HELP ATTRACT NEW CUSTOMERS WITH THE CUSTOM LIBRARY SERVICE
Acquiring new customers and driving volume are key objectives for most organizations. Given the increasingly competitive environment, it’s critical to differentiate your financial institution and attract new customers with custom loan programs. But, how do you keep up on federal and state-related regulations, reduce the risk of out-of-date documents, or make sure that your data is accurate?
With the Custom Library Service, that’s how! It offers you priority customer services, timely content updates, forms created with your logo and look, quarterly updates based on your changes, and much more.
Discover how your organization can help drive volume by getting products to market quickly and reducing your risk with the Custom Library Service. Click here for more information.
FHA MAKES CHANGES
The Federal Housing Administration (FHA) has announced several changes to its mortgage program over recent months. These changes are designed to make it easier for lenders to offer affordable FHA financing to more American families.
To find out more information on the FHA’s mortgage insurance programs, read the articles below or visit www.hud.gov.
STREAMLINING THE FHA APPRAISAL PROCESS
In September, the Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2005-34, which announced that the FHA will adopt Fannie Mae’s recently revised appraisal reporting forms, effective January 1, 2006. The FHA also determined that by utilizing these new forms the use of the Valuation Conditions (VC) form is no longer necessary.
In a press release regarding the streamlined appraisal process, Brian Montgomery, the Assistant Secretary for Housing—Federal Housing Commissioner, stated, “We will continue to work with all aspects of the housing industry to make the whole FHA mortgage process smoother, enabling more potential homebuyers to utilize the advantages of having FHA mortgage insurance.”
By eliminating the VC forms, the FHA is more in line with the industry standard and Realtors®, appraisers, and lenders are welcoming the changes.
CHANGES TO THE FHA APPRAISAL PROTOCOL
A number of welcomed changes relating to the FHA appraisal protocol were announced with Mortgagee Letter 2005-48 in December.
The FHA has shifted from an emphasis on repair of minor property deficiencies and will now only require repairs for those property conditions that rise above the level of cosmetic or minor defects or normal wear and tear.
Inspection requirements were also updated so that a well test or septic test will only be required if there is knowledge of contaminated water or system failure, respectively, or if mandated by state or local jurisdiction. The same applies for wood destroying insects/organisms. If there is evidence of active infestation (or if state or local jurisdiction mandates it), a termite inspection would be required; however, the FHA no longer requires an automatic inspection.
REVISED UNDERWRITING GUIDELINES FOR REFINANCE TRANSACTIONS
In October (with Mortgagee Letter 2005-43), the FHA announced that it will now insure a cash-out refinance transaction of up to 95 percent of the appraiser’s estimate of value (however, certain conditions must be met).
In addition, for “no cash out” and streamline refinances, the FHA has modified their program to include accrued late charges and escrow shortages as an existing debt as part of the mortgage amount calculation.
Finally, if a borrower is refinancing to a shorter term or from an adjustable rate mortgage (ARM) to a fixed rate, the FHA will now allow up to a 20 percent increase in the monthly principal and interest payment before requiring full underwriting.
NEW FHA LENDER INSURANCE PROGRAM
In September, the FHA took another step toward making FHA loans easier and more cost-efficient by announcing its Lender Insurance Program.
The program will allow high-performing lenders to endorse FHA mortgage loans for insurance without a pre-endorsement review by HUD. This means companies will be able to handle the endorsement by using HUD’s FHA Connection web site link and submitting electronic case binders to HUD only when requested.
More information about this program can be found in Mortgagee Letter 2005-36.
ANSWERS TO YOUR FANNIE MAE/FREDDIE MAC QUESTIONS
Question 1
Is the revised Uniform Residential Loan Application (Fannie Mae Form 1003/Freddie Mac Form 65) that was effective for use as of January 1, 2006, acceptable if it is printed on legal-size paper?
Answer
Yes. Fannie Mae and Freddie Mac will accept the revised 1003/65 (VMP21N) in a legal format as well as a letter-size format. Wolters Kluwer Financial Services offers both a legal size (VMP21N) as well as a letter size (VMP221N) so that customers will have the option of either format.
For more information, go to Fannie Mae’s web site at www.efanniemae.com or Freddie Mac’s web site at www.freddiemac.com.
Question 2
Freddie Mac announced new adjustable rate notes and riders in August that were effective for use on November 1, 2005. When will these be available?
Answer
The adjustable rate notes and riders are now available for purchase by calling Wolters Kluwer Financial Services’ customer service at 800-521-7291. The following is a list of the form numbers for the corresponding Freddie Mac form number:
- Revised Initial Interest ARM Notes:
VMP-190N series (multistate and all state specifics) Form 5506
VMP-191N series (multistate and all state specifics) Form 5507
VMP-192N series (multistate and all state specifics) Form 5536
VMP-193N series (multistate and all state specifics) Form 5537
- New Initial Interest ARM Riders for Use With Above Notes:
VMP-190R Form 5106
VMP-191R Form 5107
VMP-192R Form 5136
VMP-193R Form 5137
- New 6-Month LIBOR Initial Interest ARM Notes and Riders (customers must order):
VMP-195N series (multistate and all state specifics) with
VMP-195R Forms 5514/5114
VMP-196N series (multistate and all state specifics) with
VMP-196R Forms 5515/5115
For more information on these notes and riders, go to www.freddiemac.com.
Question 3
The Lender’s Phone Number was recently added to Box 2 on the Verification of Deposit (Fannie Mae Form 1006/VMP24) as a data field. Was there a Fannie Mae directive for this information?
Answer
According to Fannie Mae, there is no directive to adding the lender’s phone number. However, if the lender wants to include it, Fannie Mae has stated that it is acceptable for placement anywhere on the form, as long as it is legible.
