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Nebraska
Mortgage Monitor www.nebraskamortgageassociation.org
A Newsletter Sponsored by Nebraska Mortgage Association Oct., 2005
2004-2005 Adoption of Revised Appraisal
Officers Reporting Forms and Update to FHA
President, Susan Grieger
US Bank, Lincoln
Appraisal Protocol
402/421-2939 Fax 402-423-2039 The Federal Housing Administration (FHA) will be adopting four of the revised
st appraisal reporting forms recently released by Fannie Mae. For all appraisals of
1 Vice President, Marlin Hupka
TierOne Bank., Lincoln properties that are to be security for FHA-insured mortgages, and which are per-
402/473-6143 Fax 402/473-6218 formed on or after January 1, 2006, the appraisal must be reported on one of the
2nd Vice President, Jan Meister Continued Page -3-
Commercial Federal Bank, Omaha
402/827-2592 Fax 402/827-2594
Flexibility in the Origination of
Treasurer, Mark Johnson
CBSHome Mortgage, Omaha
402/964-4612 Fax 402/964-4677
Single Family Loans Using the
Secretary, Gina Jerauld
Commercial Federal Bank, Omaha
Principal-Authorized Agent
402/827-2860 Fax 402/827-2883
Relationship
Board of Directors
George Akers Tony Johnson The purpose of this mortgagee letter is to clarify and delineate the procedures
Steve Kunzman David Horak for the use of the FHA principal-authorized agent relationship. The principal-
Dave Hartman Sherri O’Callaghan authorized agent relationship provides mortgagees flexibility in the origination
Robert Rutan E. Dean Neidan of FHA insured single family loans in situations where a mortgagee wishes to
Cindy Muhlbach Kaye Pietzyk
collaborate with another mortgagee.
Education Committee Chair, This process provides mortgagees flexibility to offer diversified loan
Shelley Sullivan products or programs because of the ability to team with firms that may have
MidAmerican Mortgage, Lincoln
402/436-3145 Fax 402/436-3191 more expertise in specialized areas. This includes products such as HECM or
203(k). It also can be utilized to handle unique situations such as when a mort-
Lobbyist, John Boehm gagee no longer has a DE underwriter on its staff or for some reason does not
Butler, Galter & O’Brien Law Firm,
Lincoln Continued Page -2-
402/475-0811 Fax 402/475-6416
Editor, Mary Byrnes
Great Western Home Loans, Omaha Up-Front Mortgage Insurance
402/952-6042 Fax 402/593-8112
Also in this issue… Premiums (MIP)
Update to FHA Appraisal Protocol For Loans Insured Under Sections 234(c) Condominium and
for Fannie May Appraisal Forms
(Page 2)
203(k) Home Rehabilitation Programs (09/30/05)
This Mortgagee Letter notifies mortgagees that HUD will charge an up-front pre-
Lender Insurance Program (Page 4) mium for mortgages to be insured under Sections 234(c) and 203(k) of the
Check Out Our Website (Page 7) National Housing Act. Section 203(c) of the National Housing Act was amended
by Section 207 of the Departments of Veterans Affairs and Housing and Urban
Revised Uniform Residential Loan
Application (Page 7)
Development and Independent Agencies Appropriations Act, 2002, to include
mortgages insured under Section 203(k) (rehabilitation loans) and Section 234(c)
Rebuilding Katrina-Destroyed Homes (condominium loans) among those mortgages for which HUD may charge an Up-
(Page 8)
Continued Page -3-
Oct., 2005 Page 2
Flexibility in the Origination of Single Family Loans… from Page -1-
Up-Front MIP from Page -1-
have a particular expertise or capac- https://entp.hud.gov/pdf/mp_lndapp.pdf.
ity. In almost all cases, mortgagees As in all originations, the amount Front Mortgage Insurance Pre-
use this procedure when they need as- of the origination fee each lender re- mium (UFMIP). The final rule
sistance in the underwriting of a loan. ceives is a contractual matter to be implementing this change was
The principal in the relationship can determined by the two parties, which published in the Federal Register
only be an FHA approved nonsupervised in these cases are the principal and on June 28, 2005. As with other
mortgagee, supervised mortgagee or gov- authorized agent. The total fees programs in which an up-front pre-
ernment mortgagee. The authorized agent charged to a mortgagor may not ex- mium is charged, periodic
can only be an FHA approved ceed the amount allowed for the type premiums also will be charged on
nonsupervised mortgagee or supervised of FHA single family loan as con- a monthly basis.
mortgagee. FHA approved loan corre- tained in the appropriate handbooks At this time, the same 1.5 per-
spondents cannot serve as either a and mortgagee letters. cent UFMIP rate that is charged on
principal or authorized agent. OMB Information Collection mortgages insured in the Mutual
Regulation Section 202.3(a)(3) Approval: The information collection Mortgage Insurance Fund will be
permits this relationship and also re- requirements contained in this mort- charged on mortgages insured un-
quires the loan to close in the name of gagee letter have been approved by der Sections 234(c) and 203(k).
the principal, and allows the autho- the Office of Management and Bud- The monthly premium charge and
rized agent to submit the closed loan get (OMB) under the Paperwork termination schedule, and the
for insurance on behalf of the princi- Reduction Act of 1995 (44 U.S.C. FHA-to-FHA refinance UFMIP re-
pal. Since the authorized agent 3501-3520) and assigned OMB con- fund schedule announced in ML
typically underwrites the loan, its trol number 2502-0005. In accordance 2000-46 and ML 2005-03, respec-
FHA lender ID number is shown in with the Paperwork Reduction Act, tively, also apply to Sections
the sponsor field of an FHA case file. HUD may not conduct or sponsor, 234(c) and 203(k) loans, i.e., the
Also, since the principal typically and a person is not required to re- premium structure for these loans
takes the application, its ID is in the spond to a collection of information is now identical to that of Section
originator field of the case file. Both unless the collection displays a cur- 203(b) mortgages. The procedure
mortgagees are responsible for the rently valid OMB control number. for remittance of UFMIP on Sec-
part of the origination and underwrit- Lenders with questions not ad- tions 234(c) and 203(k) loans is
ing processing they perform. dressed by this letter may call the also the same as Section 203(b).
This relationship must be set up Office of Lender Activities and Com- Program ADP codes affected by
by the authorized agent via the FHA pliance at 202-708-3976 or questions this change are shown as an attach-
Connection as explained in the may be submitted via FAX at 202- ment.
Lender Approval Section of the FHA 755-0303 and via email at. The effective date of the final
Connection User Guide located at: HSG_Lender-Approval@hud.gov. rule is December 28, 2005. FHA
recognizes the normal loan closing
business cycle and will take this
Update to FHA Appraisal Protocol into account in its enforcement of
the final rule. However, all mort-
for Fannie Mae Appraisal Forms gagees are expected to be in full
compliance with the final rule by
Special Attention of: Expires: September 30, 2006 January 1, 2006, i.e., mortgages to
All Homeownership Center Directors Cross Reference: be insured under these sections of
All Real Estate Owned Directors HUD Handbook 4150.2 the act that are closed on or after
All Processing and Underwriting Directors this date are subject to the up-front
All Management and Marketing Contractors premium.
If you have any questions
This Notice is to advise of the upcoming revision to the current procedures about this Mortgagee Letter, please
in place for the performance of FHA appraisals. The current procedures do not contact your local Homeownership
address the newly revised industry standard appraisal forms introduced by Center in Denver at:
Fannie Mae on March 24, 2005. These procedures are found in the Valuation (800) 543-9378.
Analysis for Home Mortgage Insurance for Single Family One-to Four Unit
Dwellings, HUD Handbook 4150.2, Appendix D: Comprehensive Valuation
Package Protocol.
Continued Page -3-
Oct., 2005 Page 3
Adoption of Appraisal Reporting Forms… from Page -1- Update to FHA … from Page -2-
following Fannie Mae appraisal reporting forms as per property type: These existing procedures were
1. Uniform Residential Appraisal Report (Fannie Mae Form 1004) for all 1 established with the introduction of
unit single family dwellings the Homebuyer Protection Plan that
2. Manufactured Home Appraisal Report (Fannie Mae Form 1004C) for all included the three-part Comprehen-
manufactured homes sive Valuation Package (CVP). Part
3. Individual Condominium Unit Appraisal Report (Fannie Mae Form one was the appraisal reporting form
1073) for all individual condominium units itself. The two supplemental forms in-
4. Small Residential Income Property Appraisal Report (Fannie Mae Form cluded the Valuation Conditions Form
1025) for all 2 to 4 unit single family dwellings (form HUD-92654-VC), part II; and
These forms are available online at: http://www.efanniemae.com/index.jsp the Notice to The Homebuyer (form
FHA Roster Appraisers are instructed to continue to use the existing (pre HUD-92564-HS), also known as
March 2005) Fannie Mae appraisal reporting forms until the January 1, 2006 Homebuyer Summary, part III. Upon
implementation date. FHA Mortgagees and Roster Appraisers are to continue to FHA’s implementation of the four re-
rely upon existing FHA procedures for guidance in the valuation of single fam- vised Fannie Mae appraisal reporting
ily properties until the adoption of the revised appraisal reporting forms. forms detailed below, the Valuation
Appendix D of Handbook 4150.2, CHG-1, Valuation Analysis for Home Mort- Conditions Form and Notice to The
gage Insurance for Single Family One- to Four- Unit Dwellings, has been Homebuyer will be retired and are not
updated and becomes effective for all appraisals performed on or after January to be submitted as part of an appraisal
1, 2006. Revised Appendix D is attached to this Mortgagee Letter and will be valuation package. Upon elimination
available online at: of these two forms, all valuation con-
http://www.hudclips.org/cgi/index.cgi. ditions, including repairs, alterations
Upon implementation of the four revised Fannie Mae appraisal reporting and/or required inspections, must be
forms, form HUD-92564-VC, Notice to the Lender (Valuation Conditions/VC reported within the appropriate
form), and form HUD-92564-HS, Notice to The Homebuyer (Homebuyer Sum- Fannie Mae appraisal reporting form.
mary) will be retired and are not to be submitted as part of an appraisal After receiving the completed ap-
valuation package. Upon elimination of these two forms, all valuation condi- praisal report, the Mortgagee must
tions, including repairs, alterations and/or required inspections, must be note any valuation condition upon
reported within the appropriate section of the applicable Fannie Mae appraisal which the appraisal is predicated on
reporting form. form HUD-92800.5B (Conditional
Upon receipt of the completed appraisal report, the Mortgagee must note Commitment Direct Endorsement
any physical deficiency or adverse condition requiring repair, alteration or fur- Statement of Appraised Value) and
ther inspection on form HUD-92800.5B (Conditional Commitment Direct provide a copy of the completed form
Endorsement Statement of Appraised Value) and provide a copy of the com- to the mortgagor at least five business
pleted form to the mortgagor at least five business days prior to loan closing. days prior to loan closing. Mortgagee
Mortgagees are reminded to advise mortgagors of their right to request and re- Letter 2005-34 reminds mortgagees to
ceive a copy of the completed appraisal report. advise mortgagors of their right to re-
The appraisal reporting guidance contained in Handbook 4150.2, CHG-1 quest and receive a copy of the
remains in effect with the exception of any instruction(s) or policy that is in completed appraisal report.
conflict with that provided in Revised Appendix D, in which case Revised Ap- Revisions made to the Fannie
pendix D shall prevail. Any and all references to Valuation Condition (VC) Mae appraisal forms have presented
items addressed in Chapters 2 and 3 of Handbook 4150.2 are to be addressed in FHA with the opportunity to standard-
the appropriate section of the applicable appraisal reporting form. For example, ize the reporting requirements by
Chapter 2, Section 2-2-E, entitled “Slush Pits” instructs: “if there is any readily adopting property specific forms and
observable evidence of slush pits, mark the “yes” column in VC-1.” The new eliminating redundancy in the report-
protocol will require the appraiser to address this condition in the site section of ing protocols. As indicated in
the appraisal report and note that the property may not be eligible for FHA fi- Mortgagee Letter 2005-34, FHA will
nancing, referencing the information contained in Chapter 2. be adopting four of the revised Fannie
Upon elimination of the two forms that comprise the three-part CVP, only Mae appraisal reporting forms. For all
one copy of the appraisal report will be required to be retained in the origina- appraisals of properties that are to be
tion binder. security for FHA-insured mortgages,
If you have any questions regarding this Mortgagee Letter, please contact and which are performed on or after
your local Homeownership Center (HOC) in, Denver (800-543-9378). January 1, 2006, the appraisal must be
Continued Page -4-
Oct., 2005 Page 4
Update to FHA Appraisal Protocol… from Page -3-
reported on the following Fannie note that the property may not be eli- four-unit property.
Mae forms as per property type and gible for FHA financing, referencing These forms are available
cited below. the information contained in Chapter 2. online at: http://
The revised Appendix D: Valu- The appraisal reporting form to www.efanniemae.com/index.jsp and
ation Protocol of HUD Handbook be used will depend on the property copies are contained within the Re-
4150.2 (attachment to Mortgagee type that is being appraised. The ap- vised Appendix D: Valuation
Letter 2005-34) addresses the up- praiser must select the appropriate Protocol of HUD Handbook 4150.2.
dated FHA residential appraisal appraisal form for reporting an FHA An appraisal performed for
requirements and provides specific appraisal from the following: HUD/FHA purposes requires that
instructions for completing Fannie 1. Uniform Residential Appraisal all sections of the appraisal form be
Mae appraisal report forms. The Report (Fannie Mae Form 1004 addressed. The appraiser must com-
appraisal reporting guidance con- March 2005) – Required to re- plete the form in a manner that
tained in Handbook 4150.2, CHG-1 port an appraisal of a one-unit clearly reflects the thoroughness of
remains in effect with the exception property or a one-unit property the investigation and analysis of the
of any instruction(s) or policy that with an accessory unit. appraisal findings. The conclusions
is in conflict with that provided in 2. Manufactured Home Appraisal about the observed conditions of the
Revised Appendix D, in which case Report (Fannie Mae Form property provide the rationale for
Revised Appendix D shall prevail. 1004C March 2005) – Required the opinion of market value. The
Any and all references to a Valua- to report an appraisal of a one- completed appraisal form utilized,
tion Condition (VC) item addressed unit manufactured home. together with the required exhibits,
in Chapters 2 and 3 of Handbook 3. Individual Condominium Unit constitutes the reporting instrument
4150.2 are to be addressed in the Appraisal Report (Fannie Mae to HUD for FHA-insured mort-
appropriate section of the appli- Form 1073 March 2005) – Re- gages.
cable appraisal reporting form. For quired to report an appraisal of If you have questions regarding
example, Chapter 2, section 2-2-E, a unit in a condominium project this Notice, you may contact Joyce
entitled “Slush Pits” instructs: “If or a condominium unit in a Richardson, Director, Home Valua-
there is any readily observable evi- planned unit development tion Policy Division, at (202)
dence of slush pits, mark the “yes” (PUD). 708-0614, extension 2507.
column in VC-1". The new proto- 4. Small Residential Income Prop- _________________________________
col will require the appraiser to erty Appraisal Report (Fannie Brian D. Montgomery
address this condition in the site Mae Form 1025) – Required to Assistant Secretary for Housing-
section of the appraisal report and report an appraisal of a two- to Federal Housing Commissioner
Lender Insurance Program
The Federal Housing Administration tomated verification process to check For mortgagees choosing to submit
(FHA) is pleased to announce that the the data for accuracy and complete- case binders electronically, all mailing
Lender Insurance (LI) program will ness. The mortgagee then will be able costs associated with the mortgage in-
be offered beginning on January 1, to endorse the mortgage loan auto- surance endorsement process will be
2006. LI enables high-performing matically. eliminated.
FHA approved Direct Endorsement LI eliminates the mortgagee’s The Basics of the Lender Insurance
mortgagees with acceptable default submission of case binders to FHA Program
and claim rates, under authority that and having FHA review the applica- Mortgagees will submit loan
will be delegated to them pursuant to tion for mortgage insurance before level data —as they do now—via the
section 256 of the National Housing FHA endorsement of the mortgage for FHA Connection, Business-to-Gov-
Act (NHA), to endorse FHA mort- insurance. The need to submit case ernment (B2G), or other means to
gage loans without a pre-endorsement binders to satisfy Notices of Return FHA. Upon transmitting sufficient
review conducted by FHA. Instead, (NORs) is dramatically reduced under data to satisfy FHA of the legitimacy
an LI-approved mortgagee will per- LI. FHA will continue to select a of the mortgage insurance request,
form its own pre-endorsement review sample of mortgages for post-en- FHA’s system will acknowledge re-
and enter mortgage loan level data to dorsement technical review (PETR). ceipt of the data. When the mortgagee
FHA via the FHA Connection. The A mortgagee may submit case binders endorses the mortgage loan through
FHA Connection will perform an au- for PETR in paper or digitized format. Continued Page -5-
Oct., 2005 Page 5
Lender Insurance Program … from Page -4-
FHA Connection, FHA’s system will amount exceeds statutory limit). adjustable rate mortgages of the
generate a mortgage insurance certifi- FHAC/CHUMS will not be re- NHA.
cate electronically to serve as questing that deficient cases be Participation Requirements for
evidence that the mortgage has been sent to the HOCs but instead Mortgage Lenders
insured. For those submissions of will inform the mortgagee that As stated in HUD regulations,
loan-level data sets that clear all of it must resolve any rejection in order to be eligible to participate
the risk-mitigation edits that FHA has message. Only cases that FHA’s in the Lender Insurance program, a
in place, e.g., loan amount, social se- data system detects have severe mortgagee must be an uncondition-
curity number checks, and others, the case warnings (e.g., CAIVRS ally approved Direct Endorsement
mortgagee will not be required to pro- exception, SSN not verified, mortgagee and have 2 years’ accept-
vide a case binder in advance of some text messages) will be re- able default and claim rate. For DE
endorsement. Only if the loan-level quested for FHA to review. mortgagees that underwrite as spon-
edits suggest that the mortgage appli- Under this exception processing sors for FHA-approved loan
cation must be reviewed before procedure, the case binder must correspondents, the default and
endorsement, or when the loan is se- be submitted to FHA for a pre- claim rate is the aggregate of both
lected for a post-endorsement technical endorsement review unless the retail originations and mortgages un-
review or review of the appraisal, will a mortgagee is able to correct the derwritten for their loan
case binder be required. Participating deficiency and resubmit the en- correspondents. LI eligibility is
mortgagees will then either submit a dorsement data through the company-specific and not deter-
paper case binder to the jurisdictional automated data verification. If mined at the branch level. The
Homeownership Center (HOC) or, if the resubmission is successful, acceptable claim/default rate is de-
the mortgagee chooses the electronic the mortgage is eligible to be fined as at or below 150 percent of
case binder option, the electronic case processed through LI, and the the national average. DE lenders that
binder will be submitted to FHA using mortgagee can endorse it for in- operate in only one state have the
a secure file transfer protocol. surance and generate an eMIC. right to have a compare rate using
There are three categories for mort- If the mortgagee cannot correct FHA loans made in that state only
gage endorsement processing under LI: the deficiency, the system will rather than the national average.
• LI Eligible/No Binder Request: withhold the mortgagee’s abil- FHA will monitor a mortgagee’s de-
The mortgagee endorses the ity to endorse the mortgage fault and claim rate eligibility to
mortgage and FHA generates an loan until the stated deficiencies participate in the Lender Insurance
electronic mortgage insurance are corrected. program on a yearly basis. Mortgag-
certificate (eMIC), which the For mortgagees that are qualified ees can determine if they have an
mortgagee may view on-line, to participate and wish to do so, all of acceptable default and claim rate by
and there is no request for a their FHA-insured mortgages will be examining their performance
casebinder to be sent to FHA. processed for endorsement in this through Neighborhood Watch Early
• LI Eligible/Binder Request: manner, i.e., FHA’s system provides Warning System at https://
The mortgagee endorses the an electronic acknowledgment of en- entp.hud.gov/sfnw/nw/.
mortgage, FHA generates an dorsement predicated solely on an After a DE mortgagee elects to
eMIC, and FHA requests the electronic data set. For those mort- participate and is approved as an LI
case binder for PETR purposes. gagees submitting digitized case approved mortgagee, it must process
The case binder request will ap- binders, both the PETR function and and endorse for insurance all of the
pear on the FHA Connection the endorsement processing of mort- loans it originates or underwrites
Binder List screen or B2G gage applications that fail the through LI. It must also conduct a
function. This information also pre-endorsement edits will be per- “pre-insurance” review and do so
will be shown on the Insurance formed using digitized case binders. using staff that neither originated
Application screen and the Case Mortgage Loan Eligibility for nor underwrote the mortgage. FHA’s
Inquiry screen will indicate if Lender Insurance requirements for the pre-insurance
FHA has requested a binder FHA is phasing in the LI pro- review are described elsewhere in
and, after sending the binder, gram. At this time, LI approved this mortgagee letter.
when FHA has received it. mortgagees will process and endorse Request to Participate
• LI Deficient: A high level case for insurance mortgage loans under DE mortgagees electing to par-
warning was triggered (e.g., FHA’s basic mortgage insurance pro- ticipate in the LI program must
CAIVRS exception) or system grams, including sections 203(b), request approval. Similar to the re-
edits reject case (e.g., mortgage 203(h), 203(k), 234(c), 247, 248, and Continued Page -6-
Oct., 2005 Page 6
Lender Insurance Program … from Page -5-
quirement for using FHA’s TOTAL for endorsement will result in a re- Eligibility Conditions:
Mortgage Scorecard, access to the LI quest for the digitized case binder • Mortgagee has unconditional
program will be conditioned upon the back to the mortgagee. This quality DE authority with an acceptable
mortgagee’s certification, executed as control measure will be used to make default and claim record for
an electronic acknowledgement certain that the mortgagee is able to two years prior to its applica-
through the FHA Connection, that it transmit an acceptable digitized case tion for participation in the LI
will comply with the LI program’s binder for FHA’s review. program
procedures and requirements. Each FHA intends to make electronic • Acceptable default and claim
mortgagee must acknowledge prior to case binders a LI program require- rate is at or below 150 percent
participating that it is eligible under ment once it has had sufficient time to of national average
the LI program and will participate examine the process and determine if • FHA will perform an annual re-
according to applicable regulations, any amendments or changes are nec- view of the mortgagee’s
this mortgage letter, and other written essary. High-volume mortgagees are continued eligibility to partici-
instructions from FHA. encouraged to develop an electronic pate
FHA will confirm that the mort- submission capability to take advan- • Mortgagee agrees to indemnify
gagee is unconditionally DE approved tage of the substantial time and cost FHA under the conditions of
and has an acceptable FHA default savings associated with paperless LI. Section 256(c) of the National
and claim rate, and notify the mort- Selection of Case Binder for Review Housing Act
gagee electronically that it is For those mortgage insurance ap- Termination Provisions
approved for the LI program. plications that the mortgagee endorses • Failure to adopt and employ
Approval for LI will be effective for insurance through the LI program prudent review techniques
for one year. At the end of the one- that receive an electronic notice of in- • Termination of Direct Endorse-
year period, the mortgagee will be tent to review, the mortgagee must ment approval for the
automatically checked by FHA’s sys- provide the case binder, either in pa- mortgagee or any branch also
tem of records. If the mortgagee’s per or digitized format, depending on terminates LI for the mortgagee
claim/default performance continues which process the mortgagee has cho- or any branch
to be acceptable and meets all other sen, within 5 business days of FHA’s • Failure to meet the above listed
approval criteria for LI participation, transmittal of its request. Failure to eligibility criteria
the mortgagee’s approval will be re- submit 5 or more requested case bind- The Pre-Insurance Review
newed for another year. ers to the applicable Homeownership LI approval does not alleviate
All case numbers assigned after Center will result in a suspension of mortgagee responsibility for comple-
the mortgagee has obtained FHA’s ap- the mortgagee’s eligibility to submit tion of a pre-insurance review nor
proval to participate in LI must be files under the LI program until the does the pre-insurance review negate
endorsed through the LI process. mortgagee submits the case binders in the lender’s obligation to ensure that
Electronic Case Binder a satisfactory manner. the loan is in compliance with all ap-
Mortgagees participating in the For those mortgage insurance ap- plicable HUD requirements. The
LI program may choose to submit plications that the mortgagee is same staff that originated the mort-
electronic case binders (eCB) to HUD unable to endorse due to system edits gage or underwrote the mortgage for
when a case binder is requested. The or other reasons, FHA requires the insurance cannot complete the pre-in-
eCB must include all of the docu- case binder for FHA to conduct a pre- surance review. While there is no
ments previously required in hard endorsement review of the file. Such reduction in the documents required
copy binders submitted for endorse- mortgage insurance applications can- in a case binder, whether digitized or
ment, as provided in HUD Handbook not be approved until FHA has paper, minimum requirements for pre-
4165.1, REV-2, paragraph 1-5 and in reviewed the case binder and deter- insurance reviews are outlined below.
the Electronic Case Binder mined insurance eligibility. In addition to certifying that all origi-
Developer’s Guide at http:// The Lender Insurance Regulations nation documents are retained in
www.hud.gov/pub/chums/ The regulations governing either electronic or paper format, the
electronicCaseBinder. The standards Lender Insurance are in the Code of pre-insurance review will consist of:
for indexing requirements of the Federal Regulations and include sec- 1. Verification that the loan is cur-
documents within the eCB can also be tions 24 CFR §§203.4, 203.6 and rent for the month previous to
found in the eCB Developers’ Guide. 203.255(f). Termination provisions submission for all loans logged
Once a mortgagee agrees to par- for individual lenders are at 24 CFR by the lender for lender insur-
ticipate in LI with the electronic case §203.4(d). A summary follows: ance more than 60 days after
binder option, its first five requests Approval and Continued Continued Page -7-
Oct., 2005 Page 7
Lender Insurance Program … from Page -6- Check Out Our
loan closing;
2. Review of the note and mortgage/security instrument ensuring the docu- Website
ments are executed upon forms which meet the requirements of the
Secretary, the mortgage maturity meets the requirements of the appli-
cable program, and the stated mortgage amount does not exceed the
maximum mortgage amount for the area;
3. Review of form HUD-92900A, page 3 for execution of all appropriate
certifications by the underwriter or lender representative;
4. Review of the property appraisal and any additional documentation sup-
porting the appraised value;
5. Review of form HUD-92544, Warranty of Completion, for proposed
construction cases;
6. Inclusion of an executed form HUD-92561, Transient and Hotel for all
2-4 unit properties, when applicable; Nebraska Mortgage Association has
7. Inclusion of a certificate of intent to occupy by military personnel, when updated and moved our website! We
applicable; have worked hard to make our
8. Inclusion of an approval letter from the local health authority indicating website more user-friendly, and have
approval of the individual water or sewer system; increased our ability to keep it up-to-
9. Inclusion on proposed construction, if the mortgage exceeds 90 percent date. For example, you can now
loan-to-value ratio, evidence that the mortgagee qualifies for a higher ra- download registration forms for NMA
tio loan under one of the applicable provisions in the appropriate events directly from the Calendar of
regulations; Events page.
10. Verification that no mortgage insurance premium (MIP), late charge or Certain areas of our site are still
interest is due; password protected for members only.
11. Clearance of all applicable case warning messages Only members of the Association can
Record Keeping Requirements for Participants access the membership database,
Each LI mortgagee must maintain, as they do now, their origination binder download the Membership Directory
in either hard copy or electronic format for two years from the date of endorse- and the current newsletter.
ment. Servicing mortgagees must maintain the case binder for a period of two Unfortunately, we are having
years beyond the life of the loan. It is imperative that the servicing mortgagee some difficulty with the Membership
use due diligence in obtaining a complete origination binder for all FHA loans Database on the site. It does NOT cur-
it services. Mortgagees retaining eCBs need not maintain a separate version of rently hold the records for all
the eCB indexed for electronic submission to HUD. However, if HUD requests individuals of the Association, so any
a case binder which is maintained electronically, the Mortgagee must follow search at this time would provide in-
standards and procedures set forth in the eCB Developers’ Guide for submis- complete information. Hopefully, this
sion of the eCB to HUD. will be corrected soon. An email will
If you have any questions regarding this Mortgagee Letter, please contact be sent to our members when this part
your Homeownership Center (HOC) in, Denver (800-543-9378). of the site is fully functional again.
When completed, the database will be
much more useful in that you can
Revised Uniform Residential Loan search for individuals by name, com-
pany, city or state. You will also be
Application (URLA) able to search for the Contact Person
for a member firm, and sort your re-
The Uniform Residential Loan Application (URLA), shared by Fannie Mae, sults alphabetically by company, last
Freddie Mac, the Department of Veterans Affairs, Rural Housing Services, and name or city.
the Federal Housing Administration (FHA) has been revised. Mortgagees may be- We appreciate your patience
gin using the revised form immediately but must use the new URLA for all loan while finalizing the database! In the
applications taken on or after July 1, 2006. There are no data changes to the form. meantime, check out the rest of the
Mortgagees may adjust the URLA formatting as necessary to make the docu- site. We're at:
ment easier to read and complete, or to reduce the number of pages. Additional www.nebraskamortgageassociation.org.
blocks, lines or spaces may be added to allow all relevant information to be in-
cluded, but sections, blocks, lines or spaces may not be removed.
Continued Page -9-
Oct., 2005 Page 8
Rebuilding Katrina-Destroyed Homes at Least a Year Away
Only a limited number of materials will be needed in large quantities during the
clean-up and repair phase now getting underway in the aftermath of the unprec-
edented destruction from Hurricane Katrina and the less substantial but still severe
damage from Hurricane Rita, according to NAHB economist Michael Carliner, but
the effort will require more skilled workers than for new construction and labor
shortages could emerge as the biggest problem in the months ahead.
With residential construction at record levels, markets for building materials
and labor were already tight prior to the storms, Carliner noted in an update pre-
pared for the Louisiana Home Builders building will be subject to new, more about 20% of that will be successfully
Disaster Summit on Oct. 4. But for the stringent building codes,” Carliner said. salvaged during the six- to nine-month
year ahead, the repairs of the roughly “Past disasters have often resulted in window before it becomes unusable, he
half million homes that sustained major new requirements.” reported.
damage but can be repaired, suffered Looking at the impact of the Rita also struck heavily forested
minor damage and are still habitable or storms on the supply of building mate- areas and blew down additional timber.
had largely cosmetic damage will spur rials, “in most cases damage to Between this August and August
demand for materials that include ply- sawmills or cement plants has not been of 2006, Carliner expects an index of
wood, oriented strand board, roofing serious, and once electricity and other the weighted average of the wholesale
and windows. services are restored, they should be up prices of materials used in residential
Before there is any significant and running quickly,” he reported. construction to increase on the order of
work to replace the more than 350,000 “There are some facilities, including 10%, up from 6.9% in the 12 months
homes that have been destroyed— plants providing gypsum products, ending this August and 8.9% for the
more than 12 times the number wiped where the outlook is less certain.” 12-month period before that.
out by any previous natural disaster in Even if they sustained only minor Following are his assessments for
the nation’s history— efforts will focus damage, disruption to the region’s key home building materials:
on restoring homes, and that can be disproportionate number of oil and gas • Lumber. “Because framing lum-
expected to last at least a year. refineries has resulted in an inadequate ber is used primarily in new
“Clean-up and repair activities will cushion of energy entering the winter construction, rather than in repair and
be the main focus during the next months, and this will affect the cost of remodeling, the hurricanes will not pro-
year,” Carliner said. “The process of re- energy as well as asphalt, PVC pipe duce immediate increases in lumber
placing the homes that were destroyed and other oil- and gas-based building demand. In fact, because previously
will have to wait for the reconstruction products. planned new construction projects were
of infrastructure and for the demolition Damage to water transportation cancelled or delayed due to the hurri-
and disposal of the homes that were de- has also been a factor, he noted, al- canes, and because framers will be
stroyed. Unlike past hurricanes, where though ports in and around New drawn into the cleanup and repair
wind or storm surge accomplished the Orleans are becoming operational work, demand will probably be re-
demolition, many homes will have to much faster than was previously duced in the short-term.
be deconstructed, and that process will feared. However, drought in the Mid- Temporary sawmill closures and
be complicated by various types of west has reduced water levels and transportation disruptions brought by
contamination.” limited capacities of bulk loads of ce- the hurricanes contributed to a 15% in-
He added that the cleanup and re- ment, aggregates, asphalt, steel and crease in the price of framing lumber
pair phase from the four less intense other building materials, “and that is nationwide, but that may be reversed
hurricanes that struck Florida last year likely to add to problems of availability once the shuttered mills are fully back
has yet to be completed. and put additional upward pressure on in operation.
Once housing reconstruction does prices into next year.” • Plywood and OSB. Immediately
begin in earnest in the Gulf area, the Salvaged timber from the 15 to 19 prior to Katrina, the nationwide whole-
process will be spread out over many billion board feet of timber that the sale price of CDX plywood was under
years, he said, and the rebuilding will U.S. Forest Service has estimated was $10 per sheet, but it jumped to more
often be located outside the damaged blown down by Katrina may exert than $15 by the middle of last month,
areas in the communities where dis- downward pressure on Southern prime based on delivery in late October. OSB
placed households have relocated, lumber and panel prices before the end prices increased similarly, rising from
including locations outside the region. of this year and into the early part of $8.42 per sheet on Aug. 26 to $12.96
“It is unclear whether repairs or re- 2006, but it is unlikely that more than Continued Page -9-
Oct., 2005 Page 9
Katrina… from Page -8- inventories. The long-term rebuilding both U.S. Gypsumºand National
by Sept. 23. These prices are likely to effort, however, will mean additional Gypsumºlost production and invento-
recede some as temporary production demand, and shortages are therefore ries at plants in the New Orleans area.
and transportation problems are likely to continue for several more National Gypsum was able to restart its
solved and panic buying dissipates. years. Prices are still headed up, and plant about three weeks later, but had to
However, as long as the capacity average prices for cement and con- shut down for four days for Hurricane
utilization rate for these products re- crete products could be another Rita. The U.S. Gypsum plant, which is
mains in the upper 90% range, prices 10%-15% higher a year from now,” located within the city and missing a
will spike frequently. Last year, the Carline reported. roof, will not be restarted for months, at
U.S. consumed about 16 billion The U.S. has been unable to ad- least. Both are older plants producing
square feet of plywood and 24 billion equately increase its cement-making about 300 million square feet of gyp-
square feet of OSB. capacity not because of a shortage of sum annually, compared to production
Brazil provided about 7.9% of the limestone or other raw materials, but of 700-800 million square feet at more
plywood used in the U.S. last year, but because of state and local regulatory modern facilities.
it has become more expensive with the barriers. Before the hurricanes, U.S. de-
addition of an 8% duty when it lost fa- • Steel. Reflecting global markets, mand for gypsum was approximately
vorable treatment for less-developed prices for scrap steel went from $100 per 36.5 billion square feet, with the
countries after the volume of its ship- ton in January 2003 to about $300 in late nation’s productive wallboard capac-
ments increased. NAHB is supporting a 2004 before receding, reaching about ity between 36 and 37 billion square
waiver for Brazilian plywood to elimi- $150 by the middle of this year, but now feet. The producer price index for
nate the tariff. back to more than $260. gypsum rose by 13% for the year end-
The reopening of a previously Prices for relatively-crude steel ing in August.
shuttered plywood plant in Gloster, products, such as nails and rebar, have Repair of hurricane damage will
Miss. could add 2% to current U.S. followed the scrap prices up after a add to demand, and on the supply side
plywood capacity. The one new OSB short lag, but more complicated prod- the earliest that new plants will come
plant opened last year in Huber, ucts, such as appliances, take longer. on line is the third quarter of 2006.
Okla., along with increased capacity When scrap prices declined in the first “The production of drywall also uses a
in existing plants, added about 0.7 bil- half of 2005, there was some down- fair amount of energy. All things con-
lion square feet of capacity. By the ward adjustment for rebar and other sidered, it should be anticipated that it
end of 2005, capacity increases of building products, but they have will become more expensive and
about 1.8 billion square feet have headed back up. harder to get than it already was.”
been promised, but a large boost to “With the new spike in scrap • Asphalt. “Asphalt shingles are
OSB capacity won’t occur until 2007. prices, prices for metal building prod- probably the most commonly required
• Cement/Concrete. “Katrina, ucts are likely to climb further, but material for hurricane repair, and the
like the 2004 hurricanes, may actually compared to the large percentage in- fact that the raw material comes from
reduce demand in the short term. creases between 2003 and 2004, the refineries is worrisome. The Asphalt
Once the transportation disruptions price hikes will be more moderate,” Roofing Manufacturers
are resolved, the cancellation of ce- Carliner said. Associationºclaims that shingle manu-
ment-using projects may help restock • Drywall. As a result of Katrina, facturing capacity is not a problem, but
if there isn’t enough asphalt, supplies
URLA… from Page -7- could be limited.”
Lenders may obtain the revised form at any of these websites: For the 12 months ending in Au-
http://www.hudclips.org/ gust, the producer price index for
http://www.freddiemac.com/sell/forms/docs/65_010106.doc “asphalt felts and coatings” increased
http://www.efanniemae.com/sf/formsdocs/forms/pdf/sellingtrans/1003.pdf by 13.6%, with an increase of 8% from
The information collection requirements contained in this document have July to August. “This isn’t likely to be
been approved by the Office of Management and Budget (OMB) under the Pa- the last increase,” Carliner said.
perwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB • PVC, Vinyl. “Once refineries
control number 2502-0059. In accordance with the Paperwork Reduction Act, and pipelines are repaired and restarted,
HUD may not conduct or sponsor, and a person is not required to respond to, a in a couple of months, the supply out-
collection of information unless the collection displays a currently valid OMB look for oil- and gas-based inputs to
control number. building materials, as well as fuel costs,
If you have any questions regarding this Mortgagee Letter, please contact should be more favorable, but there
your local Homeownership Center (HOC), using the toll-free number, in Denver could be some unpleasant surprises be-
(800-543-9387). tween now and the end of 2005.”
