This past year we've done our best to wrap our heads and arms around the available product in the market place and at this point in time I'd have to say, without a doubt, we're writing the right loans for the right kind of borrowers.
You and your affinity partners should be proud of every single loan closing you have today. Not only because you closed that sucker but because at this point with the boxes for lending being so tight there really should not be ANYTHING to be said poorly about our origination channel or the services we are all providing for our customers.
Borrowers are being vetted to the Nth degree and anyone that is able to obtain a home loan today should know they are in a privileged group of consumers.
Picking Your Partners:
That said; all of you were making sure you had partnered with the highest and best sources for your lending/funding needs and thankfully you've chosen me to be one of those sources. The Foundation of my business is based accuracy, consistency and speed to close. That last one being the hardest part.
Our Realtor partners and buyer customers spend months and months looking for the perfect home (typically in highly impacted market price points) and suddenly after having a pre-qualified buyer file on your desk for 5 months all parties want to close inside of 21 days.
21 DAYS??? In this market? With these lending criteria? With HVCC in place it was pure luck if you got your conventional appraisal back inside of 7 calendar days and your funding source didn't hit you up for a field review or additional comps or other appraisal corrections which could add an additional 3-10 business days to your collateral conditions.
So, in some cases we worked with the seller and the buyer and obtained FHA financing instead: choose your own appraiser, have the work down inside of 3 days, your lender (ME :-)) was able to u/w and approved in 24-48 hours and we're were closing (on a well oiled timeline with all parties doing the lifting) inside of 2 weeks - every time! I have a number of customers where this was our basic mode of operation. At times it was stressful but in the end ALL parties were happy.
FHA HVCC & GFE2010 add days to transaction time
FHA and GFE2010 have put a stop to these time frames now. All of your funding sources are taking from 2-7 days to just get the loan to underwriting. Every single aspect of your GFE2010 and Initial Fee Work Sheet or Loan Fee Sheet is being scrutinized and corrections are being required.
FHA has implemented HVCC process as well. Now we don't even have a speed option for our business. It's all hitting the same process inhibitors, across the board. Your Realtor partners need to understand, that unless they want to get to be 5 years older with every transaction that a 45 day escrow is the best possible closing time frame. 30 days is pushing the outside limits as HVCC and FHA repairs could delay a transaction by a minimum of 5-10 business days.
Present this information to all of your industry partners and prepare them for the processes you are going through so that they aren't shocked when you tell them it will take more time than last year to close their escrow.
Please DO NOT hesitate to call me with any questions.
RESPA, GFE2010, Loan Fee Worksheet, Initial Fee Sheet, 2010 itemization and Letter of intent to proceed, it’s all enough to make your head spin.
First I want to point out a number of helpful items I’ve come across in my research on this topic.
1. Calyx Point – Link on How to Complete Initial Fees Worksheet
2. Calyx Point – Link about GFE2010
3. Wells Fargo Completing GFE2010 Scenarios
4. Wells Fargo GFE Job Aid
So, when you are completing all of these forms remember the following:
Calyx Users: We need GFE AND Initial Fees worksheet ONLY (no Loan Fee Worksheet) – Read the link above on how to compete your forms.
Encompass Users: we need GFE2010 AND Loan Fee Worksheet (on FAMC site)
About our Loan Fee Worksheet (Encompass users) specifically Yield Spread Premium (YSP): do not think about this form in terms of GFE2010. Think about this form in terms of GFE2009 (the old way).
If your loan is locked you need to complete this section (YSP). Head down to the line that is for YSP, The first box is the total amount of locked in YSP.
If through your origination charge you are earning (retaining) any YSP you need to include this in Broker retained YSP section. Whatever amount you are NOT retaining (crediting) gets listed in YSP Credited to borrower.
Put another way: If you are looking to earn 2.50% on your transaction AND the loan is LOCKED at 1.45% YSP you would write in:
Origination fee of 1.05% (in dollars)
YSP = 1.45% (in dollars)
Broker retained YSP of 1.45% (in dollars).
If you are charging 2.50% AND are crediting the entire YSP to the borrower then you would write in:
Origination fee of 2.50% (in dollars)
YSP Credited to the Borrower =1.45% (in dollars)
If your loan is NOT LOCKED: You would NOT complete the YSP section and ONLY list Origination of 2.50%.
Calyx Users and Initial Fees Worksheet: LOCKED LOANS:
If you are looking to earn 2.50% on your transaction AND the loan is LOCKED at 1.45% YSP you would write in:
Line 801 - Origination fee of 1.05% (in dollars)
Line 812 - YSP = 1.45% (in dollars)
In the area below Line 814 - Compensation Paid to Broker from Lender (not paid from applicants loan proceeds) you would include ALL of YSP of 1.45% (in dollars) so that it carries over correctly to GFE2010 Line 2.
Calyx Users with unlocked loans: ALL origination in this example of 2.50% goes into Line 801.
Wait! My damn Initial fees worksheet doesn’t balance! The borrower is showing as coming in with too much cash to close. In this case you will need to head on down to the bottom of your Initial Fees sheet and add a lender credit of however much you would like to balance the sheet correctly. You will also want to add a lender credit on Page 4 of the 1003 in order to get that piece Balanced correctly too.
Calyx Users: Where do all of my Fees go? How to they Transfer Back and Forth between Initial Fees worksheet and GFE2010?
Box 1 – ALL 800 Series Charges
Box 2 – if marked as credit (from above 814)
Box 5 – Do not put owners title on the Initial Fees sheet (when you break it out separately in Box 5 it will carry back to Initial Fees section 1300: Total from GFE2010)
Box 6 - Pest Inspection is auto-populated from 1302 (if input) on Initial fees worksheet.
Box 6 Continued: Any additional itemized amounts listed here will carry back to Initial Fees
section 1300: Total from GFE2010
Box 9 – Adds together ALL of 1000 series charges
Box 10 – generated from Line 901
Box 11 – Generated from Line 903
What’s Up with this Letter of Intent to Proceed?
Here’s a dooozy and this is VERY important. As you all should understand at this point, GFE’s MAY EXPIRE after the 10 business days as posted on your GFE2010 important dates line 2 (GFE2010 Page 1). After the expiration of the GFE and because there is no place for the borrower to sign the new GFE you will eventually need the borrower to commit to (or lock in) your GFE2010. Once the borrower has signed the Letter of Intent to Proceed your GFE is locked in forever. You may not make a single change (other than change of circumstance). So: DO NOT send this in with your submission ONLY send it in when you are ready to order loan docs.
I am hopeful that this was able to clarify SOME of the issues going forward with GFE2010 and where what charges are etc.
I would have to say FHA has helped to bolster the majority of our books over the last 24+ months. Without it there would be even fewer of us still in business today. That said, having David Stevens at the helm of the FHA has been a blessing in disguise. He'll be making necessary changes as he sees fit so that we can all have an origination source and platform going forward.However, these changes aren't necessarily going to be easy to swallow.
Just a as a reminder about what changes have taken effect @ FHA and which Changes are coming soon (as announced by ML).
1. The Spot Approval Process has been Eliminated all together, if your Condo project is NOT approved there are specific rules that must be followed (ML09-46a/ML09-46b) more on this below.
2. HVCC for FHA: As of any case file number issued on or after February 15th, 2010 you will have to order your FHA appraisal through an HVCC styled appraisal source, provided by your sponsoring lender (yours truly).
3. UFMIP Increase: On April 5th, 2010 the UFMIP for any case file issued on or after this date will INCREASE to 2.25% for relatively all of your FHA loans (purchase, refinance, streamline refi). (ML10-02)
4. Short Sales - this policy jives with my company's stance since day I started. IF your borrower has a short sale (with certain specific instances excepting) they will need to wait a full 3 years (as with Foreclosure) before being eligible for FHA financing. (ML09-52)
5. Appraisal Portability - Any appraisal completed after January 1st, 2010 is only valid for 120 days from its completion date. This is shorter by 2 months of the previous rule which required 180 days waiting period before a new appraisal could be issued on a property. (ML09-29).
More on Condos and the approval process: The new processes are:
HRAP - HUD Review and Approval Process - HUD reviews the project for approval to lend
DELRAP - Direct Endorsement Lender Review and Approval Process: the Sponsor/Lender reviews the project, bylaws and financials for approval and allows for FHA financing in the project. This is tricky with respect to risk and we're hearing that many if not most Sponsors/Lenders (mine included) will not be participating in this specific process. We will only be writing loans in previously approved projects (those showing on HUD's approved list). If the Document status shows as "Unrecorded" we will be unable to move forward. Some updates to the project approvals are:
1. No more than 10% owned by one investor
2. No more than 15% of the HOA dues are in arrears
3. The project must have 50% Owner Occupancy Rate
4. No more than 50% FHA concentration (or up to 100% if ML09-46a terms are met).
Guaranteed this will make financing Condo's (at least in the near term) much harder than before.
So: Keep this list.. remember..learn it. love it. share it with your partners and let's get the loans in that fit.
*********************
Remember to Go out and have fun!
2007 was the year that took us by surprise. 2008 was the year to survive and 2009 was the year to get back to basics.
We took our lumps and bumps and figured out how to originate what I think are the right loans for the right borrowers.
2010 will be the year for the originator to grow and continue to take local market share. With all of the legislative activity,
licensing requirements and HUD’s continuous changes being forced upon both the Consumer and the Originator 2010
will prove itself to be both challenging but also VERY, VERY rewarding.
More will leave this business and that presents us with a unique opportunity to position ourselves as industry veterans
(this has been a war of sorts, no?) with the capacity and ability to move and change with the times. All this upheaval is doing
for us is pushing us to become better at our craft and to hone our skills to be the best in our marketplace.
I feel like 2010 will be the year of professionalization of our industry. For all of the lack of regulation we’ve enjoyed in our
business it’s about time we got serious about our position in our customers lives: Helping them make one of, if not the
largest financial decision in their lifetime.
This presents an additional opportunity for us as well in that we (the originators) are being blamed for the collapse of the
housing industry in our country. With these changes we will be able to further position ourselves with our customers and
those of us left standing in the room will be given some much deserved credibility.
Many fear that the death of the independent originator will happen in 2010 and that may be the case. However that does
not mean that Mortgage Originators will be forced out, you will simply adapt and end up working under a different umbrella.
If this does happen, just take heart that consolidation doesn’t last forever and independence will be permitted again in the
future only with different (and definitely higher) barriers to entry. Not a bad thing for us or our business.
I look forward to continuing to partner with you and your team in 2010 and having some of the best professional years of our careers ahead of us.
Happy New Year
Sincerely,
Raoul Badde
Delayed Implementation Date for New Requirements in ML 2009-28
Enactment of ML 2009-28, Appraiser Independence, will be delayed until February 15, 2010. ML09-28 (originally planned for a January 1, 2010 implementation) has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection. The effective date for both sections of this guidance will now take effect for all case numbers assigned on or after February 15, 2010. This extension will provide FHA and lenders additional time to adjust systems to accommodate the changes.
Detailed instructions on changes to FHA Connection will be issued in a new mortgagee letter. However, lenders should be aware that the requirement for inputting the appraiser ID and the appraisal assignment date in the FHA Connection case number assignment screen will be removed. Instead, lenders will be required to enter all appraisal data, including the appraiser ID, in the Appraisal Update Screen once the completed appraisal is received by the lender and prior to closing the loan.
Delayed Implementation Date for ML 2009-51
ML 2009-51, Adoption of the Appraisal Update and/or Completion Report, states an effective date of January 1, 2010. The effective date is being extended and will now apply to all case numbers assigned on or after February 15, 2010. This extension will provide additional time needed by FHA and lenders to adjust their systems to accommodate use of the form.
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