PHILADELPHIA HOME OWNERSHIP CENTER WELCOME TO FHA’S LENDER UPDATE August 4, 2009
It’s Our Anniversary! Is FHA getting bailed out by the taxpayers? No.
About this presentation… If you find a discrepancy between the presentation and mortgagee letters, handbooks, etc., the official policies rule. Everything is subject to change. All of the links on the PowerPoint work, but you have to be in Slide Show view. If you want an e-copy of the presentation, send an e-mail to Philip.Caulfield@hud.gov
About this presentation… ML 09-14. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm New on-line versions of basic credit underwriting and loan processing handbooks. As of 05/10/09, these handbooks should be used as the official reference source.
About this presentation… 4155.1 Mortgage Credit Analysis for Mortgage Insurance replaces Handbook 4155.1 REV-5 Mortgage Credit Analysis for Mortgage Insurance (10/20/03). Incorporates mortgagee letters issued through 09-09 (03/23/09). No new material or policy.
About this presentation… 4155.2 Lender’s Guide to the Single Family Mortgage Insurance Processreplaces:- 4000.2 REV-3 Mortgagees Handbook – Application Through Insurance (05/20/04).- 4000.4 REV-1 CHG 2 Single Family Direct Endorsement Process (07/13/94).- 4165.1 REV-2 Endorsement for Insurance for Home Mortgage Programs (04/06/05).
About this presentation… New handbooks may be found at http://www.fhaoutreach.gov/FHAHandbook/prod/index.asp Look for handbook references throughout this presentation like http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.3.A.1.d
About this presentation… On-line handbooks were taken down from the site on fha.gov on July 9 for updating. As of August 4 they were still not up again. Until they return, pdf. versions of the handbooks are available at http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.1/index.cfm and http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.2/index.cfm
FHA Today • FHA’s programs are authorized by laws passed by Congress and signed by the President. • The Economic Growth Act of 2008 (The Stimulus Bill) provided temporary, higher mortgage limits. • The Housing and Recovery Act of 2008 (HERA) significantly changed FHA down payments, MIP, and LTV criteria, and introduced HOPE for Homeowners program.
FHA Today The Emergency Economic Stabilization Act of 2008 (EESA) revised some provisions of H4H. The American Recovery and Revitalization Act (ARRA) provided temporary higher income limits. The Helping Families Save Their Homes Act of 2009 revised lender approval requirements, expanded loss mitigation tools, and revised H4H.
FHA Today FHA’s book of business is booming
FHA Today FHA-Insured Loans in the United States By Calendar Year Year Total Purchase Refi Non-FHA HECM to FHA 2005522,884 332,778 141,716 33,936 48,390 2006501,587 302,690 113,383 71,987 85,514 2007580,813 293,444 179,289 138,677 108,080 2008 1,467,305 810,592 541,735 431,149 114,978 2009* 957,149 414,789 482,992 240,225 59,368 * Through June 30
FHA Business Update FHA-Insured Loans in Michigan By Calendar Year Year Total Purchase Refi Non-FHA HECM to FHA 200520,865 11,751 7,310 2,228 1,804 200619,635 10,163 7,282 4,972 2,190 200723,654 9,668 10,870 7,894 3,116 2008 51,149 26,561 21,660 14,704 2,928 2009 * 29,737 11,771 16,833 5,060 1,133 * Through 6/30
Who Can Originate an FHA Loan? Not just anyone can make an FHA loan. You need our approval.
Who Can Originate an FHA Loan? Two Types of Lenders Supervised Lenders. Depository institutions supervised by FDIC or FCUA (banks and credit unions). Non-Supervised Lenders. Non-depository institutions primarily engaged in the mortgage business (mortgage companies).
Who Can Originate an FHA Loan? Two Categories of Originating Lenders May be either supervised or non-supervised. Loan Correspondents (“Mini Eagle”). Primary activity is the origination of mortgages. Loans must be underwritten by an FHA-approved sponsor lender. Mortgagees (“Full Eagle”). May originate and underwrite its own loans, and underwrite those originated by loan correspondents it sponsors.
Who Can Originate an FHA Loan? Principal/Authorized Agent Relationships Relationships between two mortgagees (“Full Eagles”). Loan must close in the name of the principal. Otherwise, principal and authorized agent may share duties and fees based on mutual agreement.
Who Can Originate an FHA Loan? Where can a lender originate FHA loans? Each branch or home office has a Lending Area in which it may originate loans. Lending areas include multiple states. Non-supervised lenders must be licensed in the states in which they do business. http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.12.E.2
Who Can Originate an FHA Loan? Here’s some examples… A branch office located in MI may originate loans in IL, IN, MI, OH A branch office located in OH may originate loans in IN, KY, MI, NY, OH, PA, WV.
Who Can Originate an FHA Loan? Special provision for Streamline Refinance loans. Any mortgagee (not loan correspondent) with Unconditional Direct Endorsement authority may originate a Streamline Refinance anywhere in the U.S. http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-1.6.C.1.b
Who Can Originate an FHA Loan? Do the lending areas apply to underwriting and other processing functions? No. Lending areas apply to loan origination only. Lenders are free to consolidate underwriting and other business functions in the home or branch office of their choosing. http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/index.cfm
Who Can Originate an FHA Loan? How can a lender originate loans nationally? By opening and registering enough branches to cover all states. A minimum of 13 branches would be required. By establishing a Direct Lending branch using the internet, direct mail or telemarketing originations. ML 05-40. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2005ml.cfm
Who Can Originate an FHA Loan? Direct Lending Branches Must have separate manager and staff located in a single geographic location. Non-Supervised lenders must be licensed in all states in which they will do business. Branch may only originate loans through internet, direct mail or telemarketing. May not order case numbers for other branches.
Who Can Originate an FHA Loan? Loan origination services may be provided only by FHA-approved loan correspondents or FHA-approved mortgagees. Non-approved brokers cannot perform loan origination services such as taking applications. http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.1.A.3.a
Who Can Originate an FHA Loan? Services That Must Be Provided By An FHA-Approved lender Taking loan applications and ordering appraisals. Providing required disclosures. Collecting financial and other documentation http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.1.A.3.c
Who Can Originate an FHA Loan? Services That May be Provided By Non-Approved Brokers Educating prospective borrowers in the home buying and financing process. The fee charged must be paid from the mortgagor's own available assets and must be disclosed on the HUD-1 at closing. http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.1.A.3.d
Who Can Originate an FHA Loan? Under no circumstances may a borrower be charged a fee by a non-approved broker that is not commensurate with the amount normally charged for similar services. The payment to an unapproved broker for duplicated services amounts to an unearned fee in violation of Section 8(b) of RESPA. http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.1.A.3.b
Who Can Originate an FHA Loan? Helping Families Save Their Homes Act Signed by President Obama on 05/21/09. Contains a number of provisions aimed at increasing the level of FHA’s review of participating lenders and their principals. Authorizes FHA to assess civil money penalties against lenders who are not FHA-approved, but who nevertheless participate in FHA programs.
Who Can Originate an FHA Loan? • Not all lenders participate in all FHA programs. • Lenders may not establish lower eligibility and underwriting criteria than FHA. • Lenders may establish higher eligibility and underwriting criteria than FHA. • Lenders may establish different criteria for loans they originate themselves, and loans they sponsor or purchase.
Who Can Originate an FHA Loan? Lender Approval Resources Lender Approval FHA Connection User Guide. https://entp.hud.gov/pdf/mp_lndapp.pdf Lender Approval FAQs. https://entp.hud.gov/clas\faq-la.cfm How To Become An Approved Lender.http://www.hud.gov/offices/hsg/sfh/lender/lendappr.cfm
Who Can Originate an FHA Loan? What Does FHA Expect Of Its Lenders? FHA expects each mortgagee to exercise the same level of care in originating, underwriting and servicing an FHA-insured mortgage as it would for a loan in which the mortgagee would be entirely dependent on the property as security to protect its investment.
FHA Mortgage Limits Lately, it’s been a roller coaster ride….
FHA Mortgage Limits Maximum FHA mortgage limits are established for every county in the United States and territories. Separate limits established for 1, 2, 3 and 4 unit properties. The FHA-insured mortgage, not including any UFMIP financed into the loan, may not exceed these maximums.
FHA Mortgage Limits Under previous legislation, mortgage limits based on lesser of 95% of area median or 87% of GSE conforming loan limit, but not less than 48% of GSE conforming loan limit. ML 08-02. Effective 1/1/08. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2008ml.cfm
FHA Mortgage Limits • Temporary mortgage limits passed under provisions of the Economic Growth Act of 2008 (The Stimulus Bill). • Mortgage limits based on lesser of 125% of area median or 175% of conforming loan limit, but not less than 65% of conforming loan limit. • ML 08-06. Effective 3/6/08 – 12/31/2008. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2008ml.cfm