Rules & Regulations Headlines April 2010

by 12 Apr 2010

There were 12 articles and updates this month - down 30% from last year’s updates - but if you’re going to read JUST one article in this issue, it’s the one about the NMLS Consumer Website that has just been released. If you’ve gotten your license, and it does not show up on the consumer site, you’ll need to get in touch with your state’s licensing department and find out why.

Title: Official Website For Consumers to Check Your Mortgage License Online Just Released – Has Problems!
Is your licensing info on the Consumer’s NMLS website yet? We played with the site and it pretty much sucks. It’s impossible to find “individual loan officers” – and consumers are going to freak out if they can’t find you. Learn a few tricks on how to find your NMLS listing-- to make sure your clients can verify that YOU hold a valid mortgage license. 
Problem #1 - Trying to find an “individual loan officer” based on the criteria that is requested, is virtually impossible—unless the data is “exactly” correct. Example: Your name associated with your license is Joseph A. Smith, and you go by “Joe Smith”, they aren’t going to find you.
Problem #2 - If the COMPANY is licensed in another state, with mortgage branches in other states, it won’t show up either. The solution is to just do an “All States” search to find the mortgage company.
Problem #3- I did a search, by company name, of a very large mortgage company, who we know have had all of their loan officers licensed (around 200 of them). The loan officers’ info showed up alright, but the loan officer name are NOT in alphabetical order.
Problem #4 (and I swear that I’ll quit) The “search” feature needs A LOT of work. For example, I searched Rivercity mortgage, Wisconsin. It did not show up but the mortgage company is in my back yard. When I entered “Rivercity Mortgage, “all states”, it gave me not only Rivercity Mortgage in all the states reporting, it gave me 24 other mortgage companies that did not have anything to do with Rivercity Mortgage. So the consumer, who is trying to find you on the site, will also read the names of your competitors. 
Then, here’s what I would do: When you find either you company or your personal license, instead of having clients search and find nothing (because if they may a do a search and nothing shows up) include the link to your personal license listing in your brochures and email.
Title:   MDIA & GFE – Are Your RE Agents Confused Too?
There nothing in the new RESPA rules prohibiting the use of GFE worksheet (prior to issuing a GFE) however, HUD has the “practice” on its radar screen! 
If you are using a worksheet (almost everyone is) you might want to add a disclosure (at the bottom of the worksheet) that this is” NOT a BINDING estimate and is not a substitute for the new GFE”.
The Mortgage Talking Points® created for you this month ( for your real estate agents called “How to Adapt to the New Disclosure Rules is NOT about the gory “details” of MDIA, the GFE or the HUD1. It gives real estate agents tips on how to work with buyers, sellers, title companies and how to insure smoother closings. Hold sales meetings. Email. Give to your title rep. 
Title: FHA Increases in UFMIP effective April 5, 2010 – ML 2010-02
As FHA works to build the insurance fund to a level that can sustain the current and future losses I, for one, am thrilled they chose this option as opposed to a down payment increase. Hopefully your origination software will be updated for the change but don’t count on it.
The upfront mortgage insurance premium on purchase and refinance transactions (including all types of streamline refinances) shall be increased to 2.25% for loans with case numbers assigned on or after April 5, 2010. This affects all FHA programs EXCEPT:
  • Title I
  • Home Equity Conversion Mortgages (HECMs)
  • Hope for Homeowners (H4H)
  • Section 247 (Hawaiian Homelands)
  • Section 248 (Indian Reservations)
  • Section 223(e) (declining neighborhoods)
  • Section 238(c) (Military Impact areas in GA and NY)
Annual premiums will not change.
There is no “discounted” rate for counseled first-time homebuyers.
Mark your calendars and make sure you are charging the correct premiums come April 5. You’ve also got loan amount and APR issues to contend with if this is done wrong. Hopefully your origination software will be updated for the change but don’t count on it.
Title: FHA Waives the 90-day Flipping Policy – Effective 2-1-10 to 2-1-11
We’ve heard from loan officers whose underwriters are “waiting for the official ML” on the flipping policy waiver before they will allow a transaction to be approved under the waiver. “When will we see an ML?” My answer: “Probably never.” Just because policy change isn’t delivered via ML doesn’t make it any less “official”. 
Effective February 1, 2010 HUD waives the policy making a loan ineligible for FHA insurance if the contract of sale for the purchase of the property is executed within 90 days of the prior acquisition by the seller and the seller doesn’t come under any of the specific exemptions that apply to the 90-day rule.
Waiver is effective for one year—expires 2-1-11.
Waiver is limited to sales meeting the following conditions:
All transactions must be arms-length with no inappropriate agreements
  • Seller must hold title
  • No previous flipping activity on the property
  • Property must have been marketed openly and fairly via MLS, etc

When sales price exceeds sellers acquisition cost by more than 20%:
  • Value increase must be documented through rehab costs or explanation by appraiser.
  • Lender must order a property inspection report and provide to buyer prior to closing. Inspection must cover:
    • Structure – foundation, floor, ceiling, walls, roof
    • Exterior – siding, doors, windows, walkways, driveways
    • Plumbing, electrical, heating and air conditioning systems
    • Interiors
    • Insulation and ventilation
    • Fireplaces and solid fuel-burning appliances
    • Inspector does not need to be FHA approved
Lender may charge borrower for inspection
The signed announcement from HUD is included for subscribers.   Get a copy to your underwriters. We have another Mortgage Talking Points® flyer/email called “Investors Wanted: FHA Issues Moratorium on the 90-Day Flipping Rule” for your real estate agents too!
Title: An Updated 1003 Is Coming Your Way-Effective 7-1-10.
Even though it’s been announced, we still can’t find the updated 1003 to tell you about what changes will be made to the form. “Smooth” is not a word I would use to describe this most recent roll-out. The date effective has moved from January 1st to July 1st and then Fannie came out in November to state they are ready to accept the new information from the 1003 on March 1st
This is interesting only because the document is not effective until July 1st. What does this mean? Well, you may see this document come into use by some investors before July, but I don’t think most will be ready to provide the data and I am not sure the LOS systems will be recovered from the RESPA change.
Title: Freddie Joins the Chorus – Just Say NO to FHA Condo Approvals – Effective 2-1-10 – Bulletin 2010-2
As predicted last month when Fannie bailed on using FHA Condo Approvals, Freddie was not far behind. The odd thing about it – Freddie lumped in VA loans as eligible. VA was the first to come out and state that they would not accept FHA Condo approvals…but Freddie will buy ineligible VA loans???
Honestly, I am dumbfounded. What could they possibly mean by including VA loans solely using FHA Condo Approval? You won’t get your VA Guarantee – maybe I’m reading too much into it…asking to be “spoon-feed”. Obviously, they will buy VA-Guaranteed loans under the previous accepted practice when VA accepted FHA Condos…and they would not buy new VA loans without the guarantee…just struck me as funny.
Title: USDA Underwriting and Loan Closing Reminders:  Multiple Subjects – Jan 20, 2010 RD Instructions
USDA has clarified some issues that have come up within the last several months. If you do Single Family Housing Guaranteed Loans, there are some subtle updates covering: Cash Back to Borrower At Closing; Grossing Up Non-Taxable Income; Short Sales.
 A borrower is allowed to receive in “cash-back” at closing no more than that amount “documented” that they paid-in…typically being items as such as earnest money deposit, appraisal, credit report fees, and inspections….no more!!
Double drat!! We’ll have to work harder now. The majority of USDA RD field offices have allowed lenders for years to gross up non-taxable income from 20% to 25%. While this was never technically allowed in the regulations it became a standard for RD loans and only varied based on what a particular RD state office would allow. Bottom line: Breakout the income tax tables and document your calculations for determining the gross-up amount of non-taxable income.
Don’t let this “Short Sale” reminder confuse you. Common sense still applies however RD is simply reminding us that a short sale in itself is an indicator of unacceptable credit according to RD regulations 1980-D, Section 1980.345, if the debt is written off within last 36 months.
Written and contributed by Karen Deis of  Provided monthly by - Interpreting the Rules and Regulation Chnages for loan officers, processors, underwriters, and owners/managers.  Mortgage Talking Points TM, charts and checklists included.


Should CFPB have more supervision over credit agencies?