Rules & Regulation Headlines - Feb 2010 Issue

by 19 Jan 2010


By now you know that Fannie & Freddie kept the loan limits the same for 2010—but if you offer FHA loans, the loan limits can be different in EACH county in your state! Use the link provided! If you are strictly a Fannie/Freddie lender, this is the info you need to know when meeting with clients! 
Freddie Incorporates These Changes – Bulletin 2009-27 –
Whew! You’ll want to read this interpretation right now! Different effective dates & some of the major highlights!
  • Clarified buying another home without selling current home
  •  How rental income will be counted—or not counted
  • Timing of Verbal VOE extended
  • Self-Employed Taking Cash out of business clarified
  • and everyone on the planet must sign 4506T
This bulletin info is very detailed, so don’t trip up. 
Rental Income amendments are useful – you do not have to argue for the use of income on new rental properties anymore, so long as your borrower is not a new landlord as well.
Verbal VOE’s – at least they gave you a little more time by moving to business days, but the guidance on the written VOE is not so helpful – a written only trumps the new 10 business day rule if verbal is not available…be prepared to do both…
For your self-employed’s – instead of getting a letter from the client’s accountant, you may want to become familiar with the “Cash-Flow Analysis” process. Online Handbook - “Interpreting Your Client’s Tax Returns: How to Become THE expert in a Full-Doc World” ( Products Link)
Freddie Updates LP
You will start getting real, meaningful messages from LP…imagine the possibilities. Lots of changes…all coming to a Loan Prospector near you… Be aware of the Cash-Out change coming – LP is going to start alerting you to this early – but you had better not miss the settlement deadline of January 31, 2010!
November 22 Release -- Freddie continues to tweak their merged credit report options providing a new technical affiliate name field. Currently the only Credit Report Company supporting the enhancement is Equifax Mortgage Solutions (EMS). Depending upon how you request merged credit in LP, you may or may not be able to take advantage of the new system – Your LOS vendor, Wholesale lenders, etc…all have to be able to support the enhancement. All LOS vendor systems must support this field by year-end.
December 13 Release – It is finally here…with an early kicker.   On December 13th, new and updated messages will finally be provided supporting Bulletin 2009-18 – employment, income, and assets. These changes are effective for loan applications dated on or after December 14, 2009, and settlement dates on or after April 1, 2010. Freddie is also updating LP to support Bulletins 2009-22 and 2009-24 with feedback messages regarding credit and property eligibility.
FHA Gives Relief from Second Appraisal Requirements – ML 2009-48
Great news! Not often we get told to lessen documentation requirements. This second appraisal was digging into your profits and processing time….so good riddance! But wait, you are required to order a 2nd appraisal if home is being resold with 91 to 180 days of purchase by the seller. 
Home Equity Conversion Mortgage Program: Subordinate Liens – ML 2009-49 Clarifies ML 2006-20 
We had to shake our heads at the fact that 2006-20 was written as “clarification” guidance. Now we have a new ML that “clarifies” the “clarification”. Outside of the exceptions listed, you can’t create a NEW lien during the process of obtaining a HECM.
FHA Maximum Loan Limits for 2010 – ML 2009-50– Effective January 1, 2010
While reviewing this Mortgagee Letter, all we could think was “holy overlapping legislation!” Many areas will have limits that are between the declared “floor and ceiling” which is why you need to go to the link and check your area limits.
Here’s the short version:
  • The “ceiling” went up for high cost areas.
·        Go to and print out loan limits for the states/counties you do business in for quick reference. 
Compliance: Federal Reserve issues FAQ for Short-Term Balloon Loans and Reg Z HPML Repayment Ability Requirements – Effective Oct 1, 2009
This may not be a hot product at this point in time, but 5 yr Balloon loans have been popular in the past and likely will be again. This interpretation really complicates things for your standard LTV loans – 75-90 percent LTV’s. Keep this info in the back of your head – it will come up in the future.
WOW – this is not encouraging for 5 yr Balloons that cross the HPML threshold. Talk about double-speak! The Fed tells you that you are not required to predict the future, but just before that, they tell you that you had better predict the future. The only way you will get a Balloon loan with less than 7 yrs done is if your APR is low enough to stay under the HPML threshold or your borrower has tons of equity and assets.
FHA Adopts Appraisal Update and/or Completion Report (Fannie Mae Form 1004D / Freddie Mac Form 442) – Effective January 1, 2010 – ML 2009-51
Folks at HUD are sleeping better at night knowing that once again they’ve “righted a potential wrong” and protected the consumer from harm.   Well dream on people. Do not plan on ordering Appraisal Updates on your expired FHA appraisals until you know if your investors will accept them. Better to prepare your borrower for the cost of a second appraisal and disclose the higher cost up-front.
USDA Announces 2 Pools of Funds for Refi’s
The USDA RD National office recently announced additional funding availability for RD Section 502 Guaranteed loan program “refinance” transactions under the American Recovery and Reinvestment Act of 2009 (ARRA). While USDA currently allows the refinancing of existing agency loans, both the 502 Guarantee and Direct programs, this additional funding availability set additional, more restrictive, requirements beyond that of current refinance guidelines. This Notice of Funding Availability (NOFA) effectively created two pools of funds in which RD refinance transactions can be processed and with the primary difference being that the ARRA pool of funds has more restrictive use requirements than the pool of regular annual funds.
Provided monthly by – 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?