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The Department of Housing and Urban Development has issued new permanent loan limits for single family home loans insured by the Federal Housing Administration.

Beginning January 1, 2009, the FHA limits for single-family home mortgages will be $271,050 in low cost areas and up to $625,500 in high cost areas.  The new rule results in a reduction from $729,750 that was established in February 2008. 

The press release states:

For several years, FHA’s loan levels were below the cost of the average home in communities across the nation. As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process. In some cases, borrowers turned to exotic subprime loans.

FHA mortgage insurance makes home financing more available to low-income and first time homebuyers. This is because the mortgage is backed by the full faith and credit of the government, freeing lenders from assuming the risk of default.

Higher FHA loan limits do not cost the government any money because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA-insured mortgage loans.

The Housing and Economic Recovery Act pegs the national conforming mortgage loan limit to a house price index chosen by the new Federal Housing Finance Agency (FHFA). For 2009, the national conforming limit will remain at the current level of $417,000.

The Act says that the new FHA loan limits will be set at 115 percent of the median house price in a given area, as determined by HUD, but can not be lower than 65 percent of the conforming loan limit (the national floor). Also, the FHA mortgage limit cannot exceed 150 percent of the national conforming loan limit (the national ceiling).

The Act also pegs the national mortgage limit for FHA-insured reverse mortgages to the national conforming loan limit. The FHA product known as the Home Equity Conversion Mortgage (HECM) will therefore have a national mortgage limit of $417,000. Unlike the new forward mortgage loan limits, the new HECM loans limits are effective on loans insured or after November 6, 2008. This is the first time that a single limit applies to these mortgages nationwide. As in previous years, the special exception areas of Alaska, Hawaii, Guam, and the Virgin Islands may have higher loan limits. Starting in January 2009 counties in those areas may have loan limits of 115 percent of area median prices, where that amount is above $417,000, up to a ceiling of $625,500.

For a copy of the full press release, please click here.

Tags: Consumer Protection, Economic Stimulus, FHA Insurance, HUD & FHA, Legislation, Mortgage Banking - General, Regulations, Reverse Mortgages by the Editor
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The Department of Housing and Urban Development has issued Mortgagee Letter 2008-24, entitled Home Equity Conversion Mortgage (HECM) Program - Requirements on Mortgage Originators.

The Mortgagee Letter responds to recent changes to the law governing the Federal Housing Administration’s HECM (Reverse Mortgage) program.  The changes were set forth in the Housing and Economic Recovery Act of 2008 enacted July 30, 2008.

The Mortgagee Letter notes Section 255(n)(1) of the National Housing Act now provides that the:

HECM mortgage originator or any other party that participates in the origination of a FHA insured HECM mortgage shall (1) not participate in, or be associated with, or employ any party that participates in or is associated with, any other financial or insurance activity; or (2) demonstrate to the Secretary of HUD that the mortgagee or other party maintains, or will maintain, firewalls and other safeguards designed to ensure that (i) individuals participating in the origination of a HECM mortgage have no involvement with, or incentive to provide the mortgagor with, any other financial or insurance product; and (ii) the mortgagor shall not be required, directly or indirectly, as a condition of obtaining a mortgage under this section, to purchase any other financial or insurance product. 

The Mortgagee Letter states that HUD will solicit public comment on these issues prior to issuing fuller guidance.  Until that time, HUD generally admonishes compliance.

The Mortgagee Letter also notes that Section 255(n)(2) of the National Housing Act now provides:

all parties that participate in the origination of a mortgage to be insured under FHA’s HECM program must be approved by the Secretary.  This requirement means that loan origination must be performed by FHA approved entities including: (1) a FHA-approved loan correspondent and sponsor; (2) a FHA approved mortgagee through its retail channel; or (3) a FHA-approved mortgagee working with another FHA-approved mortgagee.   

For this reason, the Mortgagee Letter rescinds prior Mortgagee Letter 2008-14 as inconsistent with this statutory standard effective October 1, 2008.

For a full copy of Mortgagee Letter 2008-24, click here.

Tags: Consumer Protection, FHA Insurance, HUD & FHA, Mortgage Banking - General, Regulations, Reverse Mortgages by the Editor
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The Department of Housing and Urban Development has issued Mortgagee Letter 08-14 (Home Equity Conversion Mortgage Program - Non-FHA Approved Mortgage Brokers)

ML 08-14 purports to be a reminder to FHA-approved lenders of:

FHA’s policy regarding the use of non FHA-approved mortgage brokers, subsequently referred to as a non-approved entity or third party (i.e., advisor, consultant, mortgage broker) to support the origination of FHA-insured Home Equity Conversion Mortgages (HECM).  Loan origination must be performed by FHA approved entities which include: (1) an FHA-approved loan correspondent and sponsor; (2) an FHA-approved mortgagee through its retail channel; or (3) an FHA-approved mortgagee working with another FHA-approved mortgagee.  However, FHA policy permits a non-approved entity or third party to assist in the origination of insured loans in certain limited ways, and to receive compensation for such services actually provided under certain limited circumstances.

This Mortgagee Letter describes the ways in which a non-approved entity or third party may support the origination of HECMs and the limited circumstances under which they may be compensated, consistent with both applicable FHA policy and applicable requirements of the federal Real Estate Settlement Procedures Act (RESPA) and its implementing regulations found at 24 CFR Part 3500.

FHA-approved entities are required to complete the full origination process, as described below, in order to be compensated for their services.  A non-approved entity or third party may provide more limited services only and be compensated for those limited services under the circumstances described in this Mortgagee Letter and applicable FHA and RESPA regulations.  FHA will not permit an FHA-approved entity to serve in the limited capacity of a non-approved entity or third party.

ML 08-14 then goes on to discuss required activities for the FHA-approved entities, certain activities in which non-approved entities can engage and compensation to such non-approved entities.

For a full copy of ML 08-14, please click here.

Tags: Consumer Protection, HECM, HUD & FHA, RESPA, Regulations, Reverse Mortgages by the Editor
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The Department of Housing and Urban Development has issued Mortgagee Letter 2008-12 regarding counseling fees under the Federal Housing Administration’s reverse mortgage program - Home Equity Conversion Mortgages.

ML 2008-12 states in part:

In accordance with the regulations at 24 CFR 214.313, the Federal Housing Administration (FHA) has determined that agencies participating in HUD’s Housing Counseling Program may charge a fee for HECM counseling services as long as the cost is reasonable and customary, does not create a financial hardship for the client, and meets the other requirements of the regulation.  The housing counseling agency must make a determination about a client’s ability to pay, which should include factors, including, but not limited to, income and debt obligations.  HUD recommends that the housing counseling agency have written procedures in place for determining ability to pay. Such procedures should support that a determination is based on objective criteria, and not a subjective determination.  The counseling file of each client charged fees should include documentation demonstrating that the cost does not create a financial hardship

Agencies must inform clients of the fee structure in advance of providing services. A client must not be turned away because of an inability to pay.  Moreover, the housing counseling agency may not withhold counseling or the Certificate of HECM Counseling based on failure to pay.

HUD also addresses the amount of appropriate charges for the counseling fee, charges for counseling of related parties, and manner of payment.

For a full copy of the ML 2008-12, please click here.

Tags: Consumer Protection, HECM, HUD & FHA, Mortgage Banking - General, Regulations, Reverse Mortgages by the Editor
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The House Committee on Financial Services has issued a press release indicating will consider amendments to House Bill 3221, which the Senate amended and passed.

The press release notes there are two House amendments proposed. 

The first proposed House amendment contains the following features, as described by the Committee:

Title I - The FHA Housing Stabilization and Homeownership Retention Act.   Creates a voluntary FHA program to provide mortgage refinancing assistance to allow families to stay in their homes, protect neighborhoods, and help stabilize the housing market.

Title II – FHA Modernization [Includes permanent increase in FHA loan limits, including for reverse mortgages, increases the maximum loan term from 35 to 40 years, and makes other changes.]

Title III - Government Sponsored Enterprise (GSE) Reform.  Includes the House-passed bill to reform prudential and mission oversight of Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks (the “GSEs”).

Title IV – Castle/Kanjorski Facilitation of Loan Modifications.  HR 5579, The Emergency Loan Modification Act of 2008, adopted by the Financial Services Committee on April 23, 2008

Title V – Miscellaneous Housing Provisions  [Includes certain protection against discrimination for veterans but also includes targeted funds for certain Congressional pet projects]

Title VI - The Housing Assistance Authorization Act [Authorizes funds for the National Urban League, the LaRaza Development Fund, the Housing Partnership Network and the National Community Renaissance Program ($5 million each in 2008 and $10 million in 2009 and 2010) for technical and financial assistance for community and affordable housing development, serving low- and moderate income households.]

The  second House proposed amendment is the proposed Brad Miller-LaTourette amendment.

The press release states that this second amendment:

Affirms the right of states to prevent abusive foreclosure practices and to establish rules concerning the foreclosure process by clarifying that this Act, the National Bank Act and the Home Owner’s Loan Act do not preempt state laws regulating the foreclosure of residential real property or the treatment of foreclosed property.

Pieces of the first amendment are opposed by the mortgage banking industry, while other pieces are supported.  The second amendment is generally viewed as widely opposed by members in the mortgage banking industry.  The industry seeks a unified consumer-protection standard across the country to ease the current piece-meal burden of complying with 50+ different and sometimes conflicting laws and interpretations of the various states and DC.

 Stay tuned . . .

Tags: Consumer Protection, Economic Stimulus, Fannie Mae/Freddie Mac, Foreclosure, HUD & FHA, Legislation, Mortgage Banking - General, Regulations, Reverse Mortgages by the Editor
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The Department of Housing and Urban Development has issued Mortgagee Letter 2008-08 regarding fixed rate reverse mortgages insured by the Federal Housing Administration.  As most readers know, reverse mortgages in the FHA-insured program are known as Home Equity Conversion Mortgages.

HUD indicates that the Mortgagee Letter clarifies and reminds lenders that: 

1. Fixed interest rate HECMs may be open or closed-ended credit;
2. The expected average mortgage interest rate used to calculate the principal limit on a fixed interest rate HECM and the HECM Note rate must be identical;
3. The monthly servicing fee for a fixed interest rate HECM can be up to $30.00; and
4. HECM borrowers can change payment plan options during the term of the mortgage as long as the mortgage balance is less than the principal limit.  

For a complete copy of the Mortgagee Letter, click here.

Tags: HUD & FHA, Mortgage Banking - General, Regulations, Reverse Mortgages by the Editor
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This is a reminder.  Today is the early registration deadline for the Mortgage Bankers Association’s Reverse Mortgage Lending Conference. 

The Conference is April 10-11 in San Diego, CA.

On its website, the MBA gives the following synopsis:

MBA’s Reverse Mortgage Lending Conference 2008 provides a unique forum for real estate finance professionals to participate in advanced discussions about originator and equity investor interests in reverse mortgages. The program also provides up-to-date information regarding new technology being developed to help reverse mortgage lenders operate more efficiently.

Conference participants get a one-of-a-kind opportunity to network with industry partners and peers, to exchange ideas about one of the latest innovations available and to increase business opportunities in a down market.

Topics covered will include:

•  Ginnie Mae’s new HECM securitization program
• Improvements to the reverse mortgage product by HUD, Fannie Mae and Ginnie Mae
• New variations of reverse mortgages designed to fill gaps in the market
• Analytics and factors that drive loan pricing
• Updates that affect reverse mortgage originations, underwriting, loan servicing, closing, compliance and backroom operations
• Reverse mortgage marketing and consumer outreach

For more information, and a conference brochure, click here.

Tags: Association Activities, Conferences & Events, Mortgage Banking - General, Reverse Mortgages by the Editor
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The Department of Housing and Urban Development has issued its Annual Performance Plan for Fiscal Year 2009. 

The Plan’s highlights include:

• promoting homeownership, especially in minority and low-income communities and first-time homebuyers, through a revitalized FHA;
• promoting preservation of homeownership through housing counseling assistance and policies addressing subprime mortgages;
• strengthening communities through housing rehabilitation and improved coordination of federal resources for neighborhood revitalization;
• ensuring housing assistance to those most in need, including quality housing for approximately 4.8 million rent-assisted and public housing families, and assistance to the homeless;
• strengthening the ability of fair housing groups to enforce the laws prohibiting discrimination in housing;
• helping lead the federal government in tapping the potential of faith-based communities; and
• continuing to improve HUD’s management, internal controls and information technology systems.

The Mortgage Law Blog welcomes the continued emphasis on making the FHA program more user-friendly.  Lenders will recall that only a year FHA’s percentage of the marketplace had declined to only about two percent.  Naturally, there were many reasons for the shrunken market share.  A primary reason, however, was that the program was viewed as overly bureaucratic, with far too much red tape. 

In addition, HUD’s enforcement team and the Office of the Inspector General were viewed as overly aggressive and sometimes outright hostile to lenders.  With the risk of serious civil penalties, indemnification requests and other possible sanctions always hanging in the balance, many in the industry simply stopped using the program.  Some even predicted FHA’s ultimate demise. 

By chance, FHA has been given a second chance.  The unfortunate circumstances in other parts of the marketplace have opened the doors for a renewed and refreshed FHA.  At the same time, senior level staff within FHA have shown real determination to improve the efficiency and usability of the program.  Similarly, Congress has increased the loan limits to enable FHA to be used in higher cost areas.  In all, this excellent government sponsored program, which has been around since the New Deal era, basically invented the 30-year mortgage and created loss mitigation, and is the biggest game in town in the reverse mortgage arena, is rising from near death. 

Thankfully, HUD’s Plan indicates the agency seems determined to assist.

A copy of HUD’s Plan can be found here.

Tags: Consumer Protection, Financial Literacy, HUD & FHA, Loan Modifications/Workouts, Loss Mitigation, Mortgage Banking - General, Regulations, Reverse Mortgages by the Editor
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The Department of Housing and Urban Development’s (HUD’s) Federal Housing Administration has issued its annual Mortgagee Letter establishing the single family Maximum Mortgage Limits for FHA insured loans.

Mortgagee Letter 2008-02 provides a comprehensive update for loans endorsed for insurance on or after January 1, 2008.  The update applies to most standard FHA insured single family mortgages under the National Housing Act, including under sections 203(b) (basic 1-4 family program), 223(h) (disaster victim program), 203(k) (rehabilitation program), 223(e) (declining area program), 234(c) (condominium unit program). 

For FHA’s Home Equity Conversion Mortgages under section 255 (reverse mortgage program), the loan limits are as of the date of the mortgage closing.

Copies of the Mortgagee Letter and its attachments are available here.

Tags: HUD & FHA, Mortgage Banking - General, Reverse Mortgages by the Editor
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The Department of Housing and Urban Development this week proposed changes to its regulations governing its Reverse Mortgage program, known as Home Equity Conversion Mortgages or “HECMs.”  HUD has classified the new rules as “technical changes” excepted from normal notice and comment procedures under the Administrative Procedures Act.  The rules relate to changing the date for calculating Maximum Claim Amounts under the HECM program, and correcting a flaw that prohibited certain refinances from qualifying for a discounted Initial Mortgage Insurance Premium.

Following is the Summary from HUD’s Federal Register notice:

This rule makes two technical changes to HUD’s Home Equity Conversion Mortgage (HECM) program. First, the rule extends the date for calculating the maximum claim amount in the HECM program from the date of the underwriter’s receipt of the appraisal report to the date of closing. This change provides a more easily verifiable and more easily identifiable date. Second, this rule corrects an unintended consequence that results in a situation where HECM loans that are not in default but have been assigned pursuant to regulatory provisions, and remain in effect, are not eligible to be refinanced with a discounted initial mortgage insurance premium (MIP). This rule would permit such HECM loans to be eligible for the discounted initial MIP upon refinancing, in accordance with the purpose of the HECM program, which is to improve the financial situation of elderly homeowners.

The new rules become effective February 7, 2008.  However, HUD is accepting public comments until March 10, 2008. 

For the full Federal Register notice, Click Here, or visit the Federal Register’s website. 

For more information about HECMs, visit the HUD website. 

Tags: HUD & FHA, Mortgage Banking - General, Reverse Mortgages by the Editor
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