New Mortgagee Letter 2008-17

FHA News
Non FHA-approved Mortgage Bokers – Forward Mortgages 2008-17
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/08-17ml.doc

Mortgagee Letter 08-16 FHA Changes MI

If you are doing FHA loans you must read this mortgagee Letter
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/08-16ml.doc

Shirley Nault has been a mortgage professional for over 20 years. Visit her other mortgage web sites go to www.mtgview.blogspot.com or www.dutips.blogspot.com

FHA News

FHA just issued Mortgagee Letter 08-15. This mortgagee letter announces that the MCAW is being replaced with form HUD92900-LT. You may begin using this from June 9th and must use it by October 1, 2008.

FHA Single Family Implements Risk-Based Mortgage Insurance Premiums
Implements risk-based premiums for most Title II single family mortgage insurance programs, enabling mortgage lenders to offer borrowers FHA-insured financing with a range of mortgage insurance premiums based on the risk the insurance contract represents. Effective July 14, 2008.

Shirley Nault has been a mortgage professional for over 20 years. Visit her other mortgage web sites go to www.mtgview.blogspot.com or www.dutips.blogspot.com

FHA Tip: FHASecure Program

FHA Tip: FHASecure
Did you catch mortgagee letter 2008-13 that I sent out a few weeks ago?
The FHASecure program was designed to help borrowers who are facing Non FHA ARMS that are getting ready to reset.
FHA now allows the borrower to have had 2x30 or 1x60 days lates in the prior 12 months before the reset of the ARM.

FHA also allows: Borrowers who are delinquent on their non-FHA ARMs due to a rate reset or the occurrence of an extenuating circumstance but experienced no more than one 90-day late payment or no more than three 30-day late payments prior to the rate reset or extenuating circumstance that caused the delinquency provided the loan-to-value on the FHA insured first mortgages does not exceed 90 percent

Remember your upfront MI is different on this program. Please review Mortgage letter 2008-13 for complete details

Shirley Nault has been a mortgage professional for over 20 years. Visit her other mortgage web sites go to www.mtgview.blogspot.com or www.dutips.blogspot.com

FHA TIP CABO Standards allow for higher ratios

Did you know that if your property meets CABO standards(Council of American Building Officials) you can have higher ratio's in a manual underwrite?

The ratios can be33/45 for ENERGY-EFFICIENT HOMES (EEH). The benchmark qualifying ratios may both be exceeded by up to 2 percentage points when the borrower is purchasing or refinancing an EEH. These higher housing expense- and obligations-to-income ratios are justified due to the anticipated energy costs savings and become 33 percent and 45 percent, respectively. The appropriate HOC determines if a property qualifies for EEH designation. The original documentation attesting to energy efficiency is required on resales.
All properties meeting the Council of American Building Officials (CABO) 1992 Model Energy Code (MEC) are considered energy efficient and eligible for the two percentage points increase in the qualifying ratios.
You would need the Builder's Certification completed and the builder would need to certifys that the property meets CABO standards. The builder Certification can be found at HUD Clips form number 92541

Shirley Nault has been a mortgage professional for over 20 years. Visit her other mortgage web sites go to www.mtgview.blogspot.com or www.dutips.blogspot.com

FHA Tip: Properties Under construction or Existing Construction Less Than One Year Old

Properties Under Construction or Existing Construction Less than One Year Old Maximum Financing May Not be Allowed unless...

Properties not meeting the criteria shown below are considered as under construction or existing construction-less than one year old and are limited to 90 percent financing, i.e., 90 percent of the lesser of the appraiser’s estimate of value or sales price, plus or minus the adjustments required by paragraph 1-7, A-C. For a property to be eligible for greater than 90 percent financing, whether or not it has been previously occupied, it must meet one of the criteria described below. Otherwise, the property is classified as "under construction" or "less than one year old" and is limited to 90 percent financing.

1. Construction was completed more than one year preceding the borrower's signature on the Addendum to Uniform Residential Loan Application (form HUD-92900-A, page 2); or

2. The dwelling's site plans and materials were approved by the Department of Veterans Affairs (VA), an eligible DE underwriter, or a builder under FHA's builder certification procedures, (see HUD Handbook 4145.1 REV-2) before construction began; or

3. The local jurisdiction has issued both a building permit (prior to construction) and a Certificate of Occupancy or equivalent. (NOTE: This paragraph does not apply to condominiums or manufactured housing because of the special circumstances regarding their approval.); or

4. The dwelling is covered by a builder's ten-year insured warranty plan that is acceptable to HUD; or

5. The dwelling will be moved to a new location and the property is eligible for an insured mortgage at the new location by one of the methods described in 2 above.

Shirley Nault has been a mortgage professional for over 20 years. Visit her other mortgage web sites go to www.mtgview.blogspot.com or www.dutips.blogspot.com

FHA Tip Max Financing Allowed When Building on Own Land if

FHA Tip "Max Financing Allowed when Building on Own Land" The secret is that the borrower can not receive any cash out in order to obtain maximum financing. Read the 4155

Building on Own Land. If the borrower acts as a general contractor, and builds a house on land that the borrower already owns, or acquires land separately, maximum financing is available if the borrower receives no cash from the settlement. The appropriate LTV limits are applied to the lesser of:
1. The appraised value; or
2. The documented acquisition cost of the property, which includes: (a) the builder's price, or the sum of all subcontractor bids, materials, etc.; (b) cost of the land (if the land has been owned more than six months or was received as an acceptable gift, the value of the land may be used instead of its cost); (c) interest and other costs associated with any construction loan obtained by the borrower to fund construction of the property; (d) the closing costs to be paid by the borrower; and (e) reasonable discount points.
Equity in the land (value or cost, as appropriate, minus the amount owed) may be used for the borrower's entire cash investment. However, if the borrower receives more than $250 cash at closing, the loan is limited to 85 percent of the sum of the appraised value and allowable closing costs. Replenishment of the borrower's own cash expended during construction is not considered as "cash back," provided the borrower can substantiate with cancelled checks and paid receipts all out-of-pocket funds used for construction.

FHA Tip Max Financing not always allowed on 3-4 unit properties

We have been talking about transactions that do not qualify for maximum financing for FHA programs. There are some situation when a owner occupied 3-4 unit will not qualify for max financing. According to the 4155...
Three- and Four-Unit Properties. Regardless of occupancy status, the property must be self-sufficient (i.e., the maximum mortgage is limited so that the ratio of the monthly mortgage payment, divided by the monthly net rental income, does not exceed 100 percent). The mortgage calculations described below are in addition to the calculations detailed in paragraphs 1-6 and 1-7.
1. The monthly payment is the principal, interest, taxes, and insurance (PITI), including mortgage insurance, plus any homeowners' association dues, computed at the note rate (no consideration for buydowns may be given).
2. Net rental income is the appraiser’s estimate of fair market rent from all units, including the unit chosen by the borrower for occupancy, less the appraiser’s estimate for vacancies or the vacancy factor used by the jurisdictional HOC, whichever is greater.
This calculation is used only to determine the maximum loan amount. Borrowers must still qualify for the mortgage based on income, credit, cash to close, and the projected rents received from the remaining units. The projected rent may only be considered as gross income for qualifying purposes; it may not be used to offset the monthly mortgage payment.
3. The borrower must have reserves equivalent to three months' PITI after closing on purchase transactions. Reserves cannot be derived from a gift

FHA Tip Maximum Mortgage Calculations for non occupying borrowers

We have been talking about transactions that FHA defines THAT AFFECT MAXIMUM MORTGAGE CALCULATIONS. We talked about an Identity of Interest transaction and how it might effect your max financing now lets talk about Non Occupying Borrowers and their possible impact on the maximum mortgage calculation.

"Non-Occupying Borrowers. When there are two or more borrowers, but one or more will not occupy the property as a principal residence, the maximum mortgage is limited to a 75 percent LTV. However, maximum financing, as described in paragraph 1-7, is available for borrowers related by blood, marriage or law (spouses, parent-child, siblings, stepchildren, aunts-uncles/nieces-nephews, etc.), or for unrelated individuals that can document evidence of a family-type, longstanding, and substantial relationship not arising out of the loan transaction. All borrowers, regardless of occupancy status, must sign the security instrument and mortgage note. If a parent is selling to a child, the parent cannot be the co-borrower with the child on the new mortgage unless the loan-to-value is 75 percent or less.
To reduce risk exposure, mortgages with non-occupying co-borrowers are limited to one-unit properties if the LTV will exceed 75 percent. While we do not object to legitimate transactions in which non-occupant borrowers assist in the financing of the property–such as when parents help their children buy a first home–this arrangement may not be used by non-occupant borrowers to develop a portfolio of rental properties. The degree of financial contribution by the non-occupant borrower, and the number of properties similarly owned, may indicate that an investor loan has become the practical reality and that, in effect, family members are acting as "strawbuyers." FHA does not impose additional underwriting criteria on such transactions, such as specific qualifying ratios the occupying-borrower must meet individually." this is per the 4155

FHA May not allow max financing on your deal?

FHA defines TRANSACTIONS THAT AFFECT MAXIMUM MORTGAGE CALCULATIONS. Certain types of loan transactions affect the amount of financing available and the calculation of the maximum mortgage. I would like to review these this different scenerio this week. Let's first talk about "Identity-of Interest Transactions"

" Identity-of-Interest Transactions. Identity-of-interest transactions on principal residences are restricted to a maximum LTV ratio of 85 percent. Identity-of-interest is defined as a sales transaction between parties with family relationships or business relationships. However, maximum financing above 85 percent LTV is permissible under the following circumstances:

1. A family member purchases another family member's home as a principal residence.
If a property is sold from one family member to another and is the seller's investment property, the maximum mortgage is the lesser of either:
a. 85 percent of the appraised value, or
b. The appropriate LTV ratio percentage applied to the sales price, plus or minus required adjustments. The 85 percent limit may be waived if the family member has been a tenant in the property for at least six monthimmediately predating the sales contract. A lease or other written evidence must be submitted to verify occupancy.

2. An employee of a builder purchases one of the builder's new homes or models as a principal residence.

3. A current tenant purchases the property that he or she has rented for at least six months immediately predating the sales contract. (A lease or other written evidence must be submitted to verify occupancy.)

4. A corporation transfers an employee to another location, purchases that employee’s home, and then sells the home to another employee." This is per the 4155.1

Did you know a family Memember can Lend the borrower their downpayment and closing cost? Read the 4155

Family Member Lending-Family members (defined below) may help with the costs of acquiring a home in the form of a gift or a loan. All such gifts must also meet the requirements of paragraph 2-10(C). FHA permits family member to lend on a secured or unsecured basis, up to 100 percent of the homebuyer's required cash investment. This lending may include the downpayment, closing costs, prepaid expenses and discount points. If the money lent by the family member is secured against the subject property, whether borrowed from an acceptable source or from the family member's own savings, only the family member provider(s) may be the note holder. FHA will not approve any form of securitization of the note that results in any entity other than the family member being the note holder, whether at loan settlement or at any time during the mortgage life cycle.
Further, if the funds that are lent by the family member are borrowed from an acceptable source, the homebuyer may not be a co-obligor on that note (e.g., the son and daughter-in-law may not be co-obligors on the note used to secure money borrowed by the parents that in turn was lent for the down payment).

The following financing terms and conditions also apply:

1. The maximum insurable mortgage is not affected by gifts or loans from family members.

2. The combined amount of financing may not exceed 100 percent of the lesser of the property's value or sales price, plus normal closing costs, prepaid expenses, and discount points. While the family member may lend 100 percent of the cash investment requirements, cash back to the homebuyer (beyond refund of any earnest money deposit) at closing is not acceptable.

3. If periodic payments of the secondary financing are required, the combined payments may not exceed the borrower's reasonable ability to pay. The secondary financing payments are to be included in the total debt-payment-to-income ratio (i.e., the "back-end" ratio) for qualifying purposes.

4. The second lien may not provide for a balloon payment within five years from the date of execution.

5. If the family member providing the secondary financing borrows those funds, the source may not be any entity with an identity-of-interest in the sale of the property, including the seller, builder, loan officer, real estate agent, etc. Mortgage companies that have retail banking affiliates may have that entity make a loan to the family member, providing the secondary financing for the home purchase. However, the lending institution may not make such financing available under terms and conditions more favorable than to other borrowers (i.e., there may not be any special considerations provided in connection between making the mortgage and lending funds to family members to be used as secondary financing for the purchase of the home).

6. An executed copy of the document outlining the terms of the secondary financing must be maintained in the lender’s file. An executed copy of this agreement also must be provided in the endorsement binder.

For the purposes of this paragraph, a “family member” is defined as a child, parent, or grandparent of the borrower or borrower’s spouse. Included in this definition are legally adopted sons or daughters (and a child who is a member of an individual's household, if placed with such individual by an authorized agency for legal adoption by that individual), and foster children. The term "child" means a son, stepson, daughter, or stepdaughter.

FHA Tip: Down Payment can be borrowerd?

Did you know that there are circumstances where your borrower can borrower the down payment? This is per the 4155
Collateralized Loans. Funds can be borrowed for the total required investment as long as satisfactory evidence is provided that the funds are fully secured by investment accounts or real property. Such assets may include stocks, bonds, real estate (other than the property being purchased), etc.
In addition, certain types of loans secured against deposited funds, such as signature loans, the cash value of life insurance policies, loans secured by 401(k)s, etc., in which repayment may be obtained through extinguishing the asset; do not require consideration of a repayment for qualifying purposes. However, in such circumstances, the asset securing the loan may not be included as assets to close or otherwise considered as available to the borrower.
An independent third party must provide the borrowed funds. The seller, real estate agent or broker, lender, or other interested third party may not provide such funds. Unacceptable borrowed funds include signature loans, cash advances on credit cards, borrowing against household goods and furniture and other similar unsecured financing

FHA Tip: FHA only allows a borrower to have one FHA loan except..

HUD only allows a borrower to have 1 FHA loan. Unless... according to the 4155 there are 4 scenerios that allow an exception to this rule:

"A.Relocations. If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing and is not required to sell the existing property covered by a FHA-insured mortgage. The relocation need not be employer mandated to qualify for this exception. Further, if the borrower returns to an area where he or she owns a property with an FHA-insured mortgage, it is not required that the borrower re-establish primary residency in that property in order to be eligible for another FHA insured mortgage.
B. Increase in Family Size. The borrower may be permitted to obtain another home with an FHA-insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family's needs. The borrower must provide satisfactory evidence of the increase in dependents and the property’s failure to meet the family's needs.
The borrower also must pay down the outstanding mortgage balance on the present property to a 75 percent or lower loan-to-value (LTV) ratio. A current residential appraisal must be used to determine LTV compliance. Tax assessments, market analyses by real estate brokers, etc., are not acceptable as proof of LTV compliance.
C. Vacating a Jointly Owned Property. If the borrower is vacating a residence that will remain occupied by a co-borrower, the borrower is permitted to obtain another FHA-insured mortgage. Acceptable situations include instances of divorce, after which the vacating ex-spouse will purchase a new home, or one of the co-borrowers will vacate the existing property.
D. Non-Occupying Co-Borrower. A non-occupying co-borrower on property being purchased with an FHA-insured mortgage as a principal residence by other family members may have a joint interest in that property as well as in a principal residence of their own with a FHA-insured mortgage. (See paragraph 1-8 B for additional information).
Under no circumstances may investors use the exceptions described above to circumvent FHA’s ban on loans to private investors and acquire rental properties through purportedly purchasing "principal residences." Considerations in determining the eligibility of a borrower for one of these exceptions are the length of time the previous property was owned by the borrower and the circumstances that compel the borrower to purchase another residence with an FHA-insured mortgage. In all other cases, the purchasing borrower either must pay off the FHA-insured mortgage on the previous residence or terminate ownership of that property before acquiring another FHA-insured mortgage "

Keep in mind scenerio B is very hard to prove.

FHA Tip Counting Future Raise

FHA allows a borrower to use a raise if it is documented by the employer and received 60 days from the date of closing. Remember that the underwriter will look at the over all risk and make sure that this makes sense. Sometimes underwriters will require that the paystub is received showing the raise before closing. Make sure you know what the 4155.1 says so that you can communicate this with your underwriter and discuss the risk that the file could have with out the documentation. This information is found in 4155.1 Rev 5 Paragraph 2-7

Condo's

requires that condo's be approved by FHA. You can check the condo approvals by going to this web site https://entp.hud.gov/idapp/html/condlook.cfm. Here you will find your Condo ID.

If you Condo is not approved you can refer to Mortgage Letter 8-1-96 and possibly do a spot approval. You will need the Home Owners Association to complete items 1-13. This will be submitted with you loan and the DE underwriter has the authority to approve Spot condo's

The section of the act for condo's is 234(c). The ADP code if it is a Fixed rate is 734, if it is an ARM 731 and if it is a buy down it is 797


Town homes and PUD fall under the FHA section of the ACT 203b and do not have to be approved by HUD.

The MIP is calculated the same as on the 203b program (previously this was not the case but changed with Mtg letter 2005-38)