HUD Makes Changes to the FHA Program
July 2, 2008
The U.S. Department of Housing and Urban Development recently made several changes to the Federal Housing Administration loan program to assist consumers. These changes are designed to expand FHA financing opportunities for borrowers while guarding against overextending the program.
A. Waiver of Anti-Flipping Regulations – For a period of one year beginning June 9, 2008, HUD will insure FHA loans secured by property acquired by lenders through foreclosure, without regard to whether the lender is a state- or federally-chartered institution.
B. Expansion of the FHASecure Initiative – On July 14, 2008, HUD will expand its FHASecure initiative to refinance delinquent adjustable-rate mortgage (“ARM”) loans and offer new subordinate financing where the combined loan-to-value (“LTV”) ratio exceeds the applicable FHA LTV ratio and geographical maximum mortgage amount.
C. Risk-Based Premium Structure – Also on July 14, 2008, HUD will implement a risk-based premium structure for all FHA-insured loans, including those originated through the FHASecure program.
D. Proposal to Prohibit Seller-Paid Downpayment Assistance – On June 16, 2008, the Department re-published its proposed rule governing seller-funded downpayment assistance gifts in connection with FHA-insured mortgage loan transactions. HUD invited comments to the proposal, which must be submitted by August 15, 2008.
E. Proposal to Reverse Late Case Endorsement Requirements – HUD recently published a proposed rule that would reverse its current policy regarding documentation requirements for late case insurance endorsement submissions and reinstate its previous standards. The proposed regulation would again require lenders to submit payment histories with FHA case binders and document a six-month consecutive payment history before submitting late case endorsement loans in which the borrower missed a payment prior to submission. Comments are due by August 8, 2008.
F. Revised FHA Forms – The Department will replace the Mortgage Credit Analysis Worksheet (“MCAW”) with a new form, HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary, and has revised the Addendum to the Uniform Loan Application, HUD-92900-A. Lenders may begin using the new forms immediately, and must use the new forms for all loan applications taken on or after October 1, 2008.
G. Clarification on Broker Fees – HUD recently issued guidance regarding the circumstances under which non-FHA approved mortgage brokers may receive compensation in connection with Home Equity Conversion Mortgage (“HECM”) loans. We summarize HUD’s guidance on this issue for both HECM and forward FHA loans.
For details of these FHA changes, read the full release “FHA: Need a Scorecard to Keep Up With the Changes - Mortgage Banking & Consumer Credit Alert” written by Phillip Schulman and Krista Cooley from K&L Gates.
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