Just So There’s No Misunderstanding–Mortgage Rules & FAQ’s

Title:  Just So There’s No Misunderstanding

By: Karen Deis, Publisher, MortgageCurrentcy.com

Before I get started with the updates for December, what I’ve noticed over the last few months is that Fannie, Freddie, FHA, VA and USDA have issued quite a few clarifications and updates in the form of FAQ’s and enhancements to cover the “grey areas,” so underwriters and LO’s have a clearer picture of exactly what a rule change means in plain language (just so there is no misunderstanding).

You’ll find three of them here this month from Fannie, including the new FAQ started on 11-19-12 where they answer DU 9.0 questions. Fannie has also created a comparison chart between DU 8.3 and DU 9.0 to illustrate the differences between the two.  You’ll find it in this issue.

If there is one article I would recommend that you read this month, it’s the one where Fannie makes some big underwriting clarifications in Announcement SEL 2012-13.

Here are some of the highlights, because these affect your files in process right now.

  • If you are refinancing a loan, the property taxes are 60 days past due and you are paying the back taxes by including them in the loan amount, it triggers a mandatory escrow account.
  • Fannie went on to talk about “their indication of borrowed funds.” The trigger here is that if there is a large deposit that exceeds 25% of total monthly qualifying income, additional backup documentation is needed.
  • Retirement funds used for cash reserves may be discounted by up to 40%, depending on the volatility of the type of retirement account.
  • Additionally Fannie indicated that you no longer have to get a letter or back-up documents that say the collection poses no threat to their first lien position.  This will make it easier on you and your borrowers.
  • You’ll find five more updates in this announcement, including the treatment of capital gains or losses – you no longer have to count them, even if they are reoccurring. And Fannie says you no longer have to count the Treatment of Capital losses as a liability (or income), even if the losses are reoccurring.

Let’s talk about the Consumer Finance Protection Bureau.  The latest warning is their findings when it comes to deceptive advertising practices.  They are relying on Reg Z advertising rules, which cover mortgage companies, and the Mortgage Acts & Practices rules, which apply not only to mortgage companies, but to real estate agents and builders as well.

My personal observation is that CFPB is asking their examiners to review ALL types of advertising and then to create a section in their examination manual for everyone to follow.  That’s why, for right now, they are sending out warning letters instead of fines.

MAP has been around since 2011, and you’ll find attached to this newsletter the article and Mortgage Talking Points™ article for your real estate agents and builders and what they need to do to follow the rules. In addition, you’ll find a REG Z video training course, with examples of mortgage ads that don’t meet federal rules.

Other updates this month

  • A joint venture between FHFA and CFPB to monitor the mortgage market
  • HARP program extension
  • Updates to the Fannie Appraisal messaging system
  • No increase in loan amounts for Fannie/Freddie
  • HUD and NMLS team up to collect data when you order a case number
  • VA updates to form 26-8937
  • FHA Extends Anti-Flipping Rules

In recapping this year, we wrote 114 updates – or about 10 per month.  In addition, we posted 136 most frequently asked questions that we hoped would help you get more of your loans approved.  Oh, and I also wanted to mention the “marketing component” of your subscription to MC – the automatic Tweets, Facebook posts, Mortgage Talking Points™ and charts and checklists.  www.MortgageCurrentcy.com

I hope that 2013 is your best year ever in the mortgage industry – and remember, getting a loan approved and closed these days… is rocket science.

What Do NMLS, FHA Condos, HARP & USDA have in common?

Title:  What do NMLS, FHA Condos, HARP and USDA have in common? 

By: Karen Deis, Publisher, MortgageCurrentcy.com

What do NMLS, FHA Condos, HARP and USDA have in common?

All of them have had rule changes within the last 30 days!

So, let’s start by talking about what’s supposed to happen when NMLS updates their website on October 22…

They are updating their “credit flags” and “credit scoring thresholds” within the reporting features.  So what does this mean to you? When it’s time to renew your license,  if you have at least one derogatory credit issue or change from the previous year, or you have a decrease in your credit score, your state’s licensing board will be notified and they will determine whether or not your license will be renewed.

They have also added some additional questions when you reapply. The most significant one is where they ask you if you have had any local, state or federal displinary actions taken against you.  If you answer yes, you must explain what it is – and again, the state will decided whether to renew your license.

One thing you can do right now is check your credit, and remember that NMLS uses Vantage scores, not Fico scores.  SO within this article, we’ve include a link where you can order your Vantage credit score.

Next, Fannie and Freddie have made it easier for consumers to qualify for HARP  Refi’s.  You’ll find two separate articles, but they are pretty much in sync with each other now—including the biggie that if the new monthly payment changes less than 20% over the old monthly payment, they are reducing the documentation for income and assets.

For example, if a borrower has at least 12 months’ PITI in cash reserves, there is no need to verify income.

They have also made it easier to remove a borrower. And if you are refi’ng a rental property, they have eliminated Form 1007.

Here’s what you need to know – the DU System has not yet been updated, and underwriters have been advised to disregard DU messages and use these new requirements.

So, it’s important that YOU know what the changes are, just in case the underwriter doesn’t know what has been updated or is asking for documents that may appear on the findings, but are not needed due to these changes.

Oh, and I just wanted to mention again that you’ll find a couple of mortgage talking points for consumers about this topic.

Let’s switch to FHA, where they have changed the Condo approval process, making it easier to get them approved.

The biggest changes are the homeowner’s association dues and investor ownership percentages.  Those have been real deal-killers in the past.

And if you’ve wondered what the old condo approval rules were—and how they have changed—we not only created a handy chart for you to refer to, but also provided a Mortgage Talking PointsTM for your real estate agents.

One last bit of news from USDA…last month, they made an announcement that they would be eliminating some cities and changing income limits on others.

How they make that determination is based upon census information, but they found there was a flaw in the data because the 2010 census no longer asked for income information, which was the method used by Rural Housing to determine eligibility.  They claim they will have it all worked out by the end of March, 2013.  Makes me wonder how they plan to do THAT!

One of the reasons I write about the rules and regulations and interpret them in plain language for you, is that I realize that getting a loan approved and closed these days, is rocket science!

(Read these articles for just $1. www.MortgageCurrentcy.com)

What you don’t know–can cost you a commission!

What You Don’t Know—Can Cost You a Commission!

By: Karen Deis, Publisher, MortgageCurrentcy.com

Before I get started on the mortgage rule and regulation updates from the last 30 days, I wanted to mention that there is a free article for you this month about the Consumer Finance Protection Bureau’s proposed no point, no fee rules, with an example of how it would work in real life!  http://www.mortgagecurrentcy.com/free-article-list.php

Okay, so a couple of FHA updates for you.

FHA has a little-known area in their appraisal section in regard to what they call unique properties.  HUD has given guidelines when it comes to log homes, extra small homes, lower than normal ceiling heights, and so on.

If a property has excess land, you’ll find guidelines on how to get an FHA loan.  Also covered are commercial use of property and homes that have been moved to a new foundation.  You’ll find a Mortgage Talking Points ™article to email and share with your real estate agents with all the details.

There is a new HUD Mortgagee letter regarding documentation required to verify social security income.  Basically, they are now in line with Fannie and Freddie that if the award letter has no expiration date, the lender is to consider that the income is likely to continue.  This is great news for everyone, and loan officers and Underwriters finally have something to cover their backsides with specific documentations.  Keep this 12-15 Mortgagee Letter handy until they get the Handbook updated.

Oh, one last thing – it really doesn’t need an article written about it, but is important nevertheless – FHA updated their Total Scorecard Users Guide.  It’s been updated on the website, including the video training class called FHA Total Score Card – 8 Deal Killers.  If you are a subscriber, it’s included.  If not, you can access it for $9. http://www.mortgagecurrentcy.com/video_training/course_list.php  

Now, on to a big announcement for some of you in high-cost areas.  VA has increased quite a few loan limits, so take advantage!  Comb those “VA jumbo” past contacts and see if there are any Veterans you can help out with purchases and refinances. The higher amounts are for purchase contracts and refis between August 6 and December 31, 2012. 

If there is one article that you need to read in this issue, it’s Fannie’s announcement 2012-07 with a ton of updates that will go into effect with the release of DU 9.0 on October 20, 2012.

The biggest change here:  FNMA is retiring the Comprehensive Risk Assessment Worksheet that it created years ago to assist lenders in assessing risk on a manually underwritten loan.  Now FNMA is moving many of these tips and risk awareness/parameters to their Eligibility Matrix, which include DTI and minimum credit score flexibility restrictions.

You’ll also want to read the latest HARP 2.0 FAQ’s that came out on August 16.  They did not highlight the changes in bold this time around, so we had to go back to the previous one to find out what was changed and what was added.  There were a total of 5 updates.

One of the questions has to do with subordinated financing, which will be updated when DU 9.0 is live on Oct 20th.  The other biggie has to do with reps and warranties – which is a huge gift Fannie is giving to lenders and underwriters.

And, if you are doing Rural Housing loans, we sent an email to subscribers a couple of weeks ago that the money for refi’s is all gone for the fiscal year ending October 1st.

And if you have a purchase transaction sitting there waiting for a loan commitment for USDA, it has to have a conditional commitment by Sept 30 or new annual and guarantee fees go into effect.  If the files aren’t committed by then, you must redisclose.

Call your local USDA office and find out their backlog. You may also want to warn your clients and real estate agents that there is a good possibility that they may have to pay a higher fee.

One last thing – we have posted the latest NMLS list of licensing and continuing ed requirements, by state.  Check out the document and see what’s required in your state.

Remember, “Getting a loan approved and closed IS rocket science.” You can read all the articles for just $1.  Click Here to Access. http://www.mortgagecurrentcy.com/subscription_options.php

 

What’s with All the HUD Emails?

What’s With All the HUD Emails?

Karen Deis, Publisher, www.MortgageCurrentcy.com

I don’t know what’s happening at FHA lately, but they seem to be back-pedaling A LOT lately, and worse yet, modifying some of the mortgagee letters by sending an “email” instead of a “formal notice.”

Here are a couple of things HUD has updated that will affect your origination business right now.

First, FHA has delayed the $1,000 collection, disputed account, identity theft rule (ML 2012-3) from last month until July 1st (which means Case Numbers issued after that July 1st date—not the loan app date). Go through your files and search for the deals that you killed because of this rule—and get them closed. What we expect is a modified version of this rule down the road. So stay tuned.

Another email from HUD clarified that reducing the term of a mortgage on a streamline refi will also meet the net tangible benefit test. The big deal here is that previously it did not apply to streamlines, and now it does.

So, in yet another email, HUD gave step-by-step details on how to cancel case numbers on streamline refis and special instructions for streamlines that require an appraisal. HUD has updated the streamline refi worksheet that you should have started to use on April 6, and an updated FHA TOTAL Scorecard Guide came out on March 15.

Okay, enough about FHA and on to HARP 2.0. Fannie just updated their FAQ on March 15 and updated five of the questions. The biggie here is the addition of question 59, where Fannie says you can add a non-occupant borrower to the refi plus and DU refi plus loans. What are some of the reasons you would want to do this? One reason would be that on a manually underwritten loan, where the payment increases more than 20%, you might need additional income to qualify. Another reason would be to add a child, spouse, brother, or sister who has limited credit to help them establish a mortgage credit history.

The other questions that were updated are: Can you refi if the loan is in a trial modification period?

Does a DU refi plus loan for a property located in a condo project, have to have a condo project review?

How do you use DU to find the standardized address if DU gives you a property mismatch warning?

Which types of transactions are eligible for a DU Refi Plus field work waiver? By knowing which types of loans qualify for waivers—and there are five types—you will not only save your borrowers the appraisal fee, but you’ll be their mortgage hero.

In this issue, you’ll find the very first ever Mortgage Talking Points for consumers: What You Need to Know about HARP: Home Affordable Refinance Program. (By the way, there are a couple of training classes on the http://www.mortgagecurrentcy.com.) This article makes it easy for consumers to understand these different topics: • Determining if your home qualifies • What you will need to apply • What is the “unknown” • What are the benefits. So how can you use it? Facebook post, blog about it, an email and snail mail.

In this issue, you’ll find a couple more Mortgage Talking Points for your real estate agents. The first one is called Manufactured Housing: Quick FHA Financing Facts. There are certain areas of the country where you’ll find manufactured housing, and FHA will finance these types of homes if they meet the 11 conditions. Real estate agents need to know this if they are listing this type of home.

The second is called Mortgage Credit Certifications: A Blast from the Past. Freddie updated how they will use the tax credit to help borrowers qualify for a higher loan amount. So if you are in an area where it’s offered, it’s another way to get the word out on how it works.

And to wrap up what you need to know this month, Freddie has renamed chapter 26 from “Cash and Other Equity” to “Borrower Funds.” The big change here is that cash-out proceeds from a refi cannot be used as cash reserves on Freddie loans.

So, why read Mortgage Currentcy?

Because getting a loan approved these days IS rocket science.

Free H.A.R.P 2.0 Class – All Hype? Or a Big Help?

So, I asked a bunch of Loan Officers to post their HARP questions on www.facebook.com/mortgagecurrencty and there were so many, that I ended up doing a free class with a HARP expert–who has first-hand street creds because he also originates these types of loans.  Here’s a few of the things that you’ll learn”

  • Overview of HARP
  • The differences between “current” and “new” servicers
  • Fannie and Freddie differences
  • Qualifying Quirks
  • Private Mortgage Insurance
  • Manual vs. Automated Underwriting
  • Non-owner occupied rules
  • Subordinated Financing rules
  • Solicitation Rules
  • http://www.mortgagecurrentcy.com/videoupdates.php

Did I mention that it’s free?

Karen Deis

HVCC Morphs Into Appraiser Independence

HVCC Morphs into Appraiser Independence

Karen Deis. Publisher, www.Mortgage Currentcy.com

The new Appraiser Independence rule and the sunset of HVCC doesn’t change a thing. There are some publications out there stating that the Interim Rule doesn’t prohibit production staff from ordering, paying for, or participating in the appraisal process directly with appraisers – but we’re here to tell you differently. The link to the Federal Reserve gives you access to the actual Federal Register – it states that Lenders are required to ensure Appraiser Independence from production staff – essentially continuing the HVCC rules regarding ordering, payment, & process. Mortgage Brokers, LO’s, & other production staff are prohibited from selecting, influencing, paying, or having substantive communications with appraisers.

Portability – Reps & Warrants are still required for use of another Lender’s appraisal. Since this is now Federal Law and all Lenders will now be adhering to the Appraiser Independence Requirements, the portability should become easier. What was the problem before? Not all Lenders were selling to Fannie and Freddie and therefore did not need to comply with HVCC – since no one could ever guarantee the compliance across the board, the portability of appraisals was just not happening. If you noticed, there was never an issue with appraisal portability for Government Loans – that’s because ALL Lenders played by the same rules with clear guidance from HUD.

Fannie (SEL 2010-14) and Freddie (2010-23) issued their own interpretations—which are basically the same, HOWEVER, Freddie goes into much more detail—with added instructions on how appraisers are supposed to appraisal REO’s and Short Sales. Fannie’s interpretation leaves a lot to be desired! Can you say buy-backs anyone?

Realtors & Builders are not prohibited from having contact with or providing information to the appraiser – they are however prohibited from inappropriate or illegal behavior – coercion, extortion, collusion, compensation, inducement, intimidation, bribery, etc.

Interim Final Rule – the rule is out for comment for 60 days…a few tweaks are likely, but this was developed with all the HVCC problems in mind and all the players having input – I do not expect much will change.

Fannie (and Freddie) Controlled By AllRegs???

So, Im in a fight with Fannie–who sicked their lawyers on me for posting Fannie’s Announcements and Lender Letters on www.MortgageCurrentcy.com website.

Never mind that Fannie is a quasi-goverment agency and the info should be free to anyone (Freedom of Informatioin Act anyone?)

Never mind that when you do a Google search that there are thousands of links directly to Fannie Announcements. (okay, tens of thousands)

Never mind that Mortgage Currentcy shows up first on SEO when “mortgage Rules Fannie” is searched. (and AllRegs does not.)

So, here’s what shows up on Fannie’s website:

“The Fannie Mae Single Family Guides (the “Guides”) are posted on the AllRegs® web site of Mortgage Resource Center, Inc. (“MRC”), which posts the Guides under license from and with the express permission of Fannie Mae. MRC is the exclusive third-party electronic publisher of the Guides. Fannie Mae designates the Guides as found on the AllRegs® web site as authoritative, whether the user accesses the AllRegs® web site using the link from eFannieMae.com or by its own subscription to the AllRegs® web site. Notwithstanding this designation, Fannie Mae makes no representation or warranty regarding availability, features or functionality of the AllRegs web site.http://www.allregs.com/tpl/Main.aspx

What the hell? How is it that AllRegs has control over Fannie (and Freddie) content? Could this be one of the causes of the mortgage crisis…that there is a “gatekeeper” for the mortgage rules? And no one can find them unless you subscribe to AllRegs?

Oh, by the way, AllRegs had Freddie lawyers call me too! Wonder how they are going to monitor the tens of thousands of links to their lender letters and announcements?

Am I being singled out? You betcha!

Easy Way to Keep Track of Lender Overlays

Let’s say you do business with 5 or 6 lenders. You (or your compliance department) get email updates. Maybe you get them one at a time. Maybe you get 10 changes at one time. An easy way to keep track of all lenders, all at one time is by subscribing to www.LendingArt.com. It’s free and when you register, you can pick and choose which lenders you want updates from. It’s just that easy.