Starting September 18 HUD issued a number of new mortgagee letters. Speculation is that they waited till Friday to issue some letters to avoid a massive call in of unwanted feedback and questions. Here’s the scoop (with the most important letter coming first):
While not HVCC FHA acknowledges that appraiser independence is critical to establishing prudent lending practices. Starting in 2010 there will be stronger restrictions on who can order an FHA appraisal. AMB believes that some lenders may establish overlays that will require brokers use an AMC to order the appraisal. Be looking for announcements for our investors.
Appraisals will not be acceptable if the appraiser used was 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. This means that loan officers can’t pick the appraiser any longer!
We are also now responsible for assuring that the appraiser is correctly identified in FHA Connection. FHA has found that too often the FHA Connection named appraiser is not the appraiser who actually completed the appraisal.
In continuing its desire to have appraisers avoid conflicts of interest HUD is is not allowing a commissioned loan officer or their subordinates to have substantive communications with an appraiser relating to or having an impact on valuation and in ordering or managing an appraisal assignment. DE underwriters have been granted permission to contact the appraiser and inquire as to AMB’s compliance of this nature. It is my opinion that individuals could be added to the LDP or GSA list if they are caught trying to influence an appraiser.
To further assure appraiser independence AMB is prohibited from the following actions or threats thereof:
- Withhold timely payment
- Withhold or promise future business
- Condition the appraisal on the a preliminary value given by the appraiser or give the appraiser a desired value, except providing a sales contract
- Request an estimated or desired value or request estimated values or comparable sales prior to completion (use Zillow for that or a AVM)
- Provide the appraiser with any incentives other than a customary fee
- Remove an appraiser from an approved list without prompt written notice that includes evidence of illegal or unprofessional conduct, a violation of industry or state licensing standards
- Obtain a second appraisal or AVM unless there are written reasons in the loan file to question the initial appraisal or such action is done pursuant to AMB’s QC process
- Perform any other act that impairs an appraiser’s independence, objectivity or impartiality
In order to prepare for this new procedure AMB envisions having all FHA case number assignments done by its processing staff unless you use the facilities of an approved AMC. You need to provide a list of at least 5-10 appraisers you want to use and have us rotate appraisals between all of the appraisers within a given geographic territory.
Remember you should not contact the appraiser. Call the home office and have us intervene for you. I imagine the cost of getting the FHA case numbers and ordering and monitoring the appraisal process to be around $25 per file.
This letter takes effect in 2010 and addresses portability concerns when moving a loan from one lender to another. Typically, the original appraisal must be used by the second lender unless:
- The first appraisal contains material deficiencies as determined by the second lender’s DE underwriter
- The original appraiser is on the second lender’s exclusionary list
- The first lender failed to timely provide the appraisal to the second lender causing a delay in closing, posing potential harm to the borrower
AMB just ordered a second FHA appraisal for a GA loan. My suspicion is that it would not have been ordered starting next year. Apparently, the second lender just wanted to check out the first appraiser’s findings.
Starting in 2010 FHA appraisals will only be good for 120 days. You need to close your loans faster!
This letter imposes restrictions on who can become or continue to engage in FHA lending. The letter contain a number of limitations.
You must use your registered name in all advertisements. Advertisement must receive approval from corporate before you use them. We must retain copies for two years.
This Mortgagee Letter provides (1) revised procedures; and (2) reaffirms existing procedures regarding Streamline Refinance transactions. The changes take effect on new case numbers assigned 60 days or later after the date of the letter. Be safe and get as many primary residence home owners their streamline case numbers before September 15.
Here’s the payment history requirements:
- Less than one year old, six to eleven payments with no 30 day late
- One year or more, no more than one 30 day late in the fourth to twelfth month for payments of 12 or more (no late payments in the immediate past three months)
Loan must have tangible benefit:
- Lower total payment (minimum 5% lower total monthly payment)
- Converting from an ARM to a fixed rate (rate must be no more than 2% above the ARM rate and payments cannot increase by more than 20%)
When lowering the remaining term the loan must be rewritten as a rate and term (no cash out) refinance.
You must include a signed and dated cover letter on letterhead certifying that the borrower is employed and has income at the time of loan application. If assets are needed to close, you must verify and document those assets. You must also include the pay-off statement.You must enter all available credit scores in the FHA Connection.
If subordinate financing is remaining in place, the maximum combined loan-to-value ratio is 125%. 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.
Do not let your investor use TOTAL on streamline refinance transactions. If TOTAL is used, that loan must be underwritten and closed as a rate and term (no cash-out) refinance transaction.
You must use the standard URLA. The 1003 and HUD-92900A must be signed and dated by borrowers before the loan is underwritten.
The maximum insurable mortgage without an appraisal cannot exceed the outstanding principal balance minus the applicable refund of the UFMIP plus the new UFMIP that will be charged on the refinance.
The maximum insurable mortgage with an appraisal is the lower of the outstanding principal balance minus the applicable refund of UFMIP, plus closing costs, prepaid items to establish the escrow account and the new UFMIP that will be charge on the refinance OR 97.75% of the appraised value of the property plus the new UFMIP that will be charged on the refinance.
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.
This letter addresses the maximum mortgage amounts as revised by the Consolidated Appropriations Act, 2008 for FHA multifamily housing programs.
Since the law does not determine which areas are to be considered “High Cost Areas” the Office of Multifamily Housing Development has developed a list of High Cost Areas for 2009.
FHA is making the new factor table available on HUD’s web site, to assist lenders, counselors, and other involved in FHA’s reverse mortgage program with immediate implementation of changes to its program. The new table may be uploaded or copied from the site directly into any reverse mortgage technology systems or tool used to support the HECM program. The new Principal Limit Factors table is posted here. If you don’t understand this it means you don’t originate reverse mortgages or shouldn’t be originating them!
Not a letter that impacts AMB a lot but FHA updated its term and interest rate requirements for loan modifications to provide for a reduction in the mortgage payment whenever possible and help more mortgagors avoid re-default.
Appraisers must be state certified. Pretty benign since all lenders require this. I haven’t heard of one issue of AMB personnel using an appraiser who was not licensed and another letter indicates loan officers can no longer order appraisals. We will look at the one in a moment.
You should direct your appraisers to this page to learn more.
