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 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.

Do The Mortgage Rule Updates Want to Make your Brain Explode? More HARP

If This Just Doesn’t Want to Make Your Brain Explode…

Can you guess how many rule updates affected JUST the
origination side of the business from January 1st to December 31st,
2011?

Just guess!

Ok, I’ll tell you—it’s 259, or an average of 21 rule updates per month.  To get it down to the ridiculous, that’s 1
rule update for EVERY working day of the year.

Now, about the elephant in the room—HARP, or Home Affordable
Refinance Program. Fannie held a conference call and what’s clear to us is that
there are MORE questions than answers these days.

In fact, Fannie published an updated
FAQ for HARP and their DU Refi & DU Refi Plus loans.  Here are the new questions and answers
published as of December 20, 2011.  We
chose only the ones that affect loan officers and the processing of the loan.

Q. 23. (New) Does standard Selling
Guide
policy related to the 4506-T apply to Refi Plus and DU Refi Plus
transactions?

Standard Selling Guide policy related to the 4506-T applies to Refi Plus loans if the
payment is increasing more than 20% and to all DU Refi Plus loans since
borrower income must be verified for qualification purposes. It is not
applicable to Refi Plus loans when the payment is not increasing more than 20%
since verification of borrower income is not required.

Q 26. (Updated)  Why was the “reasonable ability to repay”
representation and warranty removed?

The “Reasonable Ability
to Repay” terminology has been removed from the DU Refi Plus and Refi Plus
Underwriting Requirements sections of the Guide because these sections already
describe the specific underwriting requirements that are applicable to each
transaction.

Under Refi Plus (manual underwriting) eligibility is based primarily on the payment history of the
existing mortgage and the borrower benefit provisions. Additionally, effective
with applications dated December 1, 2011, if a borrower’s payment increases
more than 20% then the borrower will have to be re-qualified. Under DU Refi
Plus, DU applies the standards for ensuring the borrower has a reasonable
ability to repay. For these reasons the lender is not responsible for meeting
additional “reasonable ability to repay” standards.

Q 59. (Updated) Even if no new
project review is required for a Refi Plus (manual underwriting) loan secured
by a condominium or cooperative, must the lender still confirm adequate
insurance coverage for the project or unit?

No confirmation of
insurance coverage is required for Refi Plus (manual underwriting). The
lender’s original project review would have included confirmation of the
required insurance coverage, and there are existing processes required by the
Servicing Guide to monitor and ensure such insurance coverage remains in force

Q 83. (Updated) If a loan is
originally submitted to DU, can it be converted to manual Refi Plus?

Yes. Loan casefiles
originally submitted to DU may be converted to a Refi Plus (manual) transaction
for any reason and without regard to the DU recommendation. In all cases, if
the lender is converting a loan from a DU Refi Plus to a Refi Plus (manual
underwriting) transaction, the lender must be the current servicer of the loan
and the loan must comply with all Refi Plus (manual underwriting) requirements.

Q 84. (Updated) For a loan to
be eligible for DU Refi Plus, the borrower(s) and subject property address on
the loan casefile must match an existing eligible Fannie Mae loan. Are there
any existing Fannie Mae loans that are not eligible to be refinanced using DU
Refi Plus?

Certain existing loans will not be identified by DU as eligible for DU Refi Plus. They
include, but are not limited to: loans purchased by Fannie Mae on or after June
1, 2009; loans currently subject to any outstanding repurchase request (see Q82
for related information); some loans that were subject to some form of
secondary-market credit enhancement (see Q56); and government mortgages.

Although these loans may not be eligible to be refinanced using DU Refi Plus, they may be eligible
for other Fannie Mae refinance options.

The last time we checked, there were about 30 questions, and now we are up to 100 even. The 5 listed  are the new and updated ones that affect loan
originators and processors.    We expect a bunch more as the program gets rolled out to everyone in March, 2012.  We will keep you updated on the new questions
as they are updated.

Home Affordable Refinance
FAQ’s 12-20-11

https://www.efanniemae.com/sf/mha/mharefi/pdf/refinancefaqs.pdf

More rule updates can be
found www.MortgageCurrentcy.com where you can give it a test drive for just $1

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!

Are FHA Loans Assumable? You Bet!

A great financing option that real estate agents need to know about ,if they are listing a home for sale, is if the home has an FHA mortgage that was originated after December 15, 1989.  Why?  Because the loan is assumable!  More Info and Mortgage Talking Points(tm) “FHA Assumptions=More Sales” can be found at www.MortgageCurrentcy.com 

Here are some of the rules:

Buyer must qualify based on credit–(Servicer may be more lenient about the score)

Loan Fees are lower–(Servicer will charge for processing–usually a flat fee)

Seller may pay buyer’s closing costs

Secondary financing and borrowed funds may be used by buyer (Must qualify for all payments)

Sellers will be released of liability

What’s prohibited:  If buyer purchasing to use as investment property or 2nd home (some exceptions heres), loan is NOT assumable

At the time the home is listed for sale, real estate agents should order an “FHA Assumption Package” from the company servicing the loan.  They will also be the ones processing the paperwork. Great info to share with real estate agents–especially on Face Book!