HUD’s issuance of Mortgagee Letter 2009-32, Revised Streamline Refinance Transactions today.  The announced changes may have effectively caused an indefinite hiatus for a popular program for FHA borrowers – the “No-Cost” FHA Streamline Refinance.

I’ve provided an explanation of the loss of the “no cost” fha streamline refinance (streamline refinance transaction without appraisal that finances the closing costs into the mortgage) on my blog.

Revisions Made To Reduce Risk to Home Owners

1) The result of the streamline refinance transaction must have a net tangible benefit is defined as:

• reduction in the total mortgage payment (principal, interest, taxes and insurances, homeowners’ association fees, ground rents, special assessments and all subordinate liens),
• refinancing from an adjustable rate mortgage (ARM) to a fixed rate mortgage,

or

• reducing the term of the mortgage.

The new total mortgage payment must be 5 percent lower than the total mortgage payment for the mortgage being refinanced.

This requirement is applicable when refinancing from a Fixed Rate to Fixed Rate, from an ARM to ARM, from a Graduated Payment Mortgage (GPM) to Fixed Rate, from GPM to ARM, from a 203(k) to 203(b) and from a 235 to 203(b).

Revisions Made To Reduce Risk to FHA

1) At the time of the loan application, the borrower mus have made at least 6 payments on the FHA loan being refinanced. If they have less than 12 months payment history, they can never have been late. If they have over 12 months of payment history, they can only have one late in the past 12 months and none in the most recent three months.

2) The lender must certify that the borrower is employed and has income at the time of loan application.

3) If assets are needed to close, the lender must verify and document those assets.

4) If a credit score is available, the lender must enter the credit score.

5) If subordinate financing is remaining in place, the maximum combined loan-to-value ratio is 125 percent.

• For streamline refinance transactions WITHOUT an appraisal, the CLTV is based on the original appraised value of the property.
• For streamline refinance transactions WITH an appraisal, the CLTV is based on the new appraised value.

6) If the transaction is a streamline refinance WITHOUT an appraisal, closing costs can not be financed into the loan amount.

7) If the transaction is a streamline refinance WITH an appraisal, the maximum loan amount is the lower of:

• Outstanding principal balance minus the applicable refund of the upfront mortgage insurance premium, plus closing costs, prepaid items to establish the escrow account and the new upfront mortgage insurance premium that will be charged on the refinance;

or

• 97.75 percent of the appraised value of the property plus the new upfront mortgage insurance premium that will be charged on the refinance.

8 ) Discount points may not be included in the new mortgage.  If the borrower has agreed to pay discount points, the lender must verify the borrower has the assets to pay them along with any other financing costs that are not included in the new mortgage amount.

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Good News!

FHA issued mortgagee letters today announcing major changes to FHA loan procedures. The following are highlights from the announcements:

MORTGAGEE LETTER 2009-29: Appraisal Portability

This mortgagee letter addresses the portability of appraisals for the purpose of facilitating the loan process when a borrower switches from one Federal Housing Administration (FHA) approved lender (first lender) to another (second lender) and an appraisal was ordered by and completed for the first lender. This mortgagee letter will be effective for all case numbers assigned on or after January 1, 2010.

… a second appraisal may be ordered by the second lender under the following limited circumstances:

1. The first appraisal contains material deficiencies as determined by the Direct Endorsement underwriter for the second lender.
2. The appraiser performing the first appraisal is on the second lender’s exclusionary list of appraisers.
3. Failure of the first lender to provide a copy of the appraisal to the second lender in a timely manner would cause a delay in closing, posing potential harm to the borrower.

Potential harm includes events outside the control of the borrower such as loss of interest rate lock, purchase contract deadline, foreclosure proceedings, and late fees.

This is good news for FHA lenders and FHA borrowers as many purchase and refinance transactions have been delayed or quelled as a result of the lack of portability of FHA loans.

Feel free to contact me with questions.

Steve Lines
FHA Mortgage Specialist
email: slines@bestFHAlender.com
www.bestFHAlender.com
http://twitter.com/stevelines
Academy Mortgage
Mesa, Arizona

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FHA issued mortgagee letters today announcing major changes to FHA loan procedures.  The following are highlights from the announcements:

MORTGAGEE LETTER 2009-28: Appraiser Independence

This Mortgagee Letter provides clarification and reaffirms Federal Housing Administration (FHA) appraisal requirements related to appraiser independence and announces new requirements pertaining to entities that are eligible to order appraisals for FHA insured mortgages.

The new requirements are:

Prohibition of mortgage brokers and commission based lender staff from the appraisal process

Historically FHA prohibited mortgagees from accepting appraisal reports completed by an appraiser selected, retained or compensated, in any manner by real estate agents. To ensure appraiser independence, FHA-approved lenders are now prohibited from accepting appraisals prepared by FHA Roster appraisers who are selected, retained or compensated in any manner by a mortgage broker or any member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan.

Appraiser Selection in FHA Connection

Lenders are responsible for assuring that the appraiser who actually conducted the appraisal used for the FHA-insured mortgage is correctly identified in FHA Connection. FHA has found that, on numerous occasions, the name of an appraiser in the appraiser log-in screen is not the appraiser who actually completed the appraisal. Lenders who fail to assure that the FHA Connection reflects the correct name of the appraiser will be subject to administrative sanctions.

Appraisal and Appraisal Management Company (AMC)/Third Party Organization Fees

FHA does not require the use of AMCs or other third party organizations for appraisal ordering, but recognizes that some lenders use AMCs and/or other third party organizations to help ensure appraiser independence. To address several questions that have already been raised regarding compensation, this mortgagee letter corrects and expands existing fee requirements set forth in Mortgagee Letter 1997-46.

FHA-approved lenders must ensure that:

• FHA Appraisers are not prohibited by the lender, AMC or other third party, from recording the fee the appraiser was paid for the performance of the appraisal in the appraisal report.
• FHA Roster appraisers are compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.
• The fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process or any activity other than the performance of the appraisal.
• Any management fees charged by an AMC or other third party must be for actual services related to ordering, processing or reviewing of appraisals performed for FHA financing.
• AMC and other third party fees must not exceed what is customary and reasonable for such services provided in the market area of the property being appraised.

Prior to this point, FHA loans are not subject to the appraisal independence requirements that were established by HVCC.  This announcement is FHA’s equivalent to HVCC.

Feel free to contact me with questions.

Steve Lines
FHA Mortgage Specialist
email: slines@bestFHAlender.com
www.bestFHAlender.com
http://twitter.com/stevelines
Academy Mortgage
Mesa, Arizona

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The Federal Housing Administration (FHA) today announced several significant policy changes that are intended to improve the housing agency's exposure to risk. The changes, effective January 1, include: Modification of Procedures for Streamline Refinance Transactions, Adoption of Home Valuation Code of Conduct Guidelines, Updated Appraisal Validity Period, New Appraisal Portability Regs, New Requirement of Lenders to Submit of Audited Financial Statements for Review, Adjustments to the Approval Process for Participation in FHA Loan Origination, and Increased Net-Worth Requirements for Lenders.

…(read more)

The government agency protecting mortgage lenders against losses has been burning through its liquidity as it attempts to stem the rising tide of foreclosures, the Washington Post reported. An independent audit said the reserve fund of the U.S. Federal Housing Administration will drop below the minimum levels required by Congress, spurring talk that the agency would need to seek government assistance.

An audit last year found that the reserve fund had shrunk to 3% as of Sept. 30, compared with 6.4% a year earlier, the Post said. “The fund's value was estimated at $12.9 billion, down from $21.2 billion the previous year.”

David H. Stevens, FHA Commissioner, acknowledged that the agency's reserves will slide below the 2% level required by Congress as the new fiscal year begins on October 1….(read more)

The main headline this morning doesn’t come from the markets, which are mixed on light trading, but from the Treasury, which closed its guarantee on money market mutual funds as scheduled.
The S&P 500 is up 0.04% to 1,066, pushing the weekly gain to 2.21%. The Dow is doing better with a 0.30% gain to 9,813, and the Nasdaq is edging up 0.03% to 2,127. …(read more)

Officials from four federal departments and agencies and attorneys general of 12 states met in Washington on Thursday to discuss what was termed an "epidemic" of fraudulent schemes designed to scam distressed homeowners….(read more)

Buying a home with a boyfriend, girlfriend or business partner can be a risky endeavor in Cincinnati — much more risky than buying a home with a spouse, anyway. This is because, with respect to Estate Planning, married homeowners typically get protection on the federal and state levels from which non-married homeowners are typically exempt. It’s why non-married, joint homebuyers should make their own federal and state protection with the help of an attorney.

Take a glance at the schedule and you could be forgiven for thinking it’s a holiday. No data from the US is will hit markets all day, nor are there Treasury auctions or officials speaking from the Federal Reserve. But don’t think markets will be quiet. Investors have next week’s monetary policy meeting to think of, and the lack of fresh data this morning gives a chance to reflect on whether stocks are accurately priced.

The S&P 500 is up 2.3% this week despite the modest drawback yesterday. Equity futures are flat but tilted upwards this morning, and if markets can recover from yesterday indexes will have the chance to hit new 11-month highs.
…(read more)

Rhode Island first-time home buyers have until November 30th to close on a new home to take advantage of the $8,000 tax credit.

Although the November 30th date is advertised everywhere as the drop dead date for the tax credit, it is important to be aware of some time tables. 

What first-time home buyers need to realize is with the popularity of the $8,000 tax credit, lenders, appraisers, title companies and closing attorneys are going to be busier than normal making their response time slower.

They also need to know that the week of the tax credit expiration is the week of Thanksgiving and most companies will be closed four out of the five days at the end of the month due to the holiday. The following Monday is the expiration date, November 30th.

First-time home buyers looking for a home in Rhode Island really should be in purchase and sales agreement by October 7, 2009.  Most transactions are taking about 45 days to close, which puts a closing date around November 20th.

Now is a perfect time to buy.  Don’t delay.  You should also make sure that you are pre-approved.  If you haven’t done so already, please call me and I would be happy to help.

 

Lynda Mckenzie

Mortgage Master, Inc.

401-524-9796

email: lmckenzie@mortgagemasterinc.com

web:    http://www.mortgagemasterinc.com/lmckenzie

 

 

  RI Loan Broker 95000655 / RI Lender License 2005 1976LL

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Copyright © 2008
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