camp oamp webinar fha updates thru ml 10-29 sept (2)

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U.S. Department of Housing and

Urban Development

September 2010

FHA Updates

Today’s Agenda

Changes in FHA programs that may affect

your transactions

Prior to 2010

Under the Housing and Economic

Recovery Act of 2008

2010

Closing Costs

Lenders are expected to charge fees that

are fair, reasonable, customary, and documented

Any and all fees must be disclosed

Good-Faith-Estimate

Non-allowable closing cost fee schedule eliminated

A borrower may pay all fees associated with the completion of the transaction

Except “Tax Service”

Housing and Economic

Recovery Act of 2008 - HERA Key FHA Provisions

Permanently increases loan limits

Lowest county limit will be $271,050

Limits vary by county (MSA)

Home Equity Conversion Mortgage limit $417,000

Banned Seller-Assisted Downpayment

Assistance Programs

Provided “Hope for Homeowners Program”

Expires September 2011

Minimum Required Investment

Minimum cash investment – down payment

3.5% of appraised value or sales price

Whichever is less Sales price greater than appraised value

then also need to pay difference

No longer calculated on “acquisition cost”

Secretary of HUD has authority to amend minimum required investment Can set higher, but not lower required borrower

investment

Minimum Required Investment –

Cont.

May come from borrower’s own funds or

100% gift

Immediate family member/close familial tie

HUD approved non-profit organization

Acceptable secondary financing

Local city, county, and state programs

All seller-assisted down payment

assistance eliminated

Maximum Loan-To-Value Ratio

Purchase Transaction Maximum LTV for purchase simplified

96.5% of sales price or appraised value

Whichever is less

Distinctions between low and high closing cost states eliminated

Maximum FHA insured mortgage Loan-to-Value with Upfront Mortgage Insurance Premium financed

May not exceed 100 percent

Example: 96.5% LTV + 1% UFMIP = 97.5% (ok)

Mortgage Limits

FHA has no minimum mortgage loan amount

Only maximum mortgage amounts

Lenders may impose a minimum loan amounts

One national limit for Home Equity

Conversion Mortgage

$417,000

Temporary limit to $625,500

Mortgage Limits Under American

Recovery and Reinvestment Act

Mortgagee Letters 2009 – 07 and 2009 – 50

Temporary ceiling/limit extended for 2010

175% of GSE ($417,000 x 1.75%)

$729,750

County MSA’s determine maximums

Higher in Alaska, Hawaii, Guam, and U.S. Virgin Islands

Home Equity Conversion Mortgage nationwide limit

$625,500

Expires December 31, 2010 (reverts to HERA limits)

Loan must be fully approved

FHA Condo Loan Insurance

203(b)

Now also under FHA program code 203(b)

Previous program code 234 (c)

All condo projects must be in a HUD approved

project

Except site-condos

Approval processing requirement dates vary

“Spot” approvals no longer allowed

Case numbers assigned on/after Feb. 1, 2010


203(b) - Continued

May be attached, detached, row, low or

high rise, and condo conversions

Manufactured homes in condo projects

allowed

Lender cannot approve project

Only HUD can approve

Not treated as a site-condos

Not “stick” built


203(b) - Continued A site-condominium is:

Stick built home

1 – unit

Nothing attached (walls, garages, etc.)

Legal classification is condominium

Site-condos do not need to be in a HUD approved project

Effective June 12, 2009


203(b) - Continued

Lenders will decide on approval process

Lender to review and process (DELRAP)

HUD to review and process (HRAP)

Lender’s choice on any given project

Project approvals good for period of 2 years

Lender is required to recertify occupancy

requirements and no adverse conditions exist

each and every time a loan is made even if

project approved

Condo Approval Process – Cont.

Allows for minimum of 2 units in a

project

Previously 4 units in a project

Condo conversions waiting period

eliminated

Any and all remodeling or rehab must

be 100% complete


50% Owner occupancy required

Previously 51%

REO’s owned by only a foreclosing lender and/or second homes are not counted in total number of units for owner occupancy calculation

No more than 15% total units in arrears on HOA Dues

No one entity can own more than 10% of all units


30% maximum FHA concentration

Temporary increase to 50% penetration of

FHA insured mortgages until 12/31/10

Possible further increase to 100% FHA

penetration until 12/31/10

See Mortgagee Letter for this exception

Reserve and environmental reviews/studies

may be needed


New construction pre-approval and inspections

Based on types of jurisdictional inspections

May or may not need Early Start Letter and ten-

year HUD approved warranty plan

Project approval not required for:

HUD REO to buyer using FHA financing

FHA to FHA refinance

Final Notes for Condo Insurance

Project approvals expire

Two years from when placed on list

If approved before 10/1/08 have until 12/7/10

Complete guidelines, requirements, and

instructions contained in:

Mortgagee Letters

2009 – 46A and 2009 – 46B

HUD’s list of approved projects is located at: https://entp.hud.gov/idapp/html/condlook.cfm

Mortgagee Letter 2009 – 28

September 2008

Appraiser independence

Effective for case numbers assigned January 1,

2010

Prohibits lenders from accepting appraisals

selected, retained, or compensated by lender’s

staff compensated on commission basis

FHA does not require use of Appraisal

Management Companies (AMC’s)


September 2009

Appraisal Portability

FHA prohibits “Appraiser shopping”

Effective case numbers January 10, 2010

Second appraisal acceptable under limited

circumstances

First appraisal contained material deficiencies (DE)

Appraiser in first appraisal excluded from lender list

Failure of first lender to provide copy of appraisal

to second lender in timely fashion


September 2009

Appraisal Validity Periods

Effective for case numbers assigned 1/1/2010

Appraisals valid on all appraisals for 120 days

Existing, proposed, and under construction

Previously 6 months on existing property

Previously 12 months on proposed and under

construction

NOTE: 120 Days is NOT 4 months


December 2009 Short Sales and Short Pay offs

Borrowers not eligible for FHA insured financing if pursued a short sale

3 years – treated like a foreclosure

May be eligible

Did not take advantage of declining market

New purchase is at reduced price for similar or superior property within a reasonable commuting distance

Were current on mortgage and all other installment debt for immediate preceding 12 months from sale


December 2009

Real Estate Settlement Procedures Act

FHA no longer limits origination fees except

Rehabilitation loan programs @ 1.5%

Home Equity Conversion Mortgage @ 2%

Lenders are expected to charge fair and reasonable fees

Any and all fees must be disclosed

Good-Faith-Estimate

Regulations relating to fees handled by R.E.S.P.A.

202 – 708 – 0502

Waiver of Requirements of 24 CFR

203.37a(b)(2) – January 2010 Property Flipping – Resale Within 90 days

Temporarily allows FHA insured financing if property

resold within 90 – days

Expires 1/31/2011

Forward mortgages only (not HECM)

Must be arms length, no identity of interest, seller actually holds title, no pattern of previous flipping, marketed openly and fairly

When sales price exceeds 20% or more over and above seller’s acquisition cost

Additional conditions apply - Discuss with lender


January 2010 Increase Of Upfront Premiums for FHA

Mortgage

Effective for case numbers issued on or after April 5, 2010

Purchase money and full credit qualifying refinance

Increased to 2.25%

Streamline refinances – all types

Increased to 2.25%

No change to annual/monthly premiums

Changes again in October 2010


September 2010

Changes to FHA Mortgage Insurance Preimiums

Effective for case numbers issued on or after October 4, 2010

Purchase money and all refinance transactions

Upfront - decreased

Annual/monthly - increased

Home Equity Conversion Mortgage

2% Upfront and 1.25% Annual/Monthly

Mortgage Insurance Premiums (Cont.)

Effective October 4, 2010

Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010

Mortgage Insurance Premiums (Cont.)

Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010


January 2010

Loss Mitigations For Imminent Default

Helps current FHA borrowers avoid foreclosure

Mortgage current or less than 30 days past due

Borrower experiencing significant reduction in

income or other hardship

Loss mitigation options

Forebearance

FHA Home Affordable Modification Program

FHA HAMP


March 2010

Appraisal Update and/or Completion Report

One time use only

Eligible intended user must be original user

Provides 30 day extension to original report

May provide up to 240 days for insuring


April 2010

Electronic Signatures on Third Party Documents

Electronic Signatures now acceptable

Except HUD REO contracts

Wet signatures required

Lenders reminded to employ same levels of care and due diligence


June 2010

Strengthening Risk Management

Eliminated approval of FHA loan correspondents

Effective May 20, 2010

Those already approved still approved until 12/31/10

Non-FHA approved originators now permitted to originate FHA insured mortgages

Third party originators

Sponsored relationship with FHA approved direct lender

Additional guidance to be provided in future Mortgagee Letters


August 2010

FHA Refinance of Borrowers in Negative Equity Position

Enhancement to existing Making Home Affordable Program

Allows borrowers current on their mortgage to qualify for an FHA insured mortgage

Participation by existing lien holders is voluntary

Requires consent of existing lien holder

Similar to a short sale transaction

See Mortgagee Letter for specific guidelines


August 2010 Combined Loan-to-Value Requirements For

Refinance Transactions

The combined FHA insured mortgage and any subordinate lien

may not exceed:

Applicable FHA loan-to-value ratios AND

Geographical maximum mortgage amount limits

Maximum combined loan-to-value limits are

97.75% rate and term refinance (no cash out)

115% refinance of borrowers in negative equity

125% FHA to FHA streamline refinance

85% Cash out refinance

Effective with Case Numbers Assigned on/after September 7, 2010


September 2010

Minimum Credit Scores & Loan-to-Value Ratios

Effective Case Numbers assigned

On or after October 4, 2010

Does not affect Title I, Hope for Homeowners,

Hawaiian Homelands, Indian Reservations,

Declining Neighborhoods – Section 223(e),

and Military Impact Areas of Georgia and New

York

Minimum Credit Scores and

Loan-to-Value Ratios – Continued

Maximum loan-to-value limits based on credit scores

Score of 580 or greater 97.75%

Scores between 500 to 579 90%

Scores less than 500 Not eligible

Disaster Relief Program

Score of 500 or greater 100%

Below 500 Not eligible

Borrowers in negative equity position

Refer to Mortgagee Letter 2010 – 23

Where to Get More Information

1-800-CALL - FHA (1 – 800 – 225 - 5342) A source for all FHA questions

Lenders and Consumers

www.hud.gov On-line resource for info about FHA and FHA

programs

On-line resource for other types of programs, forms, press releases, etc.

User friendly

www.fhaoutreach.gov/FHAFAQ

On-line resource to frequently asked questions

www.hud.gov

www.fhaoutreach.gov/FHAFAQ

The U.S. Department of Housing and Urban Development

would like to thank the

California Association of Mortgage Professionals

and

Oregon Association of Mortgage Professionals

and its’ members

for your interest in

FHA and FHA programs