Blog of the Mortgage

February 10th, 2009 10:17 PM

From time to time I'll post updates from our Consultancy firm: Potomac Partners.
This update was provided late last week by Potomac Partners of Washington D.C. for those of you that are newer to these mails this firm is run by former HUD executives and their information is both market leading and and a firm indicator of future changes in guidelines especially on HUD business.
We would like to update you on the following:

Legislation - Mortgage Limits

Fannie Mae and Freddie Mac Appraisal Requirements - May 1st

Legislation - Mortgage Limits

The House of Representatives' Stimulus bill restores the 2008 mortgage limits across-the-board for the remainder of 2009. In other words, if the limit was $729,750 (or any amount above the base limit), the limit for 2009 will be the limit that HUD implemented in ML 2008-06. It appears the HECM limit would stay at $417,000. The change will also affect the GSEs. The bill would provide the Secretary of HUD with the discretion to increase limits further in "sub-areas".

We believe this provision has an excellent chance of being enacted into law by mid-February. In fact, it is possible that the limits could be increased further. One proposal being considered is raising the GSE limit base limit to $ 625,000. That change would have the effect of raising the FHA "floor (65% of $625,000). The increase of the GSE limit to $625,000 is less likely but possible particularly if the jumbo market encounters additional problems in the coming weeks.

Below is the legislation.
SEC. 12002. FHA LOAN LIMITS FOR 2009.
(a) LOAN LIMIT FLOOR BASED ON 2008 LEVELS.-
For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, if thedollar amount limitation on the principal obligation of a
mortgage determined under section 203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)) for any sizeresidence for any area is less than such dollar amount limitation that was in effect for such size residence for sucharea for 2008 pursuant to section 202 of the EconomicStimulus Act of 2008 (Public Law 110-185; 122 Stat.620), notwithstanding any other provision of law, the maximum dollar amount limitation on the principal obligationof a mortgage for such size residence for such area forpurposes of such section 203(b)(2) shall be considered (except for purposes of section 255(g) of such Act (12 U.S.C.1715z-20(g))) to be such dollar amount limitation in effect for such size residence for such area for 2008.
(b) DISCRETIONARY AUTHORITY FOR SUB-AREAS.-
Notwithstanding any other provision of law, if the Secretary of Housing and Urban Development determines, forany geographic area that is smaller than an area for whichdollar amount limitations on the principal obligation of amortgage are determined under section 203(b)(2) of theNational Housing Act, that a higher such maximum dollaramount limitation is warranted for any particular size or sizes of residences in such sub-area by higher medianhome prices in such sub-area, the Secretary may, for mortgages for which the mortgagee issues credit approval for
the borrower during calendar year 2009, increase the maximum dollar amount limitation for such size or sizes ofresidences for such sub-area that is otherwise in effect (including pursuant to subsection (a) of this section), but inno case to an amount that exceeds the amount specifiedin section 202(a)(2) of the Economic Stimulus Act of2008.

SEC. 12003. GSE CONFORMING LOAN LIMITS FOR 2009.

(a) LOAN LIMIT FLOOR BASED ON 2008 LEVELS.-
For mortgages originated during calendar year 2009, ifthe limitation on the maximum original principal obligation of a mortgage that may purchased by the Federal
National Mortgage Association or the Federal Home LoanMortgage Corporation determined under section 302(b)(2)of the Federal National Mortgage Association Charter Act(12 U.S.C. 1717(b)(2)) or section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C.1754(a)(2)), respectively, for any size residence for anyarea is less than such maximum original principal obligation limitation that was in effect for such size residencefor such area for 2008 pursuant to section 201 of the Economic Stimulus Act of 2008 (Public Law 110-185; 122236Stat. 619), notwithstanding any other provision of law, the limitation on the maximum original principal obligation ofa mortgage for such Association and Corporation for such
size residence for such area shall be such maximum limitation in effect for such size residence for such area for2008.
(b) DISCRETIONARY AUTHORITY FOR SUB-AREAS.-
Notwithstanding any other provision of law, if the Director of the Federal Housing Finance Agency determines,for any geographic area that is smaller than an area for
which limitations on the maximum original principal obligation of a mortgage are determined for the Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation, that a higher such maximum original principal obligation limitation is warranted for anyparticular size or sizes of residences in such sub-area byhigher median home prices in such sub-area, the Directormay, for mortgages originated during 2009, increase themaximum original principal obligation limitation for suchsize or sizes of residences for such sub-area that is otherwise in effect (including pursuant to subsection (a) of thissection) for such Association and Corporation, but in nocase to an amount that exceeds the amount specified inthe matter following the comma in section 201(a)(1)(B)of the Economic Stimulus Act of 2008.

GSE Appraisal Update

Attached is our analysis of the GSE Home valuation Code of Conduct which is effective for applications taken on or after May 1st. While the Code does not apply to FHA loans at the present time, we believe it very possible that they will adhere to this policy in the coming months.
Below are the highlights of the Code and its impact.
In late December, the Federal Housing Finance Agency, the GSEs and the NY Attorney General released a revised Home Valuation Code of Conduct. The purpose of the Code is prevent "improper influences on appraisers". On January 7th, the GSEs published Q&A's on the valuation Code. Fannie Mae's Q&A's are used in this analysis.
The highlights of the Code are:

Lenders must maintain strict separation from the appraisal and loan production functions including any staff compensated on the "successful completion of the loan".

There can be "no substantive communication" about any aspect of the appraisal process. The person performing appraisal assignments (if an employee of the lender) must be trained and "wholly independent of the loan production staff and process".

Mortgage lenders that do not sell directly to the agencies (i.e. "correspondent lenders") are permitted to select and manage the appraisal process. A "correspondent lender" is defined as a lender that closes in its own name w/ its own funds (RESPA definition).

Mortgage brokers are prohibited from selecting or managing appraisal assignments including from appraisal management companies.

Mortgage brokers may not provide the lender with a list of approved appraisers or order an appraisal from a management company.

A lender (including correspondent lenders) may use staff appraisers or appraisers from affiliated or non-affiliated settlement service firms if the conditions of the code are met.

The lender must provide the borrower a copy of the appraisal "promptly" (at least three days prior to closing). The borrower can waive the requirement.

Finally, the Code establishes a new "Institute," funded by the GSEs, to accept complaints from appraisers and the public about "improper influence" of appraisers. It is not yet effective.

To sum up, except as noted above, lenders, their affiliated appraisal firms and independent settlement service providers may continue normal business practices. However, services could become more expensive for lenders and ultimately borrowers. Moreover, lenders are still required secure assurances that these companies are in compliance with the Code.

attached in this link is the Executive Summary provided by Potomac Partners

I'm looking forward to helping you close more loans in 2009! Have a great weekend.

You'll need the following links to download these forms:

Education Station
Government Loan Programs

Posted by Raoul Badde on February 10th, 2009 10:17 PMPost a Comment (0)