Tag Archives: fha

FHA Issues Rule to Include Approval of Individual Units in Non-Approved Condo Projects

FHA responds to the market

By Jeff Sorg, OnlineEd Blog

(August 22, 2019)

To promote homeownership, especially among credit-worthy first-time buyers, the Federal Housing Administration (FHA) published its long-awaited final regulation, and policy implementation guidance, which establish a new condominium approval process. That provides for comprehensive revision to FHA condominium project approval policy. The new policy will allow specific individual condominium units to be eligible for FHA mortgage insurance even if the condominium project is not FHA approved. The polices become effective on October 15, 2019.

FHA’s new rule introduces a new single-unit approval process to make it easier for individual condominium units to be eligible for FHA-insured financing; extends the recertification requirement for approved condominium projects from two to three years; allows more mixed-use projects to be eligible for FHA insurance.

“Condominiums have increasingly become a source of affordable, sustainable homeownership for many families and it’s critical that FHA be there to help them,” said U.S. Housing and Urban Development Secretary Ben Carson. “Today, we take an important step to open more doors to homeownership for younger, first-time American buyers as well as seniors hoping to age-in-place.”

HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery added, “Today we are making certain FHA responds to what the market is telling us. This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium.”

The vast majority (84 percent) of FHA-insured condo buyers have never owned a home before. While there are more than 150,000 condominium projects in the U.S., only 6.5 percent are approved to participate in FHA’s mortgage insurance programs.  As a result of FHA’s new policy, it is estimated that 20,000 to 60,000 condominium units could become eligible for FHA-insured financing annually.

Read FHA’s new condominium approval regulation.

 

 

###

OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

Excerpts from articles not originating with Jeff Sorg/OnlineEd are reprinted with permission; remain the sole property of the author; no permission to reprint is given or implied.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

Information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

FHA To Require Second Appraisal For Certain Reverse Mortgages

 Where a second appraisal is required, lenders must use the lower value of the two appraisals.

By Jeff Sorg, OnlineEd Blog

(October 2, 2018)

(WASHINGTON) HUD – The Federal Housing Administration (FHA) announced that it will begin requiring lenders originating new Home Equity Conversion Mortgages (HECMs), commonly referred to as reverse mortgages, to provide a second property appraisal under certain circumstances. FHA is instructing lenders to provide a second independent property appraisal in cases where FHA determines there may be inflated property valuations.

FHA’s new requirement takes effect for case numbers assigned on or after October 1, 2018 through September 30, 2019. FHA will periodically review this guidance and, based on the results, may renew these requirements beyond fiscal year 2019. Read FHA’s Mortgagee Letter.

FHA will perform a risk assessment of appraisals submitted for use in new HECM originations. Based on the outcome of that assessment, FHA may require a second appraisal be obtained prior to approving the reverse mortgage for an insurance endorsement. Under the new policy, lenders must not approve or close a HECM before FHA has performed the collateral risk assessment and, if required, a second appraisal is obtained. Where a second appraisal is required by FHA, lenders must use the lower value of the two appraisals.

The appraisal validation policy announced today will further reduce risks to FHA’s Mutual Mortgage Insurance Fund (MMIF) and protect the health of the HECM program. The financial soundness of FHA’s reverse mortgage program is contingent on an accurate determination of a property’s value and condition. The property value is used to determine the amount of equity that is available to the borrower and it is also used by FHA to determine the amount of insurance benefits paid to a mortgagee.

In a 2017 evaluation, the U.S. Department of Housing and Urban Development (HUD) found higher-than-expected losses in the HECM program could be attributed in part to “optimistic estimates of collateral value driven by exaggerated property appraisals when the loan was originated.”

FHA is addressing the accuracy of appraised property values due to continuing volatility in the HECM program. Last year, FHA’s Fiscal Year 2018 Annual Report to Congress found the agency’s reverse mortgage portfolio had a negative capital ratio of 19.84 percent and a negative net worth of $14.5 billion. To begin to address the financial solvency of the program, FHA instituted several reforms to the HECM program to improve its financial health and to ensure reverse mortgages remain a resource to allow senior borrowers to remain in their homes and age in place. FHA is continuing to analyze the impact of these reforms and expects to provide an assessment in its Annual Report on the financial status of the MMIF.

###

OnlineEd blog postings are the personal opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

FHA to Reduce Annual Insurance Premiums on Most Mortgages

hudFHA’s reduction in premium rates is an appropriate measure to support the path to the American dream

By Jeff Sorg, OnlineEd Blog

(January 13, 2017) – As the nation’s housing market continues to improve, U.S. Housing and Urban Development Secretary Julián Castro announced the Federal Housing Administration (FHA) will reduce the annual premiums most borrowers will pay by a quarter of a percent.  FHA’s new premium rates are projected to save new FHA-insured homeowners an average of $500 this year.

FHA is reducing its annual mortgage insurance premium (MIP) by 25 basis points for most new mortgages with a closing/disbursement date on or after January 27, 2017.  For a full schedule of the new premium rates announced today, read FHA’s mortgagee letter.

This action reflects the fourth straight year of improved economic health of FHA’s Mutual Mortgage Insurance Fund (MMIF), which gained $44 billion in value since 2012.  Last year alone, an independent actuarial analysis found the MMI Fund’s capital ratio grew by $3.8 billion and now stands at 2.32 percent of all insurance in force—the second consecutive year since 2008 that FHA’s reserve ratio exceeded the statutorily required two percent threshold.

Secretary Castro said FHA’s action reflects today’s risk environment and comes at the right time for consumers who are facing higher credit costs as mortgage interest rates are increasing.

“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” said Secretary Castro.  “This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.”

Ed Golding, Principal Deputy Assistant Secretary for HUD’s Office of Housing added, “We’ve carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers.  Homeownership is the way most middle-class Americans build wealth and achieve financial security for themselves and their families.  This conservative reduction in our premium rates is an appropriate measure to support them on their path to the American dream.”

In the wake of the nation’s housing crisis, FHA increased its premium prices numerous times to help stabilize the health of its MMI Fund.  Since 2010, FHA had raised annual premiums 150 percent which helped to restore capital reserves but significantly increased the cost of credit to qualified borrowers.  This step restores the annual premium to close to its pre-housing-crisis level.

This action is expected to lower the cost of housing for the approximately 1 million households who are expected to purchase a home or refinance their mortgages using FHA-insured financing in the coming year.

[Source: HUD press release]

 

###

HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Bank Agrees to Pay $64 Million to Resolve Alleged Liability Arising from FHA-Insured Mortgage Lending

The settlement resolves allegations that M&T Bank failed to comply with certain FHA origination, underwriting and quality control requirements.

By Jeff Sorg, OnlineEd Blog

gavel money court settlement(May 16, 2016) – M&T Bank Corp. (M&T Bank) has agreed to pay the United States $64 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today. M&T Bank is headquartered in Buffalo, New York.

“Mortgage lenders that fail to follow FHA program rules put taxpayer funds at risk and increase the chances of borrowers losing their homes,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “We will continue to hold lenders accountable for knowingly submitting ineligible loans for FHA insurance.”

“M&T Bank bypassed its responsibility to originate and underwrite mortgages in accordance with the standards required by the FHA,” said First Assistant U.S. Attorney James P. Kennedy Jr. for the Western District of New York. “This case demonstrates that when a financial institution takes such a detour, we will work to ensure that it does not bypass the consequences of that conduct.”

During the time period covered by the settlement, M&T Bank participated as a direct endorsement lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite and endorse mortgages for FHA insurance. If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan. Under the DEL program, the FHA does not review a loan for compliance with FHA requirements before it is endorsed for FHA insurance. DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance, to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices, and to self-report any deficient loans identified by their quality control program.

The settlement announced today resolves allegations that M&T Bank failed to comply with certain FHA origination, underwriting and quality control requirements. As part of the settlement, M&T Bank admitted to the following facts: Between Jan. 1, 2006, and Dec. 31, 2011, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and did not adhere to FHA’s quality control requirements. Prior to 2010, M&T Bank failed to review all Early Payment Default (EPD) loans, which are loans that become 60 days past due within the first six months of repayment. Between 2006 and 2011, M&T also failed to review an adequate sample of FHA loans, as required by HUD.

Additionally, M&T created a quality control process that allowed it to produce preliminary major error rates that were significantly lower (sometimes below one percent) than what the rate would have been if M&T had calculated its preliminary major error rate by dividing the number of loans with preliminary major errors by the number of loans reviewed to determine what percent of loans contained a preliminary major error.

M&T Bank also failed to adhere to HUD’s self-reporting requirements. While M&T Bank identified numerous FHA insured loans with “major errors” between 2006 and 2011, M&T Bank did not report a single loan to HUD until 2008, and thereafter self-reported only seven loans to HUD. As a result of M&T’s conduct and omissions, HUD insured hundreds of loans approved by M&T that were not eligible for FHA mortgage insurance under the Direct Endorsement program and that HUD would not otherwise have insured. HUD subsequently incurred substantial losses when it paid insurance claims on those loans.

[Source: US Department of Justice press release]

###

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered trademark of OnlineEd, Inc.

FHA Announces New Loan Limits to Take Effect January 1st

There is no change to the FHA national loan limit “ceiling” which remains at $625,500

By Jeff Sorg, OnlineEd Blog

(December 15, 2015) – The Federal Housing Administration (FHA) announced the agency’s new schedule of loan limits for 2016. These loan limits are effective for case numbers assigned on or after January 1, 2016, and will remain in effect through the end of the year.  Read FHA’s mortgagee letters (for forward and reverse mortgage programs).

Due to changes in housing prices, the maximum loan limits for forward mortgages increased in 188 counties.  There were no areas with a decrease in the maximum loan limits for forward mortgages.

Each year, FHA recalculates its loan limits based on 115 % of the median house price in the area. For counties, or equivalent, located in Metropolitan Statistical Areas (MSAs) the limit for all areas in the MSA is calculated based on the highest cost county.

There is no change to the FHA national loan limit “ceiling” which remains at $625,500 and the “floor” which remains at $271,050.   FHA’s minimum national loan limit “floor” is set at 65 percent of the national conforming loan limit of $417,000. The floor applies to those areas where 115 percent of the median home price is less than 65 percent of the national conforming loan limit.

Any area where the loan limit exceeds the “floor” is considered a high cost area. The maximum FHA loan limit “ceiling” for high cost areas is 150 percent of the national conforming limit.

Additional information and loan limit adjustments for two-, three-, and four-unit properties, and in Special Exception Areas, are noted in FHA’s mortgagee letter. An attachment to the Mortgagee Letter provides information on which counties are eligible for loan limits above the national standard. Borrowers with existing FHA insured mortgages may continue to utilize FHA’s Streamline refinance program regardless of their loan balance.

The mortgage loan limits for FHA-insured reverse mortgages will also remain unchanged. The FHA reverse-mortgage product, known as the Home Equity Conversion Mortgage (HECM), will continue to have a maximum claim amount of $625,500, with actual limits based on property value, borrower age, and current interest rates. Reverse mortgages allow homeowners age 62 and older to age in place by borrowing against the value of their homes without any requirements for monthly payments; no repayment is required as long as a homeowner lives in the home. The reverse mortgage is repaid, with interest, when the homeowner leaves the home.

To find a complete list of FHA loan limits, areas at the FHA ceiling, areas between the floor and the ceiling, as well as a list of areas with loan limit increases, visit FHA’s Loan Limits Page.

###

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

 All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

 

Quicken Loans Sues United States DoJ and HUD

time to sue(Jeff Sorg, OnlineEd) –  Quicken Loans, claiming to be the nation’s largest Federal Housing Administration (FHA) mortgage lender, has filed suit in Federal District Court against the United States Department of Justice (DOJ) and Department of Housing and Urban Development (HUD). The company claims they were left with no alternative but to take this action after the DOJ demanded Quicken Loans make public admissions that were blatantly false, as well as pay an inexplicable penalty or face legal action.

“After three years of struggling to understand the DOJ’s position and methodology that would warrant the country’s largest and highest quality FHA lender to make untrue admissions and pay an inexplicable penalty or face public legal action, it is time to ask the court to intervene,” said Quicken Loans CEO Bill Emerson. “No threat, including high-profile senseless lawsuits from powerful federal officials, will deter our company and its leadership from doing the right thing. We will stand in defense of our impeccable reputation established by thousands of hard-working ethical team members over our 30-year history.”

According to Quicken Loans, they have provided the DOJ with more than 85,000 documents, including 55,000 emails. In addition, the DOJ has conducted hundreds of hours of depositions from numerous Quicken Loans team members. Three years later, the DOJ inquiry has resulted in the threat of a federal lawsuit based on faulty analysis of a miniscule number of cherry picked mortgages from the nearly 250,000 FHA loans the company has closed since 2007.

“It’s a shame the DOJ would choose to attack the country’s largest and highest quality FHA lender providing government lending for homebuyers and home owners across all 50 states at the very time our nation needs expanded access to credit for middle-class Americans who benefit most from the FHA program.”

“The Constitution provides for checks and balances among the three branches of government. We are hopeful and confident that after examining the facts, the judicial branch will exercise their authority to provide just relief from this misuse of power,” Emerson concluded.

Morganroth & Morganroth and Goodwin Procter of Washington, DC., is representing Quicken Loans in the Michigan-based suit.

###

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was published on April 21, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

MetLife Home Loans to Pay $123.5 Million to Resolve Alleged FHA Mortgage Lending Violations

settlement check(Jeff Sorg, OnlineEd) – In an announcement released by the United States Department of Justice, MetLife Home Loans LLC has agreed to pay the United States $123.5 million to resolve allegations that MetLife Bank N.A. (MetLife Bank) violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements.

As part of the settlement, MetLife Home Loans LLC admitted to the following: From September 2008 through March 2012, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements. MetLife Bank was aware that a substantial percentage of these loans were not eligible for FHA mortgage insurance due to its own internal quality control findings. According to these findings, between January 2009 and August 2010, the portion of MetLife Bank loans containing the most serious category of deficiencies, which MetLife Bank called “material/significant,” ranged from 25 percent to more than 60 percent. These quality control findings were routinely shared with MetLife Bank’s senior managers, including the chief executive officer and board of directors. While the overall “significant” error rate identified by MetLife Bank decreased in 2010 and 2011, during the same time period, MetLife Bank more frequently downgraded FHA loans from “significant” to “moderate.” In one instance, a quality control employee wrote in an email discussing MetLife Bank’s practice of downgrading its quality control findings: “Why say Significant when it feels so Good to say MODERATE.” Overall, between January 2009 and December 2011, MetLife Bank identified 1,097 FHA mortgage loans underwritten by MetLife Bank with a “significant” finding, but despite an obligation to self-report findings of material violations of FHA requirements, MetLife Bank only self-reported 321 mortgages to HUD. MetLife Bank’s conduct caused FHA to insure hundreds of loans that were not eligible for insurance and, as a result, FHA suffered substantial losses when it later paid insurance claims on those loans.

“MetLife Bank took advantage of the FHA insurance program by knowingly turning a blind eye to mortgage loans that did not meet basic underwriting requirements, and stuck the FHA and taxpayers with the bill when those mortgages defaulted,” said U.S. Attorney John Walsh of the District of Colorado. “This settlement is part of our systematic, national effort to hold lenders accountable for irresponsible lending practices that not only harmed FHA, but also contributed to a catastrophic wave of home foreclosures across the country.”

“MetLife Bank’s improper FHA lending practices not only wasted taxpayer funds, but also inflicted harm on homeowners and the housing market that lasts to this day,” said Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division. “As this settlement shows, we will continue to hold accountable financial institutions that elected to ignore the rules and to pursue their own financial interests at the expense of hardworking Americans.”

During the time period covered by the settlement, MetLife Bank participated as a Direct Endorsement Lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite and certify mortgages for FHA insurance. If a loan certified for FHA insurance later defaults, the holder of the loan may submit an insurance claim to the FHA for the losses resulting from the defaulted loan. Because the FHA does not review the underwriting of a loan before it is endorsed for FHA insurance, the FHA depends on a DEL to follow program rules to ensure that only eligible loans are submitted for FHA insurance.

Read the complete announcement.

###

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was published on February 27, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.