The new form from HUD has raised a question among some lenders as to whether a pre-approval letter or a pre-qualification letter is also an enforceable loan commitment. The issue — say some lenders — is that they cannot possibly issue such a letter without a lot of information from the borrower, information which they cannot require.

Of course, when toxic loans were popular, lenders issued pre-approval letters, pre-qualification letters and entire loans without too much checking in the case of so-called no doc and low doc loan applications. The result was a big part of the mortgage meltdown, especially when a lack of documentation was combined with option-ARMs and interest-only financing.

So now some lenders — but not all — do not want to issue pre-qualification and pre-approval letters. This is a problem for real estate buyers because such letters — known generally as hand-holding letters — help assure home sellers that a would-be purchaser has at least met with a lender and can qualify for a loan.

Hand-holding letters are not loan guarantees because they invariably contain an “out” making them subject to “changing market conditions” or the need to review an appraisal, credit report, or whatever. However, many lenders continue to issue pre-approval and pre-qualification letters with the understanding that they are not promises to make a loan, just evidence that a borrower has met with a lender to discuss financing.

Worksheets

“A worksheet,” says FHA Commissioner David H. Stevens, “is a document issued by a loan originator that may include generic information regarding interest rates and loan fees, or a document that may provide additional information to the consumer regarding the cost of the overall transaction outside of loan fees that are disclosed on the GFE.”

However, says Stevens, lenders must use care when issuing a worksheet:

A worksheet may be provided to a customer for a rate quote if the consumer does not want to provide the information necessary to generate a GFE. However, loan originators should ensure the following: (1) to eliminate consumer confusion, a worksheet should not look like a GFE and should not lead the customer to believe that it is a GFE and (2) a loan originator should NEVER use a worksheet in lieu of a GFE.

A loan originator may also use a worksheet to provide the consumer with additional information about his or her loan transaction, such as the amount of cash needed to close, seller credits, and other non-loan transaction fees that would be helpful to the consumer.

In other words, borrowers can find value in a worksheet but it’s plainly not a good faith estimate, it’s not binding and if it is presented as a GFE or the equivalent of a GFE then go elsewhere for mortgage financing.

What Is A Mortgage Loan Worksheet? is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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FHA-backed mortgages are now a huge part of the financing landscape, but since April the up-front mortgage insurance premium has been 2.25 percent for most FHA borrowers. Now there’s some discussion regarding the idea of a 1 percent up-front MIP — but a higher annual MIP, a charge that would go from .55 percent now to .90 percent for most FHA borrowers.

A revised MIP schedule would lower the cash needed to close an FHA mortgage — but increase monthly cash costs.

It seems difficult to imagine that the up-front mortgage insurance premium (MIP) will soon be reduced given the rising claims and payouts faced by all mortgage insurance plans, including the FHA. That said, such a reduction is not outside the realm of possibility.

How do we know? It’s what the FHA is telling Congress. No less important, the math favoring such a change is entirely plausible.

Speaking before the Senate Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies last week, FHA Commissioner David H. Stevens said that “while HUD is moving to increase the upfront premium to 225 basis points we are ultimately planning to reduce that premium to 100 basis points, offset by a proposed increase in the annual premium to 85 basis points for loans with loan-to-value ratios (LTV) up to and including 95 percent and to 90 basis points for LTVs above 95 percent.”

Back-Loading Fees

The FHA mortgage program has to have premium money for reserves so it can pay lender claims in case borrowers default. At the same time the FHA wants to get more people into homeownership. One of the best ways to make homes more affordable is to reduce up-front costs. In the case of the FHA mortgage program that’s done by requiring 3.5 percent down instead of the 5 percent to 20 percent required for most other mortgages– but the down payment is not the whole story. There are also costs for closing and that pesky up-front mortgage insurance premium which was raised from 1.5 percent to 2.25 percent as of April 5th.

HUD has moved to cut financing costs by $700 per transaction through the use of its new good faith estimate and HUD-1 forms. If it also can cut the FHA up-front MIP the settlement savings per transaction would be significant.

More Marketplace Volume

The move toward lower up-front costs could make it easier for first-time buyers to enter the marketplace. That’s important because the National Association of Realtors says first-timers represent 40 percent of all purchasers. You need first-time buyers so owners can sell current residences and purchase replacement properties. At the same time, the FHA reserves would actually grow over time. Here’s why.

The FHA has both an up-front mortgage insurance premium AND an annual mortgage insurance premium. The annual MIP is now .55 percent of the loan balance for most borrowers. If the annual mortgage insurance premium is raised from .55 percent to .90 percent then the FHA will see an increase in premium revenue that looks like this:

A home is sold for $300,000. the FHA loan amount is $289.500. In year one, if the annual MIP is .55 percent, the borrower is paying roughly $1,592.25 per year or $132.69 per month for FHA insurance. If the annual MIP is raised to .90 percent the monthly payment will be $217.13 ($2,605.50 divided by 12). The annual increase is $1,013.25 in year one. (All numbers are approximate because the loan balance is reduced each month as a result of amortization.)

The up-front MIP in our example was reduced from 2.25 percent to 1 percent. In this example the cash required at closing fell from $6,513.75 to $2,895 — a difference of $3,618.75. If the FHA will now collect an extra $1,013.25 in the first year of the loan and it will only take about 3.6 years to bring in as much cash as the old system.

Affordability

While the idea of a lower up-front insurance premium for FHA borrowers is attractive, not all loan applicants would benefit. Although a smaller up-front MIP would encourage homeownership, the new and higher annual MIP would make homes less affordable. Buyers would need more income to qualify for financing because monthly costs under the new plan would be higher. The tougher affordability standard would off-set some of the increased volume represented by lower up-front costs, a consideration not to be ignored.

Is The FHA Moving Toward 1% Up-Front Insurance Premiums? is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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However, there are situations where owners run into tough times because of the loss of a job, divorce, an accident or medical costs. In such cases there are always nearby friendly hard-money lenders to provide the financing you need — at a cost.

Hard Money Loans

To understand how hard money financing works lets take an example where owner Wilson needs to refinance.

The Wilson property is worth $300,000 and Wilson has $160,000 in equity and $140,000 remaining on the mortgage. With a job and good credit Wilson can refinance the property with a new $210,000 loan at 5 percent plus 1 point in today’s market.

A point is worth 1 percent of the loan balance and is paid or credited at closing. In this case Wilson deducts the point (1 percent of the amount borrowed or $2,100 in this case) from the loan amount leaving $207,900 before closing costs and the repayment of the current loan. After paying off the existing loan of $140,000, Wilson has $67,900 before closing expenses.

Wilson now has a $210,000 mortgage at 5 percent interest. Paid with a 30-year schedule, the monthly cost for principal and interest is $1,127.33

But let’s say times have gotten tough for Wilson. His employer of 20 years has gone bankrupt and his medical insurance lapsed just before he was diagnosed with a disease that will cost $40,000 to treat. His credit is shot and his savings are gone.

Tough Terms

Filling this void are hard money (HM) lenders, sometimes described as lenders, individuals or investment groups. They will loan money but under different and, er, unique terms. In this case they might make a loan equal to 60 percent of the property or $180,000. Seen the other way, they want Wilson to have 40 percent equity. In a strong market HM lenders might accept 25 percent equity, while in slow markets they might only finance properties with 50 percent equity.

In addition, the interest rate will be 15 percent. There will be 5 points at closing.

HM lenders don’t care about income, they care about equity and the value of the property. In this example it’s the 40 percent equity that’s central to the transaction. If Wilson does not make his payments, the HM lender will swoop in and take the property through foreclosure.

At closing Wilson is set to receive $180,000 less 5 points. That means Wilson is actually getting $171,000 — the points are equal to $9,000 up front. Wilson uses his loan to pay off his existing $140,000 mortgage and then has $31,000 remaining before closing costs.

Wilson also has a $180,000 mortgage at 15 percent interest. The monthly cost for principal and interest with a 30-year schedule is $2,276.00 — TWICE the cost of the conventional payments for a bigger loan.

Why would anyone deal with a hard money lender? Is it a foreclosure scam, the step just before losing a home? Because of poor credit the regular lending system has been cut off to Wilson — and remember that the regular mortgage system has not always been so great, think of toxic loans. In difficult circumstances desperate borrowers turn to lenders with tough terms, terms HM lenders can only get because the borrower is so needy.

Is a hard-money loan a predatory mortgage? Assuming that all terms and conditions are plainly known and understood by the borrower, and provided there are no clauses which instantly raise interest rates if a payment is missed, call the loan when a payment is late or have hidden fees and charges, then no. Rather than being predatory, a hard-money loan in the best circumstances is simply a form of financing with hard terms reflecting the borrower’s poor credit.

What’s a Hard Money Mortgage? is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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At first it might seem that a purchase money mortgage was the same as any other financing but that’s not entirely true. For instance, in California a homeowner with a purchase money mortgage who is foreclosed cannot be sued by the lender to make up any losses on the loan. However, if the property has been refinanced there’s no longer a purchase money mortgage and so the protection for homeowners against deficiency judgments disappears. Notice that in our example the purchase money protection does not apply to investors and that the rules in other states are different.

Foreclosure Purchase

With foreclosures the rules to finance are simply the same — if not exactly the same — as one would find with any residential property. After all, the fact that the property was once foreclosed has nothing to do with bricks and mortar, it has very much to do with the financial capacity of the last owner — or the lack thereof.

Is the buyer an owner-occupant or an investor? If an investor you may be required to put down more and to pay a somewhat higher rate.

What’s the value of the property?

Does the purchaser have good credit?

Can the purchaser document his or her income and employment?

Cash, of course, solves all foreclosure financing problems while loans from hard money lenders with stiff rates, huge down payments and lots of points up front are not worth considering.

Lastly, if you’re buying a foreclosure from a lender see if the lender will provide financing as part of the transaction. In this situation the seller and the lender are the same, so such financing can be seen as a formal and institutional owner take-back of sorts.

What’s A Foreclosure Purchase Mortgage? is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Conventional Mortgages

FHA Mortgages

Jumbo Mortgages

VA Mortgages

Go to any of these links and you’ll see that Google generates a search for the type of mortgage you want and that at the top of the page is a yellowish area with a compare rates button. Press the magic button and you get a list of mortgage offers which can be localized for your community.

You can arrange the ads by monthly payment, APR, interest rates, lender fees and lender names. The best strategy is to set the “points” option on the right to zero so see you can see par pricing, the real interest rate without points. This makes comparing loans easy.

Once you have your table set up look for the lowest rate AND the lowest fee level. For instance, with conventional financing I see at this writing that one lender is offering financing at 5.353 percent and $6,140 in fees. Another offers the same loan for 5.297 percent plus fees worth $4,952. While the APRs and lender costs differ, the nominal interest rate for both loans is 4.875 percent and the monthly payments are identical.

Picking A Lender

I very much like the idea of visible, uniform mortgage comparisons. That said, there are concerns with the Google system.

First, the Google system is only open to advertisers and there’s no stone tablet which says advertising lenders always have better rates than lenders who do not advertise.

Second, I do not see lenders at this writing who I think of as being local. I do see at least one lender who by name must be 1,000 miles from my location.

Third, advertised mortgage rates whether online or in a newspaper are, well, the best advertised rates at one point in time. Alas, rates are constantly in flux, the best rates certainly won’t be available for borrowers with weak credit and advertised rates are always subject to a number of caveats such as a check of credit and income, the value of the property, credit scores, etc. In other words, great rates and low costs may not be available to everyone — including you.

Fourth, if everyone is charging 5 percent and $2,000 in fees and someone else is offering 4.5 percent and no fees you need to wonder how that’s possible. Money is money, and while some variance of rates and fees makes sense, caution should be in order when someone has terms which are too good to be believed.

Fifth, borrowers need more information about a given loan program than just rates and costs. For instance, there’s a reason FHA mortgages are often a better deal than other loans (can we spell T-O-X-I-C financing) even if the rate is sometimes higher.

The Real Value Of The Google System

The attraction of the Google system comes in the form of consumer education and intelligence. Borrowers rely on lenders for information, program options and rates — but under federal rules lenders have no obligation to get the best rates and terms for borrowers.

In this system the lender has every advantage — but at least the Google ads provide some sense of the rates and costs available from various lenders. Armed with this information, borrowers can then check with such sources as community banks and local credit unions to see how their offers stack up.

Lastly, the Google comparison system is important if only because Google itself is so huge, so significant and so transformational. It’s an addition to the mix of options available to mortgage borrowers which should be welcomed — as should anything which makes the lending process more competitive, more open and more transparent.

Google Mortgage Ads — Do They Reduce Borrower Costs? is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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How It Works

Some important points about private mortgage insurance (MI) include:

• MI companies are state regulated, not federally regulated. State regulation is very tight.
• MI companies are monoline insurance firms — that is, they only provide mortgage insurance and not coverage for cars, boats, etc.
• MI companies have serious reserves — half of every premium dollar must be set aside for 10 years. And in years when claims rise, reserve requirements increase.
• The lower the borrower’s down payment the greater the amount of coverage required by lenders. For instance, with 5 percent down a mortgage insurer would provide coverage equal to 30 percent of the mortgage amount. With 10 percent down the MI company would insure 25 percent of the loan.
• When borrowers apply for a loan with little down, the loan application must be approved both by the lender and the MI company. It is possible to have a loan application approved by the lender but not the MI company, in which case the loan will not be originated.
• More coverage, of course, means higher premiums. Less coverage means lower premiums.
• MI premiums can be paid up front in a lump sum and the payment can be added to the loan amount. In some cases MI premiums may be refundable in part when a property is sold or refinanced. Premiums, however, are usually paid monthly.
• Mortgage insurance can generally be cancelled when the loan amount has been reduced to 78 percent of the original debt.
• Private mortgage insurance is routinely referred to as PMI. The right term is MI. Why? Because there’s actually a company named the PMI Mortgage Insurance Co.

Claims

When a borrower who bought with little down defaults, the lender looks toward the insurance company to cover the loss up to the coverage limit. The claim can include not only mortgage principal but also unpaid interest, the costs of maintaining the property and legal expenses.

Claim Advances

MI companies, like any insurance companies, want to hold down losses and claims. One way that MI companies reduce losses is with claim advance programs. With a claim advance the lender receives cash from the MI company to stop a foreclosure — this can be very useful for a borrower who has generally good credit but runs into a short-term financial problem. If you have MI coverage and face foreclosure, be sure to contact your MI company and ask if help with a claim advance is possible.

Second Look Programs

The MI industry also has what’s called a second look program. It gives borrowers an additional underwriting review if they’ve been turned down for a loan modification by certain lenders. Contact your MI company if you need more information.

How To Slash MI Costs

The are a number of strategies borrowers can you to reduce MI expenses.

First, ask your settlement provider if you can qualify for a re-issue rate. This is generally available when properties have been sold during the past five or ten years.

Second, buy with more down.

Third, if possible buy with at least 20 percent down. With 20 percent down lenders do not require MI coverage.

Resources

PrivateMI.com

MI Calculators

The Value of Mortgage Insurance. (An interesting — and readable — disucssion of MI issues).

How Can We Slash Mortgage Insurance Costs? is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Fixing the mortgage system is crucial if we’re to prevent another financial meltdown. If the mortgages are done right than mortgage-backed securities will also be right — and that means there won’t be worries regarding securities ratings or insurance. Lenders will not be stuck with overvalued properties and undervalued paper.

No less important, if we fix the mortgage origination system we will also protect borrowers. No more toxic mortgages which are at the heart of our financial problems.

Here are six steps the borrowers, lenders and government officials can take now, this week, to revamp the mortgage system.

First, in the past year a Nationwide Mortgage Licensing System supported by state regulators and the federal government has begun operations. In essence loan officers now have unique registration numbers even if they move from state to state. This means the name and registration number for a loan officer can be included in mortgage documents — and loan officer performance can then be graded in the same way that we have credit scores. It may well be that prudent investors will not want mortgages included in a mortgage-backed security from loan officers with a score below a certain level — and it may also be that lenders will not want to hire such poor performers. Of course, the same concept of registration and responsibility should be extended to mortgage underwriters.

Second, lending rules must be changed so that loan officers have a fiduciary obligation to borrowers, in the same way that lawyers have an obligation to clients and doctors have an obligation to patients. The creation of a fiduciary obligation for loan officers would mean that aggrieved borrowers could take loan officers and their lenders to court in the event of abuse, a system which seems to work well for virtually every other type of business. Members of the UpFront Mortgage Brokers Association already have adopted this standard and promise that they “will endeavor to act in the best interests of the customer,” disclose their fees up front and credit the borrower for cash they receive from third-parties.

Third, require that all loans be fully documented and that income and employment are verified. This would do away with “stated income” loan applications where lenders do not verify borrower income claims.

Fourth, have HUD set the interest rate and points for FHA loans — and post that information daily online. There’s no reason this can’t be done. In fact, until 1983 HUD actually did set FHA mortgage rates. Borrowers would then have an easy way to follow the market by using FHA rates as a benchmark.

Fifth, predatory lending is NOT a federal crime. Loan fraud — where a lender is abused — is very much a federal crime but predatory lending where a borrower is overcharged by a lender is entirely ignored by federal laws. The next time you hear a politician yammer about “predatory” lending ask if he or she would support a specific federal law against such activities.

Sixth, every mortgage-backed security which has a high level of foreclosures should be audited by the FBI to assure that all loans were properly underwritten. When that’s not the case then appropriate action should be taken against the lender, the loan officer, the underwriter and the Wall Street securities packager who were paid for such work.

Would these ideas work? You bet. Toxic loans would be impossible and there would be real penalties for abusing borrowers and investors.

Mortgage Reform Now — 6 Ways To Fix What’s Broke is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Mortgage insurance comes in three basic flavors, FHA, VA and private mortgage insurance (MI). Let’s look at each.

FHA Mortgages

If you get an FHA loan you must pay two types of a mortgage insurance premium (MIP): the up-front fee and the annual fee.

On January 21st the FHA announced that it was increasing up-front premiums as of April 1, 2010. The new schedule will look like this:

___ Purchase Money Mortgages and Full-Credit Qualifying Refinances = 2.25 percent

___ Streamline Refinances (all types) = 2.25 percent

___ HOPE for Homeowners (Delinquent Mortgagors) = 2.00 percent

___ Home Equity Conversion Mortgages = 2.00 percent

The rate for the annual FHA premium is unchanged at .55 percent on the outstanding loan balance for those who buy with less than 5 percent down.

However, you can cut your FHA premium to .50 percent if you buy with at least 5 percent down.

VA Mortgages

With the VA mortgage insurance program the insurance premium is called a funding fee. The VA explains the fee this way:

“The VA funding fee is required by law. The fee is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is slightly higher. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment. First and second time users who make a down payment of at least 5 percent pay a reduced funding fee of 1.5 percent, the same as first time users making the same down payment. For a 10 percent down payment, the fee drops to 1.25 percent. The effect of the funding fee on a veteran’s financial situation is minimized since the fee may be financed in the loan. National Guard and Reservist veterans pay a slightly higher funding fee percentage.”

At this time the VA funding fee schedule looks like this:

VA Purchase And Construction Loans

VA Cash-Out Refinancing Loans

(* The higher subsequent use fee does not apply to these types of loans if the veteran’s only prior use of entitlement was for a manufactured home loan.)

Other Types Of VA Loans

As with private-sector mortgage insurance, if you pay a little more down you can cut your up-front VA funding fee. However, notice that unlike the FHA or private mortgage insurance companies the VA does not have an annual fee so the benefit of a bigger down payment is limited in the sense that it cannot reduce annual fees since there are none.

Conventional Mortgages

With conventional mortgage financing the lender will select a private mortgage insurance company if you buy with less than 20 percent down and the borrower will pay the bill. Given who pays and who benefits, there’s not much incentive for the lender to seek the least costly source of private mortgage insurance.

That said, there are several ways to reduce your MI costs.

First, your rate will be lower if you finance with a fixed-rate loan rather than an ARM.

Second, your rate will be lower if you put more down — 10 percent instead of 5 percent and 15 percent instead of 10 percent.

Third, in some cases it may be possible to pay for MI insurance in a single premium — with a lump sum. This may or may not be cheaper than annual payments, depending on how long the loan is outstanding.

Fourth, you can buy private mortgage insurance with a lump sum and with a possible refund. However, the policy is cheaper if no refund is allowed.

For details, changes and specifics, please speak with lenders.

How Can I Pay Less For Mortgage Insurance? is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Think about stock. You buy stock in the morning and sell it in the evening. You flipped the stock. Does anyone care? No.

Think about a foreclosed property bought from a lender, a REO (real estate owned by a lender). You buy this morning and sell this afternoon. Does anyone care? Maybe. Here’s why.

Foreclosure Flipping

First, a trail of quick sales for a single property often suggests illegal activity such as faked appraisals, false documentation, and fraudulent closings and settlements. If a home is bought for $200,000 at 10 AM, sold for $225,000 at noon and re-sold for $250,000 at 3 PM you have to wonder what caused the sudden increase in value.

Second, to protect against illegal flipping the FHA and many private-sector lenders have long had a rule which says that they will generally not finance a property which has been sold within the past 90 days. In January 2010 HUD suspended the FHA 90-day anti-flipping rule for a year, meaning that you can buy a property today, a buyer can purchase tomorrow, and the buyer can get an FHA loan. For specifics and the latest details please speak with lenders.

To protect yourself when dealing with foreclosures and quick sales, be sure to keep good records of any repairs as well as before-and-after photos of the property to document why a higher price could be justified.

Is Foreclosure Flipping Legal & Legit? is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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What’s going on here? A few things:

First, FHA reserves are falling. The insurance program needs more money. What happens when insurance programs need cash? They raise premiums. In the case of the FHA they want to move from 1.75 percent up front to 2.25 percent.

Second, the FHA says if your credit score is below 580 you should not be among the annointed and allowed to borrow with just 3.5 percent down. Instead, borrowers with woeful credit will need 10 percent. The question, of course, is why the FHA does not offer 10% for investors.

Third, the FHA is concerned that owners are offering seller contributions which are forcing up home prices artificially. In other words, without a seller contribution — a credit to the buyer at closing of as much as 6 percent of the sale price — the sale price would actually be lower because the owner would not be trying to re-coup dollars being credited to the buyer. The FHA will limit seller contributions to 3 percent of the sale price, a common lender norm.

fourth, with the subprime market sunk, loan officers who once offered tasty toxic loans to unknowing borrowers now want to sell FHA mortgages. The FHA, with very good reason, wants to track lenders with far greater care than in the past given the influx of subprime loan officers and companies. In essence, if they break the rules even a bit the FHA is threatening to dump them.

The Details

Below is what the FHA says specifically:

1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending

The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.

If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing

The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.

2. Update the combination of FICO scores and down payments for new borrowers.

New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.

This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.

This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

3. Reduce allowable seller concessions from 6% to 3%

The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.

This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

4. Increase enforcement on FHA lenders

Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.
This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.

Enhance monitoring of lender performance and compliance with FHA guidelines and standards.

Implement Credit Watch termination through lender underwriting ID in addition to originating ID.

This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.

Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process

Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.

HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:

Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite

Legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

FHA To Borrowers: Gimme More! is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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