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Kentucky Housing Corporation

August 2010 Regional Training FHA Mortgagees and TPO 1/TPO 2. Kentucky Housing Corporation. Overview. Upcoming Changes to KHC Lender Structure/Compensation Interest Rate Structure & Fees Closing/Post Closing. Future Changes January 1, 2011. Lender Structures Lender Compensation

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Kentucky Housing Corporation

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  1. August 2010 Regional Training FHA Mortgagees and TPO 1/TPO 2 Kentucky Housing Corporation

  2. Overview Upcoming Changes to KHC Lender Structure/Compensation Interest Rate Structure & Fees Closing/Post Closing

  3. Future ChangesJanuary 1, 2011 • Lender Structures • Lender Compensation • Urban vs. Rural Designations • KHC Fees • Other Allowable Fees • Post Closing Due Dates

  4. What’s Driving the Change? • FHA Reform: Mortgagee Letter 2010-20 • Federal Financial Reform • KHC desire to streamline compensation across the state • KHC’s new relationship with Ginnie Mae • MERS

  5. FHA Reform: Strengthening Risk Management

  6. Mortgagee Letter 2010-20 Increase Net Worth requirements $1,000,000 as of May 20, 2011 KHC’s effective date is January 1, 2011 20% Liquid Assets Eliminates Loan Correspondents Introduction of Third Party Originators Existing Approval ends 12/31/2010

  7. Third Party Originators • As of January 1, 2011, may no longer have access to FHA Connection. • Can still participate in FHA programs through sponsorship by an FHA approved Direct Endorsement Mortgagee (KHC). • Any loans must close in the name of the sponsoring underwriting mortgagee.

  8. Mortgagee Letter 2010-20 Changes to Principal-Authorized Agent Relationships with Approved Mortgagees The Principal must originate the loan. The Authorized Agent must Underwrite the loan. The loan may close in either party’s name & either party may submit for insurance.

  9. Loan Performance • FHA will provide loan performance data in Neighborhood Watch for all loans originated via a sponsored Third Party Originator relationship. • Compare Ratio with HUD

  10. What’s a Compare Ratio? • The percentage of originations which are seriously delinquent or were claim terminated divided by the percent of originations which are seriously delinquent or were claim terminated for the selected geographic area.

  11. Compare Ratio • KHC lenders must maintain a Compare Ratio with FHA of 120% or less. • If it is between 120-150%, KHC will review for mitigating factors.

  12. New KHC Lender Partnerships FHA Mortgagee Lenders and Third Party Originators

  13. FHA Mortgagee Lenders Originate Process Credit underwrite FHA/VA If KHC Delegated, will underwrite all loans Close KHC loans in Mortgagee’s name Register & Transfer loan in MERS Obtain insuring document MIC/Loan Guaranty Certificate/Loan Note Guaranty

  14. FHA Mortgagee Lender Agreement Changes Increased Net Worth & Underwriting Requirement Did away with SRP & YSP language Everything is Origination Charge Business days vs. Calendar days Requirements for Ginnie Mae and MERS Delivery Fee paid on a sliding scale Consistent Lender Compensation

  15. Documentation RequirementsFHA Mortgagee Audited Financials Errors & Omissions: $300,000 Compare Ratio with HUD Will be checked by KHC Power of Attorney Registration with KY Department of Financial Institutions Licensing with the KY Secretary of State

  16. Third Party Originators Option 1 Originates, processes, and closesin KHC’s name TPO-1 MUST be in compliance with MDIA, RESPA, etc. KHC will provide MIN number at approval. MUST use KHC’S MIN number! KHC underwrites and insures.

  17. Third Party Originators Option 2 Originates and processes KHC loans. KHC provides TIL, underwrites, closes and insures. **Same as current Level II Lenders**

  18. Third Party Originator Agreements Option 1 or 2?? Net Worth & Closing Experience TPO-1: $250,000 w/repurchase clause TPO-2: $63,000 Eliminates SRP & YSP language Origination Charge Business days vs. Calendar days Delivery Fee paid on a sliding scale Consistent Lender Compensation

  19. Documentation RequirementsTPO Option 1 Audited Financials Errors & Omissions or Bond $300,000 E&O or $250,000 Bond Compare Ratio with HUD Will be checked by KHC Registration with KY Department of Financial Institutions Licensing with the KY Secretary of State

  20. Documentation RequirementsTPO Option 2 Compiled Financial Statements Errors & Omissions or Bond $300,000 E&O or $50,000 Bond Compare Ratio with HUD Will be checked by KHC Registration with KY Department of Financial Institutions Licensing with the KY Secretary of State

  21. Lender AgreementsFor All Partnerships Emailed by September 1, 2010 Original executed lender agreement along with required documentation due back by October 20, 2010. To insure no lapse in KHC product availability be sure to return in a timely manner Is your contact information correct? Agreements effective January 1, 2011

  22. KHC Lender Compensation *Beginning with reservations on or after January 1, 2011. Must Comply with State & Federal Laws

  23. KHC Compensation 2.5% Origination Charge: Based on Total Loan Amount Statewide KHC Credit: .5%credit on Regular Rate Borrower’s will pay 2% Adjusted Origination Charge for Regular Rate. 2.5% credit on Zero Point Rate

  24. FHA Mortgagee CompensationMaximum of 2.5% plus $775 Paid at Closing: • 2% of total loan • $425 Underwriting Fee: • On FHA • On all loans for KHC Delegated Lender • Processing Fee: • Up to $350 • Charged to the borrower or seller Paid at File Completion: • Delivery Fee: up to .50% • Paid upon delivery of a fully completed file • Post closing/legal items • Paid on a sliding scale depending on time to complete

  25. KHC Fees Charged to Lender TPO Option 1 • .25% Insuring Fee • Based on Total Loan Amount • Paid from Lender Compensation TPO Option 2 • 1% Closing/Insuring • .25% Insuring Fee • .75% Closing Fee • Based on Total Loan Amount • Paid from Lender Compensation

  26. TPO Option 1 CompensationMaximum of 2.25% plus $350 Paid at Closing: • 1.75 % of total loan • Processing Fee: • Up to $350 • Charged to the borrower or seller. Paid at File Completion: • Delivery Fee: up to .50% • Paid upon delivery of a fully completed file • Post closing/legal items • Paid on a sliding scale depending on time to complete

  27. TPO Option 2 CompensationMaximum of 1.50% plus $350 Paid at Closing: • 1. 25 % of total loan • Processing Fee: • Up to $350 • Charged to the borrower or seller. Paid at File Completion: • Delivery Fee: up to .25% • Paid upon delivery of a fully completed file • Post closing/legal items • Paid on a sliding scale depending on time to complete

  28. KHC Fees & Compensation on the GFE

  29. Block 1, “Our Origination Charge” Origination charge: 2.5% of Total Loan Amount Regardless of County Underwriting Fee: $425 Processing Fee: Up to $350

  30. Block 1, “Our Origination Charge” Courier Fee, if applicable DU/LP fee, if applicable Affiliate Business Relationships (i.e. title companies) Reservation extension fee, if applicable Considered a change circumstance **Special Note:Fee Itemization Sheet must be included in order to break down Block 1.

  31. Block 2, “Your credit or charge (points) for the specific interest rate chosen” “You receive a credit of $____ for the interest rate of____%. The credit reduces your settlement charges.” Regular Rate .50% Credit Zero Point Rate 2.5% Credit

  32. Failure to correctly disclose lender compensation could result in forfeitureof income.

  33. FHA Mortgagee and TPO-1/TPO-2 Regular Rate GFE Example

  34. 2.5% + Processing, UW & admin fees. .5% Credit

  35. FHA Mortgagee And TPO-1/TPO-2 Regular Rate HUD-1 Example

  36. FHA Mortgagee And TPO-1/TPO-2 Zero Point Rate GFE Example

  37. 2.5% + Processing, UW & admin fees 2.5% Credit

  38. FHA Mortgagee and TPO-1/TPO-2 Zero Point Rate HUD-1 Example

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