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HUD update and Potomac Partners Update on HUD:I had the opportunity to sit in on an all-day HUD training in San Francisco the Friday before last. I had to note this is likely one of the only times government employees got to stay at one of the nicest Hotels in San Francisco (the training was at the St. Francis Hotel on Union Square). In any case, I saw quite a few of you there in the morning and it was encouraging to know that you are taking the time out of your day to keep improving your skills in this ever changing market. To get updates on more Training Opportunities from HUD head over to this link and sign up for their automatic e-mails. This will keep you ahead of the game with Mortgagee Letters (ML) changes etc. Unfortunately for me after 8 hours there were really only a couple of take-a-ways:
I anticipate that HUD will be going back to the "old" model of fee schedules with allowable and non-allowable fees.
Since this a HUD update mail I am sharing our most recent Potomac Partners update that we received on Friday as well.
Below are some comments on specific issues. IRS and FHA are going to do a conference call between them to discuss the tax credit--but FHA does not expect a change to its current policy. Even though moratorium on risk based pricing of insurance premiums will expire soon, FHA will not be changing its current premium structure and will not change the amounts in October 2009. That decision is another encouraging sign about the status of the FHA fund. Condominium Processing: Consultants/contractors can be used by DE lenders to process condos under DELRAP but a lender employee must sign the lender certs required by FHA and lender is accountable and responsible for decisions. Another ML will be issued with specific instructions for completing the necessary data entries and new screens in FHA Connection for the new processes. There is no reciprocity with VA/Fannie/Freddie on condo approvals. No attorney certification letter for legal documents is needed under new process. If there is an environmental issue that cannot be resolved by the lender under the DELRAP process then the lender must reject the project--the lender cannot send the project to FHA. Projects approved before 10/1/08 must be reprocessed under new instructions. FHA recognizes that 30% concentration limit is causing lenders concerns- We now expect FHA to make a change on this requirement. With respect to 30% concentration limit, if the FHA case number is assigned before the project reaches the 30% limit, then FHA will still allow endorsement even if the project exceeds the 30% limit at the time of endorsement. HUD expects DELRAP lenders to process all of their projects under DELRAP--they cannot decide to send some projects to HUD for processing.
The House Appropriations Committee has included provisions in the HUD annual appropriations bill to extend the current FHA limits for FY 2010. The limits could increase if market conditions improved in an area. See page 145 of the link below.Link to the Bill
In National Mortgage News Online last Friday, it was reported that FHA had advised Congress that it had used up 75% ($236 billion) of its $315 billion of commitment authority by June 16th. Since FHA activity continues to increase as the GSEs and MIs restrict new purchase originations, it is possible that FHA will run out of commitment authority in the next month or so unless additional commitment authority is obtained. HUD has requested an additional $85 billion in authority to address the current shortfall in FY 2009. We believe that FHA will eventually obtain the necessary authority (because of FHA's importance to the economy) even though some in Congress are raising concerns. In the unlikely event that HUD is delayed in receiving additional commitment authority, we have prepared the following background information for you.
The fundamental lender concern with the lack of commitment authority is your liability for delinquent loans not endorsed within 60 days of loan closing. After 60 days, as you know, the lender cannot obtain insurance endorsement unless it certifies the loan is current. FHA Has Shown Flexibility in Past In 1997, FHA temporarily suspended its ARM program because, by law, FHA ARM volume is capped at 30% of total insured activity for the previous fiscal year. In Mortgagee Letter 97-35 addressing this issue, FHA was very flexible and treated uninsured loans as current as long as the case files were submitted for endorsement within 60 days of closing. While lender insurance was not implemented in 1997, FHA prepared an analogous process that guaranteed insurance as long as lenders entered insurance data into FHA Connection. Bottom LineWe would be very surprised if the Congress did not increase FHA's commitment authority. In the unlikely event that FHA must suspend insurance operations, we believe they will follow the approach outlined in 1997. In a worst case scenario (which we do not see happening), lender insurance does provide you with a mechanism to minimize possible disruption to your operations. As long as the lapse in commitment authority does not occur until August, you should have time to insure loans in October (in the new fiscal year) and still meet the 60 day submission requirement for insurance endorsement.
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