorrowerUnacceptable Source of Borrower’’s Cash s Cash InvestmentInvestment

nn No mortgagee letter was issued on this subject.No mortgagee letter was issued on this subject.nn Questions and answers about the ban are Questions and answers about the ban are

available at:available at:http://portal.hud.gov/portal/page?_pageid=73,http://portal.hud.gov/portal/page?_pageid=73,7597819&_dad=portal&_schema=PORTAL7597819&_dad=portal&_schema=PORTAL

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http://portal.hud.gov/portal/page?_pageid=73

http://portal.hud.gov/portal/page?_pageid=73

FHA Purchase LoansFHA Purchase LoansWhere a gift is providedWhere a gift is provided……nn Gift letter required.Gift letter required.nn Must document transfer of funds.Must document transfer of funds.nn If from a donorIf from a donor’’s account, document withdrawal s account, document withdrawal

from donorfrom donor’’s account and deposit into s account and deposit into borrowerborrower’’s account.s account.

nn If provided at closing, document withdrawal If provided at closing, document withdrawal from donorfrom donor’’s account or other acceptable s account or other acceptable source.source.

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Refinance LoansRefinance Loansnn FHA offers refinances of both FHA and nonFHA offers refinances of both FHA and non--

FHA loans.FHA loans.nn FHA offers both cashFHA offers both cash--out and rate and term out and rate and term

refinances.refinances.nn For existing FHA loans, a special nonFor existing FHA loans, a special non--credit credit

qualifying refinance option is available. qualifying refinance option is available. nn Mortgage calculation worksheets available at Mortgage calculation worksheets available at

http://www.hud.gov/offices/hsg/sfh/trn/training.cfmhttp://www.hud.gov/offices/hsg/sfh/trn/training.cfm

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http://www.hud.gov/offices/hsg/sfh/trn/training.cfm


Rate and Term RefinancesRate and Term Refinances

nn Existing subordinate financing may remain in Existing subordinate financing may remain in place behind the FHA mortgage.place behind the FHA mortgage.

nn New subordinate financing may be placed New subordinate financing may be placed behind the FHA mortgage.behind the FHA mortgage.

nn No CLTV restrictions on new existing No CLTV restrictions on new existing subordinate financing.subordinate financing.

nn Cash back to the borrower at closing may not Cash back to the borrower at closing may not exceed $500. exceed $500.

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Rate and Term RefinancesRate and Term RefinancesSecondary Financing RequirementsSecondary Financing Requirementsnn No prepayment penalty.No prepayment penalty.nn No balloon payment before 10 years.No balloon payment before 10 years.nn Monthly, consistent payments.Monthly, consistent payments.nn 11stst and 2and 2ndnd loan payments cannot exceed loan payments cannot exceed

borrowerborrower’’s ability to repay.s ability to repay.nn EquityEquity--sharing permitted.sharing permitted.

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Mortgage amount Mortgage amount not including UFMIP not including UFMIP may not may not exceed exceed

nn Applicable county maximum.Applicable county maximum.nn Lesser ofLesser of

-- 97.75% of appraised value, or97.75% of appraised value, or……-- the sum of the following:the sum of the following:

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Can be included in new mortgageCan be included in new mortgage……nn Existing first lienExisting first liennn Purchase money second mortgagePurchase money second mortgagenn Junior liens over 12 months oldJunior liens over 12 months oldnn Closing costsClosing costsnn Prepaid expensesPrepaid expensesnn Discount pointsDiscount points

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Calculating Maximum MortgageCalculating Maximum Mortgage

Appraised ValueAppraised Value $212,000$212,000x . 9775x . 9775

Maximum MortgageMaximum Mortgage $207,230$207,230

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Calculating Maximum MortgageCalculating Maximum Mortgage1st Lien Payoff1st Lien Payoff $179,000$179,0002nd Lien Payoff2nd Lien Payoff 19,50019,500Closing CostsClosing Costs 4,0004,000PrePre--PaidsPaids 3,0003,000TotalTotal $205,500$205,500

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Insured Mortgage AmountInsured Mortgage AmountMaximum MortgageMaximum Mortgage $205,500$205,500+ UFMIP (1.75%)+ UFMIP (1.75%) 3,5963,596Insured MortgageInsured Mortgage $209,096$209,096

LTVLTV 98.63%98.63%

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CashCash--Out Refinances Out Refinances nn ML 09ML 09--0808..nn Maximum LTV Maximum LTV 85%85% of appraised value.of appraised value.nn Full creditFull credit--qualifying. Full appraisal.qualifying. Full appraisal.nn Must be current for the month due.Must be current for the month due.nn NonNon--occupying cooccupying co--borrower may borrower may notnot be added.be added.

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CashCash--Out RefinancesOut Refinancesnn New secondary financing may be added, but New secondary financing may be added, but

CLTV for 1CLTV for 1stst mortgage and mortgage and newnew subordinate subordinate financing limited to 85%.financing limited to 85%.

nn No CLTV restrictions on No CLTV restrictions on existingexisting secondary secondary financing.financing.

nn Modified 2nds not considered new 2nds. Modified 2nds not considered new 2nds. nn If located in declining area and mortgage If located in declining area and mortgage

exceeds $417,000, second appraisal required.exceeds $417,000, second appraisal required.

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FHA to FHA StreamlineFHA to FHA Streamline

nn For existing FHA loans only.For existing FHA loans only.nn NonNon--creditcredit--qualifying.qualifying.nn Mortgage must be current for the month due.Mortgage must be current for the month due.nn Cash back to the borrower at closing may not Cash back to the borrower at closing may not

exceed $500.exceed $500.

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FHA to FHA StreamlineFHA to FHA StreamlineNew PaymentsNew Paymentsnn ML 05ML 05--4343..nn Should result in decrease in monthly principal Should result in decrease in monthly principal

and interest payment.and interest payment.nn Mortgage on principal residence may be Mortgage on principal residence may be

refinanced to a shorter term, provided that P&I refinanced to a shorter term, provided that P&I increases by no more than 20%.increases by no more than 20%.

nn Certain other restrictions based on ARM to Certain other restrictions based on ARM to fixed rate or fixed rate to ARM.fixed rate or fixed rate to ARM.

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Maximum Mortgage AmountMaximum Mortgage Amountnn Without AppraisalWithout Appraisal

Lesser ofLesser of principal balance, accrued interest, principal balance, accrued interest, fees, charges and escrows fees, charges and escrows oror original insured original insured mortgage amount.mortgage amount.

nn With AppraisalWith AppraisalLesser ofLesser of principal balance, accrued interest, principal balance, accrued interest, fees, charges and escrows fees, charges and escrows oror 97.75% of 97.75% of appraised value.appraised value.

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Subordinate FinancingSubordinate Financingnn No new subordinate financing.No new subordinate financing.nn Existing subordinate financing may remain in Existing subordinate financing may remain in

place.place.nn No limits on CLTV.No limits on CLTV.

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FHA Rehabilitation ProgramFHA Rehabilitation Program

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110


What is Section 203k?What is Section 203k?nn One loan to finance both acquisition and rehab One loan to finance both acquisition and rehab

of a property.of a property.nn Mortgage amount is based on projected value of Mortgage amount is based on projected value of

the property with the work completed.the property with the work completed.nn Repair escrow account created and repairs Repair escrow account created and repairs

completed completed afterafter closing.closing.

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Eligible UsesEligible Usesnn To purchase a home and rehab it.To purchase a home and rehab it.nn To refinance a mortgage and rehab a home.To refinance a mortgage and rehab a home.nn To purchase a home on another site, move it To purchase a home on another site, move it

onto a new foundation, and rehab it.onto a new foundation, and rehab it.nn Mortgage calculation worksheet available at Mortgage calculation worksheet available at

http://www.hud.gov/offices/hsg/sfh/trn/training.cfmhttp://www.hud.gov/offices/hsg/sfh/trn/training.cfm

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Regular Section 203kRegular Section 203knn Minimum repairs of $5,000. No maximum on Minimum repairs of $5,000. No maximum on

repairs.repairs.nn Must use 203k Consultant to prepare detailed Must use 203k Consultant to prepare detailed

work writework write--up and to conduct inspections of up and to conduct inspections of work.work.

nn Few limitations on the type of repairs.Few limitations on the type of repairs.

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Streamline 203kStreamline 203knn ML 05ML 05--5050..nn No minimum amount of repairs. Maximum No minimum amount of repairs. Maximum

repairs of $35,000.repairs of $35,000.nn 203k Consultant not required.203k Consultant not required.nn If repair amount under $15,000 no 3If repair amount under $15,000 no 3rdrd party party

inspections required.inspections required.nn No additions or structural repairs.No additions or structural repairs.

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How about commercial space on a 203k?How about commercial space on a 203k?nn 1 Story property1 Story property

25%25%nn 2 Story property2 Story property

49%49%nn 3 Story property3 Story property

33%33%

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FHA Reverse Mortgage ProgramFHA Reverse Mortgage Program

FHA has a special program for senior citizens FHA has a special program for senior citizens who own their home.who own their home.

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Home Equity Conversion Mortgage (HECM)Home Equity Conversion Mortgage (HECM)nn Allows seniors to tap into the equity in their Allows seniors to tap into the equity in their

homes.homes.nn No payment is ever required of borrower. No payment is ever required of borrower.

Borrower can never be forced from home, or Borrower can never be forced from home, or forced to sell.forced to sell.

nn Only after borrower dies or permanently moves Only after borrower dies or permanently moves must loan be satisfied.must loan be satisfied.

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HECM Eligibility and QualifyingHECM Eligibility and Qualifyingnn All borrowers must be at least 62 years old.All borrowers must be at least 62 years old.nn No credit underwriting. Amount of loan No credit underwriting. Amount of loan

calculated through a formula using the age of calculated through a formula using the age of the youngest borrower, the value of the home, the youngest borrower, the value of the home, interest rate and anticipated appreciation.interest rate and anticipated appreciation.

nn Rather than a mortgage amount, HECMs are Rather than a mortgage amount, HECMs are based on maximum claim amounts.based on maximum claim amounts.

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Ways To Receive Loan ProceedsWays To Receive Loan Proceedsnn Lump sum.Lump sum.nn Line of Credit.Line of Credit.nn Regular monthly payments Regular monthly payments toto borrower.borrower.nn Combination of these.Combination of these.

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Housing CounselingHousing Counselingnn ML 08ML 08--1212, , ML 08ML 08--2828, , ML 09ML 09--1010..nn Borrowers must receive housing counseling Borrowers must receive housing counseling

beforebefore a loan application can be taken.a loan application can be taken.nn Borrowers may be charged by agencies for Borrowers may be charged by agencies for

counseling. Fee may be paid out of loan counseling. Fee may be paid out of loan proceeds if borrower agrees.proceeds if borrower agrees.

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nn Origination fee may not exceed 2% of Origination fee may not exceed 2% of maximum claim amount up to $200,000, then maximum claim amount up to $200,000, then 1% of maximum claim amount above $200,000, 1% of maximum claim amount above $200,000, but not to exceed $6,000. but not to exceed $6,000. ML 08ML 08--3434..

nn Mortgagee and other parties barred from Mortgagee and other parties barred from requiring, directly or indirectly, the purchase of requiring, directly or indirectly, the purchase of other financial or insurance products as a other financial or insurance products as a condition of HECM approval. condition of HECM approval. ML 08ML 08--2424. .

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Lender MonitoringLender Monitoring

We trust our lenders to do a good job,We trust our lenders to do a good job,but we also checkbut we also checkthem.them.

12110/16/2009


FHA monitors lenders in three principal waysFHA monitors lenders in three principal waysnn Post Endorsement Technical Reviews (PETRs).Post Endorsement Technical Reviews (PETRs).nn OnOn--Site Lender Monitoring Reviews.Site Lender Monitoring Reviews.nn Credit Watch. Credit Watch. nn ML 09ML 09--1212..

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FHA Can Impose the following sanctionsFHA Can Impose the following sanctionsnn Require indemnification on loan.Require indemnification on loan.nn Suspend Direct Endorsement authority.Suspend Direct Endorsement authority.nn Terminate origination authority within a field Terminate origination authority within a field

office jurisdiction.office jurisdiction.nn Impose civil money penalties. *Impose civil money penalties. *nn Terminate FHA approval. *Terminate FHA approval. *

* * Mortgagee Review Board action only. Mortgagee Review Board action only.

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Post Endorsement Technical ReviewsPost Endorsement Technical Reviewsnn ML 07ML 07--0202. Loans selected for review using an . Loans selected for review using an

algorithm based on various risk factors as well as algorithm based on various risk factors as well as random sampling.random sampling.

nn About 5% of loans selected for PETR.About 5% of loans selected for PETR.nn Review of credit and valuation underwriting Review of credit and valuation underwriting

results and documentation contained in results and documentation contained in Endorsement case binder.Endorsement case binder.

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Post Endorsement Technical ReviewsPost Endorsement Technical Reviewsnn Loans assigned one of three ratings:Loans assigned one of three ratings:

-- ConformingConforming. No deficiencies found.. No deficiencies found.-- DeficientDeficient . Deficiencies found but loan still. Deficiencies found but loan still

approvable.approvable.-- UnacceptableUnacceptable. Such serious deficiencies . Such serious deficiencies

that loan should not have been approved.that loan should not have been approved.

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Post Endorsement Technical ReviewsPost Endorsement Technical Reviewsnn Separate ratings for Mortgage Credit and Separate ratings for Mortgage Credit and

valuation.valuation.nn PETR Reason Codes identify the category of PETR Reason Codes identify the category of

deficiency. Specific issue identified in deficiency. Specific issue identified in accompanying narrative. accompanying narrative.

nn Reason codes are provided in ML 07Reason codes are provided in ML 07--02.02.

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Post Endorsement Technical ReviewsPost Endorsement Technical Reviewsnn Letter sent to lender for loans rated Letter sent to lender for loans rated

Unacceptable requesting that issues be Unacceptable requesting that issues be addressed, or that Lender indemnify FHA addressed, or that Lender indemnify FHA against possible losses.against possible losses.

nn If issues resolved, rating changed to Mitigated.If issues resolved, rating changed to Mitigated.

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Post Endorsement Technical ReviewsPost Endorsement Technical Reviewsnn Results of PETRs reviewed on a quarterly basis.Results of PETRs reviewed on a quarterly basis.nn Lenders with higher than average number of Lenders with higher than average number of

Unacceptable cases subject to sanctions.Unacceptable cases subject to sanctions.nn Sanctions may include increasing percentage of Sanctions may include increasing percentage of

cases reviewed, or suspension of DE authority cases reviewed, or suspension of DE authority (i.e., return to test case status).(i.e., return to test case status).

nn PETR results available through FHAC.PETR results available through FHAC.

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OnOn--Site Lender Monitoring ReviewsSite Lender Monitoring Reviewsnn To ensure that mortgagee practices are in To ensure that mortgagee practices are in

compliance with statutory, regulatory and compliance with statutory, regulatory and administrative loan origination requirements.administrative loan origination requirements.

nn Lenders selected for review using an algorithm Lenders selected for review using an algorithm based on various risk factors as well as random based on various risk factors as well as random sampling.sampling.

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OnOn--Site Lender Monitoring ReviewsSite Lender Monitoring ReviewsReviews includeReviews include……nn Interviews with mortgagee officials and Interviews with mortgagee officials and

employees.employees.nn Reviews of individual case files, logs and Reviews of individual case files, logs and

computer records.computer records.nn Reviews of the mortgagees policies, procedures, Reviews of the mortgagees policies, procedures,

and Quality Control Program.and Quality Control Program.

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OnOn--Site Lender Monitoring ReviewsSite Lender Monitoring Reviewsnn Reviews of loan files involve reReviews of loan files involve re--verification of verification of

source documentation.source documentation.nn Results of review, including findings, sent to Results of review, including findings, sent to

lender following review.lender following review.nn Lender is required to respond to any findings.Lender is required to respond to any findings.nn Lender may be required to indemnify FHA on Lender may be required to indemnify FHA on

individual loans.individual loans.

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OnOn--Site Lender Monitoring ReviewsSite Lender Monitoring Reviewsnn Reviews also conducted by HUDReviews also conducted by HUD’’s Inspector s Inspector

General for Audit.General for Audit.nn Typically targeted based on default rates.Typically targeted based on default rates.nn Reviews focus on internal controls over Reviews focus on internal controls over

processing and on Quality Control Plan.processing and on Quality Control Plan.

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Credit Watch Termination InitiativeCredit Watch Termination Initiativenn Lenders may not apply for reinstatement of Lenders may not apply for reinstatement of

origination authority for at least six months.origination authority for at least six months.nn Lenders may apply for reinstatement only after Lenders may apply for reinstatement only after

an independent review of its operations.an independent review of its operations.nn Lenders may monitor their claim and default Lenders may monitor their claim and default

rate through Neighborhood Watch.rate through Neighborhood Watch.

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Where to Get More InformationWhere to Get More Information

nn 11--800800--CALLFHACALLFHA (225(225--5342)5342): The source for all : The source for all FHA questions.FHA questions.

nn www.fhaoutreach.gov/FHAFAQwww.fhaoutreach.gov/FHAFAQOver 1,300 onOver 1,300 on--line frequently asked questions.line frequently asked questions.

nn www.fha.govwww.fha.govUpUp--toto--date info about FHA programs and more.date info about FHA programs and more.

nn http://www.hud.gov/offices/adm/hudclips/index.http://www.hud.gov/offices/adm/hudclips/index.cfmcfm. Mortgagee letters, handbooks and more.. Mortgagee letters, handbooks and more.

10/16/2009

http://www.fhaoutreach.gov/FHAFAQ

http://www.fhaoutreach.gov/FHAFAQ

http://www.fha.gov

http://www.fha.gov

http://www.hud.gov/offices/adm/hudclips/index

http://www.hud.gov/offices/adm/hudclips/index

www.fha.govwww.fha.gov

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http://www.fha.gov

http://www.fha.gov

HUD Handbooks HUD Handbooks 4155.1 and 4155.24155.1 and 4155.2

nn New onNew on--line version of basic credit underwriting line version of basic credit underwriting and loan processing handbooks.and loan processing handbooks.

nn 4155.2 replaces 4000.2, 4000.4 and 4165.1.4155.2 replaces 4000.2, 4000.4 and 4165.1.nn ML 09ML 09--1414..nn Until May 21, 2009, onUntil May 21, 2009, on--line handbooks are for line handbooks are for

informational purposes only. Until then, they informational purposes only. Until then, they should not be cited as references.should not be cited as references.

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HUD Handbooks HUD Handbooks 4155.1 and 4155.24155.1 and 4155.2

nn Incorporates mortgagee letters issued through Incorporates mortgagee letters issued through 0808--39 (12/18/08).39 (12/18/08).

nn By the time the new handbooks are effective on By the time the new handbooks are effective on May 21, 2009, all applicable MLs through May 21, 2009, all applicable MLs through 12/31/08 will be incorporated.12/31/08 will be incorporated.

nn No new material. No new material. nn http://www.fhaoutreach.gov/FHAHandbook/http://www.fhaoutreach.gov/FHAHandbook/

prod/index.aspprod/index.asp

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http://www.fhaoutreach.gov/FHAHandbook/

http://www.fhaoutreach.gov/FHAHandbook/

ThatThat’’s all. s all.

Questions?Questions?

13810/16/2009

Documents

Ppt0000004.ppt [Read-Only]Title: Ppt0000004.ppt [Read-Only] Author: Debbie Created Date: 10/16/2009 3:30:33 PM