Filed under FHA news, Published Articles · Tagged: FHA lenders, FHA Secure, Hope for Homeowners, Reverse Mortgages
Community banks, thrift institutions, and credit unions seeking to serve mortgage customers with loans insured by the Federal Housing Administration (FHA) can qualify for FHA loan approval with minimal capital investment, according to author and mortgage expert Anna DeSimone. Operating as Supervised Correspondents, local lenders can offer FHA mortgage loans, including options such as Reverse Mortgages, FHA Secure, and Hope for Homeowners. Supervised correspondents maintain control of all aspects of the client relationship without the necessity of hiring FHA-certified personnel.
“FHA mortgage lending is no longer just a product option. For community-based institutions, it’s an imperative for helping to sustain our neighborhoods,” stated DeSimone, founder of Bankers Advisory and author of twelve books and numerous articles on the mortgage business. DeSimone, who also wrote the three-volume “Responsible Lending Series” on FHA mortgage lending, pointed out that banks seeking to become direct FHA mortgage lenders must invest in substantial training and have a Direct Endorsement underwriter on staff. But as she emphasized in a seminar attended by 80 community banks last March at the Boston Federal Reserve, the supervised correspondent option enables the banks to enter the market quickly and with minimal expense.
FHA mortgage lenders can look to specialists like Bankers Advisory for assistance with FHA licensing and initial steps which include structuring relationships for outsourced underwriting and private-label servicing. “Community bankers have done well in expanding residential mortgage lending to include affordable housing, soft seconds and mortgages sold to secondary market investors. But recent legislation, including the Housing and Economic Recovery Act and portions of the so-called ‘bailout bill’ are tied to FHA loans. Most small lenders are not familiar with the back-end obligations of FHA home lending, such as quality control compliance and reporting requirements,” explained DeSimone.
Bankers Advisory’s “Audit and Assessment Guide” has 80 pages of step-by-step instructions on submitting reports through the FHA’s mandatory online reporting system. The company also helps lenders adhere to HUD’s strict directives on quality control through QC plans and services that cover post-funding quality control, document re-verification, trend reports, risk monitoring and compliance.
About Bankers Advisory ( www.bankersadvisory.com ) Founded in 1986, Bankers Advisory has helped mortgage lenders throughout the United States achieve high standards of credit quality and employee proficiency through a full range of audit and consulting services, customized policy manuals, training, and workflow development. Bankers Advisory has an unparalleled reputation for excellence in the mortgage industry and among national and state banking agencies. The firm’s underwriting experts have audited more than 50,000 FHA mortgage files. Thousands of employees have been trained on Banker’s Advisory’s educational materials.
Filed under FHA FAQ, FHA news · Tagged: FHA insured mortgage, FHA mortgage insurance, FHA mortgage lender, second mortgage
FYI- If the borrower is presently delinquent on any federal debt (IE VA-guaranteed mortgage. HUD insured FHA loan, federal student loan, Small Business Administration loan, delinquent federal taxes, etc) or has a lien, including taxes, placed against his or her property for a debt owed to the United States, the borrower is not eligible until the delinquent account is brought current, paid or otherwise satisfied, or a satisfactory repayment plan is made between the borrower and the Federal agency owed and is verified in writing.
Tax liens may remain unpaid provided the lien holder subordinates the tax lien to the FHA insured mortgage loan. If any regular payments are made, they must be included in the qualifying ratios. Since the IRS routinely takes a second mortgage position without the necessity of independent documentation, eligibility for FHA mortgage insurance will not be jeopardized by outstanding IRS tax liens remaining on the property unless the FHA mortgage lender has information that the IRS has demanded a first mortgage position.
In a recent FHA Mortgagee Letter, the Federal Housing Administration makes moves to quickly curb a dishonest trend arising in the housing mortgage market that poses a risk to FHA, FHA-mortgage lenders and consequently to FHA’s ability to provide home financing to new homeowners. Recently, FHA and others in the mortgage industry have observed an increasing number of homeowners who have chosen to vacate their existing principal residence and purchase a new residence. This has been occurring as some homeowners, given the rising price of fuel, are relocating to homes nearer their employment, or are taking advantage of other real estate opportunities arising in the marketplace.
Due to FHA’s concern that some homebuyers in these transactions may attempt to provide misleading information regarding the rental income of the property being vacated to qualify for the new mortgage, FHA is instituting underwriting guidance designed to assure that the homebuyer can make payments on the full debt service of both mortgages. Consequently, beginning with case number assignments on or after the date of this Mortgagee Letter and until further notice, the underwriting analysis may not consider any rental income from the property being vacated except under circumstances described in this Mortgagee Letter. The exclusion of rental income from property being vacated is being instituted on a temporary basis while FHA further analyzes this situation to determine whether permanent measures may need to be taken. This will assure that a homeowner either has sufficient income to make both mortgage payments without any rental income or has an equity position not likely to result in defaulting on the mortgage on the property being vacated. In either case, this guidance is directed to preventing the practice known as “buy and bail” where the homebuyer purchases, for example, a more affordable dwelling with the intention to cease making payments on the previous mortgage. Although the property being vacated will not have a mortgage insured by FHA, surrounding properties may and, thus, FHA loan programs may be indirectly negatively affected should that property result in a foreclosure.
Rental income on the property being vacated, reduced by the appropriate vacancy factor as determined by the jurisdictional FHA Homeownership Center (see http://www.hud.gov/offices/hsg/sfh/ref/sfh2-21u.cfm) may be considered in the underwriting analysis under the following circumstances:
· Relocations: The homebuyer is relocating with a new employer, or being transferred by the current employer to an area not within reasonable and locally recognized commuting distance. A properly executed lease agreement (i.e., a lease signed by the homebuyer and the lessee) of at least one year’s duration after the loan is closed is required. FHA suggests that underwriters also obtain evidence of the security deposit and/or evidence the first month’s rent was paid to the homeowner.
· Sufficient Equity in Vacated Property: The homebuyer has a loan-to-value ratio of 75 percent or less, as determined by either a current (no more than six months old) residential appraisal or by comparing the unpaid principal balance to the original sales price of the property. The appraisal, in addition to using forms Fannie Mae1004/Freddie Mac 70, may be an exterior-only appraisal using form Fannie Mae/Freddie Mac 2055, and for condominium units, form Fannie Mae1075/Freddie Mac 466.
The guidance in this FHA Mortgagee Letter applies solely to a principal residence being vacated in favor of another principal residence. This Mortgagee Letter is not applicable to existing rental properties disclosed on the loan application and confirmed by tax returns (Schedule E of form IRS 1040). It is important to realize that if the property being vacated had a mortgage insured by FHA, eligibility for a second FHA home loans can only occur under the exemptions described in handbook HUD-4155.1 REV-5, paragraph 1-2.
According to HousingWire, the short admission yields volumes about the battering Paulson and other outgoing Bush administration officials have taken at the hands of lawmakers and fellow regulators behind closed doors as of late for failing to “do more” to help a growing group of homeowners that cannot afford their mortgage loans. FHA loans have been carrying too much of the mortgage load and it’s time that the conventional mortgage lenders offer more attractive home financing programs with refinance options and loan modifications.
On November 12, Paulson announced that the Treasury had ditched the asset-management portion of the TARP proposal, opting instead to focus on capital purchases where most needed to revitalized lending activity and to allow banking institutions the chance to earn their way out of the current financial crisis. “I will never apologize for changing an approach or strategy when the facts change,” Paulson told reporters in a question-and-answer session after the announcement at the time. “The most important thing we can do to mitigate the housing correction and reduce the number of foreclosures is to increase access to lower cost mortgage lending,” he said. “The actions we have taken to stabilize and strengthen Fannie Mae and Freddie Mac, and through them to increase the flow of mortgage credit, together with our bank capital program, are powerful actions to promote FHA mortgage lending.” Read more at US Government Waffling on Mortgage Loan Relief?
Filed under FHA news, Published Articles · Tagged: FHA loan, HECM
While the 4.3% growth in home equity conversion loan volume isn’t close to what the industry has seen previously, with loan limits raised and fees capped at $6,000 people are expecting a surge of FHA loan applications. “One reason for the lower reverse mortgage volume was the uncertainty over the FHA loan limits,” said Peter Bell, president of NRMLA, the nonprofit trade group based in Washington, D.C. “There were so many people waiting on the sidelines to see what would happen. Why would you want to close a loan a few weeks ago when you could borrow less and get a higher mortgage rate?”
While the industry has seen the HECM loan limits increase to $417,000, Kelly suggests that mortgage lenders vow to push vigorously to lift the ceiling to $625,500 as soon as possible, especially given the exit of all jumbo reverse mortgage products. Raising the FHA loan limits to $417K helps people in certain areas of the country, but in places like California the new mortgage loan limits don’t provide much more benefit.
An interesting part of the from the story is about FHA Commissioner Brian Montgomery’s mother and reverse mortgages, which Kelly describes below: Commissioner Brian Montgomery, who will leave his post when the current administration exits in January, said there is a bright future ahead for reverse mortgage loans, despite the current credit crunch. He has tried to convince his mother to take out a reverse, but she, like many seniors, has been suspicious of the concept. “I told her that I was her son and would always be looking out for her best interests,” Montgomery said. “I also told her that I administered the program for the United States of America and thought it was a pretty good idea.” FHA mortgage lending continues to evolve rapidly, so check back for the latest news and updates.