Rules and Regulation Headlines

by 07 May 2009
We would like to introduce a new column with some of the major rules and regulation updates by Fannie Mae, Freddie Mac, FHA and VA. Periodically, we will include compliance changes. While this will not cover all of the changes that are released monthly, we have chosen the ones that affect loan officers, processors, underwriters and company owners/managers. Best of all, they are short, simple interpretations that will not only keep you up to date, but help you increase your business. ------------------------------------------------------------------------------------------------------- USDA Funds Released - $10 Billion (yes, that?s billion with a B) has been allocated. According the USDA, about 25% have already been used to fund ?purchase transactions only? that have been on HOLD since January 9, 2009. When the ?dust? settles, money will be released for refi?s.. Not every community qualifies?but if it does, it?s the best thing since sliced bread!. Check for counties in your state. USDA offers free training! -------------------------------------------------------------------------------------------------------- Fannie Increases Limits AND Credit Scores ? Good News-Bad News-Borrowers who were previously eligible under the temporary higher loan limits in 2008 will now be eligible again. Take a look at the loans you closed in 2008 that would benefit from expanded loan limits. The bad news?minimum credit scores have increase for higher-loan limits.  Credit scores with 75% LTV (or less) are 660 and over 75% 700+.  Link to the Loan Limit Geocoder to assist in determining the maximum loan amount available for a specific property ---------------------------------------------------------------------------------------------------------- Market Conditions Appraisal Report (1004MC) required for most loan types- This ?addendum? is like your math teacher asking you to ?show your work?. MC Addendum findings determine whether or not the property is in a declining market. Due to the additional time required to complete this form, most appraisers are going to raise their fees. The appraisers are saying an additional $50-$75. You will need to re-disclose. --------------------------------------------------------------------------------------------------------- FHA Limits Cash-Out Refi?s to 85% -- Wave goodbye?they?re really gone. No more 95% cash-out refis on FHA loans. However, FHA has clarified ?subordinated? financing and how it applies to the cash out refi?s.  If new subordinate financing is being offered, the CLTV is limited to 85 percent (the FHA-insured first mortgage + any new junior liens).  Existing subordinate financing may remain in place regardless of the total indebtedness or combined LTV. Borrower must qualify with all debt.  Existing subordinate liens that are being modified at closing are not considered ?new? financing.  Non-occupant co-borrowers or co-signers may not be added. ----------------------------------------------------------------------------------------------------------- Fannie & Freddie?s Rules When Client Buys Home Without Selling Current One-- Still a lot of confusion on what happens when a client will not be selling their current home before buying another one. Current Home Pending Sale ? (not sold prior to new loan closing) 1 Count PITI payment for both properties 2 6 months PITI reserves for both homes required 3 2 months PITI reserves required if 30% equity can be documented o Fannie will accept new appraisal, BPO or AVM o Freddie requires 2055 appraisal within 60 days of closing 4 Do not count current home payment if ? Home is sold with valid purchase contract AND ? Financing contingencies are removed, OR o Reserve requirements are met  6 mos. PITI both properties less than 30% equity  2 mos. PITI both properties more than 30% equity Freddie Only ? Corporate relocation/buyout agreement where the company will take responsibility for the old mortgage, does not require current payment be counted. There is a completely different set of rules that apply when current home is converted to a second home or an investment property. ------------------------------------------------------------------------------------------------------------ VA Relaxes Rules On Lender-Owned New Construction -- This is a great way to help clear out some of the new construction inventory on the market right now. VA has taken a more cautious approach by requiring the appraisal be reviewed by one of their own appraisers?but hey?who can blame them. This is 100% financing we are talking about. VA will process these properties as existing construction as long as the property is complete. ? Order the appraisal as ?Individual Origination Case? and ?Existing Construction? ? Provide evidence of their ownership ? Agree to complete any required repairs ? Obtain final inspection or certificate of occupancy in areas where it is required ? Written acknowledgement from the purchaser that: ?This property is being purchased as existing construction from a lender that acquired this new construction property from the builder. There is no warranty and VA will provide no assistance with any construction defects.? 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?