Niche Report May 2009 Rule Updates Column

by 11 Jun 2009

With all the rule and regulation changes that occur in our industry, it’s critical that you keep up to date--not only to insure that your pre-approvals don’t get rejected when your client’s find a home, but more importantly, how to structure transactions so they don’t get denied in underwriting. 

Not all of the rule changes are mentioned in this article, we have chosen the ones issue in the last 30 days that affect loan originators, processors, underwriters and owners/managers. 

USDA Increases Income Limits for Single Family Guaranteed Loan Program – Before you tell clients that “FHA is the way to go”, new income limits could make USDA the first option you recommend.  Sure, property location is important but you’d be surprised what areas qualify! 
HVCC does not apply here.
100% financing. No MI but 2% added to loan amount.
Home cannot have a swimming pool.
Qualifies for FTHB Tax Credit. 
Contact your State’s USDA office—they will train you and your staff on how to use this unique niche loan. 

Fannie Updates Guide for Non-Traditional Credit Underwriting – Can you say FHA? This hurts the person who lived with mom and dad, saved the down payment and paid cash for everything.  Underwriting non-traditional credit requires:
4 to 6 credit sources (one MUST be housing related);
Owner Occupied, 1-unit only
Purchase or limited cash out refi
No self-employed income. 
My Community Mortgage has more liberal exceptions.  Did we forget to mention the LLPA add ons? 

Fannie DU Refi Plus Rules Has More Options – It’s been enhanced from 30 days ago to include:
More types of properties,
No project approvals
No minimum credit scores.
LO’s automatically assume that if the loan has MI, they cannot refi the client unless LO works for the current servicer. That’s not necessarily true.  You may find that you are able to refinance, using the existing percentage of MI coverage.  You might be able to switch MI companies and still keep a like-amount premium.  Genworth appears to be an MI company able to modify an exiting certificate for a new lender. 

Freddie Enhances Relief Refi’s - This program forces clients to go to the servicer to refi, but if you are LO who works for a company that has sold to Freddie, these changes make it a little easier to use this program.
$2500 can be added to loan amount
$250 cash back
Term can be longer than the term of original mortgage
Second homes qualify
Investment property that is NOW owner-occupied by borrower

These changes make sense and no last minute, principal reductions at closing.

FHA Updates Home Purchase Guidelines for Reverse Mortgages - Everything has changed from Mortgagee Letter 2008-33.  Some highlights:
Only one principal residence
Verify income/assets to maintain home (i.e. taxes, insurance repairs)
Down payment required
FHA minimum property standards
NO “sweat equity”, “trade equity”, “rent credits” “seller contributions” allowed
MIP = 2% paid 15 days after closing
If you do HECM’s, print ML 2009-11.  This is the ONLY guideline reference now available. 

FHA Consolidates Handbooks Into 2 Main Resources – Halleluiah—it’s about time.  It’s online and incorporates mortgagee letters and revisions.  You can access online at   However, this comes with a word of warning:  As of May 2009, it only includes changes made up until December 2008.  It has NOT been updated to reflect changes for 2009.  We assume that eventually it will be updated—but you still need to double check.

VA Speeds Up COE’s for Paid In Full Loans - When a veteran had a previous VA loan still showing up on his/her COE after it’s been paid, it was a pain to get it updated.  VA says they have updated VALERI to speed up the process of getting full eligibility restored on a timely basis.  Let’s keep our fingers crossed that this new system works as stated! 

More detailed updates can be found at – Interpreting the rules and regulation changes for loan officers, processors, underwriters, and owners/managers.  Mortgage Talking Points®, charts and checklists included.  


Should CFPB have more supervision over credit agencies?