TopCompliance ALERT Logo
                                      FHA Announces Important Policy Changes

WEBSITE
QUICK LINKS


HOME

Mortgage Compliance

Service Presentations

CORE Compliance

About Us

Our Clientele

News & Views Posts

Archive

Library

Contact Us




Website
LCG - Link

Visit Us!
News and Views
LCG Weblog - 1
Visit Us!

PRESENTATIONS

Mortgage Compliance

Due Diligence

Forensic Services

FHA Examinations

Legal Reviews/Remedies

CORE Compliance Matrix

Loss Mitigation

Quality Control

HMDA / CRA

Licensing

Policy Guides/QC Plans

IT and IS

_______________

516-442-3456

Email Us




Join Our Mailing List
Overview

Federal Housing Administration (FHA) Commissioner David  H. Stevens today announced a set of policy changes.

The FHA is proposing to take the following steps:


  1. Increase the mortgage insurance premium (MIP);
  2. Update the combination of FICO scores and down payments for new borrowers;
  3. Reduce seller concessions to three (3%) percent, from six (6%) percent; and 
  4. Implement a series of significant measures aimed at increasing lender enforcement.
Highlights

Four Major Policy Changes

 
1) Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending.

  • The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
  • If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
  • This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
  • The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
2) Update the combination of FICO scores and down payments for new borrowers.

  • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
  • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
  • This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

3) Reduce allowable seller concessions from 6% to 3%.

  • The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
  • This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

4) Increase enforcement on FHA lenders.

  • Publicly report lender performance rankings to complement currently available Neighborhood Watch data - Will be available on the HUD website on February 1, 2010.
  • Enhance monitoring of lender performance and compliance with FHA guidelines and standards. (Implement Credit Watch termination through lender underwriting ID in addition to originating ID.This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.)
  • Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process. (Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.)
  • HUD is pursuing legislative authority to increase enforcement on FHA lenders.
Specific authority includes:                                                    
  1. (a)Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite.
  2. Legislative authority permitting HUD maximum flexibility to establish separate "areas" for purposes of review and termination under the Credit Watch initiative. (This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches.)


 Visit our Library for Issuance      Action Button Image 1                   


FHA Announces Policy Changes to Address Risk and Strengthen Finances - HUD No.10-016 - Press Release, January 20, 2010


Action Button Image 1


Lenders Compliance Group
is a full-service, mortgage risk management firm, providing professional guidance to financial institutions in all areas of mortgage compliance.

Specializations

Mortgage Compliance
Compliance Audits
Forensic Loan Audits
FHA Examinations
State and Federal Examinations
Fannie/Freddie/Ginnie Applications
Mortgage Due Diligence
Legal Reviews & Remedies
Loss Mitigation Compliance
Quality Control
HMDA & CRA Reviews
IT & IS Compliance
Statutory Licensing


This communication is sent to our valued clients and colleagues, who regularly receive our Advisory Bulletins, Mortgage Compliance Updates,  Compliance Alerts, Licensing Alerts, and News and Views.

These publications are free to subscribers.

2010 Lenders Compliance Group, Inc. All Rights Reserved.