2. Today’s Agenda
Changes in FHA programs that may affect
your transactions
Prior to 2010
Under the Housing and Economic
Recovery Act of 2008
2010
3. Closing Costs
Lenders are expected to charge fees that
are fair, reasonable, customary, and
documented
Any and all fees must be disclosed
Good-Faith-Estimate
Non-allowable closing cost fee schedule
eliminated
A borrower may pay all fees associated with
the completion of the transaction
Except “Tax Service”
4. Housing and Economic
Recovery Act of 2008 - HERA
Key FHA Provisions
Permanently increases loan limits
Lowest county limit will be $271,050
Limits vary by county (MSA)
Home Equity Conversion Mortgage limit $417,000
Banned Seller-Assisted Downpayment
Assistance Programs
Provided “Hope for Homeowners Program”
Expires September 2011
5. Minimum Required Investment
Minimum cash investment – down payment
3.5% of appraised value or sales price
Whichever is less
Sales price greater than appraised value
then also need to pay difference
No longer calculated on “acquisition cost”
Secretary of HUD has authority to amend
minimum required investment
Can set higher, but not lower required borrower
investment
6. Minimum Required Investment –
Cont.
May come from borrower’s own funds or
100% gift
Immediate family member/close familial tie
HUD approved non-profit organization
Acceptable secondary financing
Local city, county, and state programs
All seller-assisted down payment
assistance eliminated
7. Maximum Loan-To-Value Ratio
Purchase Transaction
Maximum LTV for purchase simplified
96.5% of sales price or appraised value
Whichever is less
Distinctions between low and high closing cost
states eliminated
Maximum FHA insured mortgage Loan-to-
Value with Upfront Mortgage Insurance
Premium financed
May not exceed 100 percent
Example: 96.5% LTV + 1% UFMIP = 97.5% (ok)
8. Mortgage Limits
FHA has no minimum mortgage loan amount
Only maximum mortgage amounts
Lenders may impose a minimum loan amounts
One national limit for Home Equity
Conversion Mortgage
$417,000
Temporary limit to $625,500
9. Mortgage Limits Under American
Recovery and Reinvestment Act
Mortgagee Letters 2009 – 07 and 2009 – 50
Temporary ceiling/limit extended for 2010
175% of GSE ($417,000 x 1.75%)
$729,750
County MSA’s determine maximums
Higher in Alaska, Hawaii, Guam, and U.S. Virgin
Islands
Home Equity Conversion Mortgage nationwide limit
$625,500
Expires December 31, 2010 (reverts to HERA limits)
Loan must be fully approved
10. FHA Condo Loan Insurance
203(b)
Now also under FHA program code 203(b)
Previous program code 234 (c)
All condo projects must be in a HUD approved
project
Except site-condos
Approval processing requirement dates vary
“Spot” approvals no longer allowed
Case numbers assigned on/after Feb. 1, 2010
11. FHA Condo Loan Insurance
203(b) - Continued
May be attached, detached, row, low or
high rise, and condo conversions
Manufactured homes in condo projects
allowed
Lender cannot approve project
Only HUD can approve
Not treated as a site-condos
Not “stick” built
12. FHA Condo Loan Insurance
203(b) - Continued
A site-condominium is:
Stick built home
1 – unit
Nothing attached (walls, garages, etc.)
Legal classification is condominium
Site-condos do not need to be in a HUD
approved project
Effective June 12, 2009
13. FHA Condo Loan Insurance
203(b) - Continued
Lenders will decide on approval process
Lender to review and process (DELRAP)
HUD to review and process (HRAP)
Lender’s choice on any given project
Project approvals good for period of 2 years
Lender is required to recertify occupancy
requirements and no adverse conditions exist
each and every time a loan is made even if
project approved
14. Condo Approval Process – Cont.
Allows for minimum of 2 units in a
project
Previously 4 units in a project
Condo conversions waiting period
eliminated
Any and all remodeling or rehab must
be 100% complete
15. Condo Approval Process – Cont.
50% Owner occupancy required
Previously 51%
REO’s owned by only a foreclosing lender
and/or second homes are not counted in
total number of units for owner occupancy
calculation
No more than 15% total units in arrears on HOA
Dues
No one entity can own more than 10% of all
units
16. Condo Approval Process – Cont.
30% maximum FHA concentration
Temporary increase to 50% penetration of
FHA insured mortgages until 12/31/10
Possible further increase to 100% FHA
penetration until 12/31/10
See Mortgagee Letter for this exception
Reserve and environmental reviews/studies
may be needed
17. Condo Approval Process – Cont.
New construction pre-approval and inspections
Based on types of jurisdictional inspections
May or may not need Early Start Letter and ten-
year HUD approved warranty plan
Project approval not required for:
HUD REO to buyer using FHA financing
FHA to FHA refinance
18. Final Notes for Condo Insurance
Project approvals expire
Two years from when placed on list
If approved before 10/1/08 have until 12/7/10
Complete guidelines, requirements, and
instructions contained in:
Mortgagee Letters
2009 – 46A and 2009 – 46B
HUD’s list of approved projects is located at:
https://entp.hud.gov/idapp/html/condlook.cfm
19. Mortgagee Letter 2009 – 28
September 2008
Appraiser independence
Effective for case numbers assigned January 1,
2010
Prohibits lenders from accepting appraisals
selected, retained, or compensated by lender’s
staff compensated on commission basis
FHA does not require use of Appraisal
Management Companies (AMC’s)
20. Mortgagee Letter 2009 – 29
September 2009
Appraisal Portability
FHA prohibits “Appraiser shopping”
Effective case numbers January 10, 2010
Second appraisal acceptable under limited
circumstances
First appraisal contained material deficiencies (DE)
Appraiser in first appraisal excluded from lender list
Failure of first lender to provide copy of appraisal
to second lender in timely fashion
21. Mortgagee Letter 2009 – 30
September 2009
Appraisal Validity Periods
Effective for case numbers assigned 1/1/2010
Appraisals valid on all appraisals for 120 days
Existing, proposed, and under construction
Previously 6 months on existing property
Previously 12 months on proposed and under
construction
NOTE: 120 Days is NOT 4 months
22. Mortgagee Letter 2009 – 52
December 2009
Short Sales and Short Pay offs
Borrowers not eligible for FHA insured financing if
pursued a short sale
3 years – treated like a foreclosure
May be eligible
Did not take advantage of declining market
New purchase is at reduced price for similar or
superior property within a reasonable commuting
distance
Were current on mortgage and all other installment
debt for immediate preceding 12 months from sale
23. Mortgagee Letter 2009 – 53
December 2009
Real Estate Settlement Procedures Act
FHA no longer limits origination fees except
Rehabilitation loan programs @ 1.5%
Home Equity Conversion Mortgage @ 2%
Lenders are expected to charge fair and reasonable
fees
Any and all fees must be disclosed
Good-Faith-Estimate
Regulations relating to fees handled by R.E.S.P.A.
202 – 708 – 0502
24. Waiver of Requirements of 24 CFR
203.37a(b)(2) – January 2010
Property Flipping – Resale Within 90 days
Temporarily allows FHA insured financing if property
resold within 90 – days
Expires 1/31/2011
Forward mortgages only (not HECM)
Must be arms length, no identity of interest, seller
actually holds title, no pattern of previous flipping,
marketed openly and fairly
When sales price exceeds 20% or more over and
above seller’s acquisition cost
Additional conditions apply - Discuss with lender
25. Mortgagee Letter 2010 – 02
January 2010
Increase Of Upfront Premiums for FHA
Mortgage
Effective for case numbers issued on or
after April 5, 2010
Purchase money and full credit
qualifying refinance
Increased to 2.25%
Streamline refinances – all types
Increased to 2.25%
No change to annual/monthly premiums
Changes again in October 2010
26. Mortgagee Letter 2010 – 28
September 2010
Changes to FHA Mortgage Insurance
Preimiums
Effective for case numbers issued on or after
October 4, 2010
Purchase money and all refinance transactions
Upfront - decreased
Annual/monthly - increased
Home Equity Conversion Mortgage
2% Upfront and 1.25% Annual/Monthly
27. Effective October 4, 2010
Mortgage Insurance Premiums (Cont.)
Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010
28. Mortgage Insurance Premiums (Cont.)
Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010
29. Mortgagee Letter 2010 – 04
January 2010
Loss Mitigations For Imminent Default
Helps current FHA borrowers avoid foreclosure
Mortgage current or less than 30 days past due
Borrower experiencing significant reduction in
income or other hardship
Loss mitigation options
Forebearance
FHA Home Affordable Modification Program
FHA HAMP
30. Mortgagee Letter 2010 – 13
March 2010
Appraisal Update and/or Completion Report
One time use only
Eligible intended user must be original user
Provides 30 day extension to original report
May provide up to 240 days for insuring
31. Mortgagee Letter 2010 – 13
April 2010
Electronic Signatures on Third Party
Documents
Electronic Signatures now acceptable
Except HUD REO contracts
Wet signatures required
Lenders reminded to employ same levels
of care and due diligence
32. Mortgagee Letter 2010 – 20
June 2010
Strengthening Risk Management
Eliminated approval of FHA loan
correspondents
Effective May 20, 2010
Those already approved still approved until 12/31/10
Non-FHA approved originators now
permitted to originate FHA insured mortgages
Third party originators
Sponsored relationship with FHA approved direct
lender
Additional guidance to be provided in future Mortgagee Letters
33. Mortgagee Letter 2010 – 23
August 2010
FHA Refinance of Borrowers in Negative
Equity Position
Enhancement to existing Making Home Affordable
Program
Allows borrowers current on their mortgage to
qualify for an FHA insured mortgage
Participation by existing lien holders is voluntary
Requires consent of existing lien holder
Similar to a short sale transaction
See Mortgagee Letter for specific guidelines
34. Mortgagee Letter 2010 – 24
August 2010
Combined Loan-to-Value Requirements For
Refinance Transactions
The combined FHA insured mortgage and any subordinate lien
may not exceed:
Applicable FHA loan-to-value ratios AND
Geographical maximum mortgage amount limits
Maximum combined loan-to-value limits are
97.75% rate and term refinance (no cash out)
115% refinance of borrowers in negative equity
125% FHA to FHA streamline refinance
85% Cash out refinance
Effective with Case Numbers Assigned on/after September 7, 2010
35. Mortgagee Letter 2010 – 29
September 2010
Minimum Credit Scores & Loan-to-Value Ratios
Effective Case Numbers assigned
On or after October 4, 2010
Does not affect Title I, Hope for Homeowners,
Hawaiian Homelands, Indian Reservations,
Declining Neighborhoods – Section 223(e),
and Military Impact Areas of Georgia and New
York
36. Minimum Credit Scores and
Loan-to-Value Ratios – Continued
Maximum loan-to-value limits based on credit scores
Score of 580 or greater 97.75%
Scores between 500 to 579 90%
Scores less than 500 Not eligible
Disaster Relief Program
Score of 500 or greater 100%
Below 500 Not eligible
Borrowers in negative equity position
Refer to Mortgagee Letter 2010 – 23
37. Where to Get More Information
1-800-CALL - FHA (1 – 800 – 225 - 5342)
A source for all FHA questions
Lenders and Consumers
www.hud.gov
On-line resource for info about FHA and FHA
programs
On-line resource for other types of programs, forms,
press releases, etc.
User friendly
www.fhaoutreach.gov/FHAFAQ
On-line resource to frequently asked questions
40. The U.S. Department of Housing and Urban Development
would like to thank the
California Association of Mortgage Professionals
and
Oregon Association of Mortgage Professionals
and its’ members
for your interest in
FHA and FHA programs