Mortgage Insurance

							            Mortgage Insurance
                 Joanne Kuczma
    HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
           What Is FHA?

• 100% mortgage insurance.
• Insures lenders against default.
• Provides loss mitigation services for 
  borrowers.
• FHA is NOT sub‐prime.
• FHA is NOT a new sub‐prime product.



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    FHA Mortgage Products
• 203(b) Single Family
  – Condominium and cooperative
  – Manufactured housing
  – Energy efficient mortgage (EEM)
• 203(h) Disaster Loans
• 203(k) Rehabilitation Mortgage
  – Standard
  – Streamlined
• 255 Home Equity Conversion Mortgage

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                 Changes
• Legislative impact 
   – Housing and Economic Recovery Act of 2008 
     (HERA)
   – American Recovery & Reinvestment Act of 2009 
     (ARRA)
• Online guidance  (handbooks, mortgagee 
  letters, housing notices, Federal Register, 
  and more)
• Mortgage limits (forward and reverse)
• Mortgage insurance premiums (MIP)
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           FHA Connection (FHAC) 
              Joanne Kuczma
    HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
https://entp.hud.gov/clas/index.cfm




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              Pending Guidance
                 Joanne Kuczma
    HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
         Pending Guidance
•   Closing costs
•   Cooperative housing
•   Short sales
•   Short payoffs




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     First‐Time Homebuyer Tax Credits 
              Daniel Gomez Jr.
    HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
      First‐Time Homebuyer 
            Tax Credits
•   ARRA
•   Mortgagee Letter 2009‐15
•   IRS Website–updated information
•   Secondary financing
•   Purchase
    – Conditions
    – Due diligence
• Monitoring

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            Refinance Transactions
                 Joanne Kuczma
    HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
      Refinance Transactions
• General information
  –   Statutory/geographical limit 
  –   Refinance authorization
  –   Payoff statement
  –   Loan current for month due




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      Refinance Transactions
• General eligibility
  –   LDP/GSA
  –   CAIVRS
  –   Vested, not on note
  –   Seasoning
      • Ownership
      • Junior liens/subordination
• Eligible items for “existing indebtedness”
• Full documentation/qualifying

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    Refinance Transactions
• No cash‐out (rate & term)
  – Non‐FHA‐to‐FHA  or  FHA‐to‐FHA
  – Maximum mortgage lesser of
      97.75% of appraised value
      existing indebtedness




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    Refinance Transactions
• Streamlined transaction
  – FHA‐to‐FHA first lien only
  – With appraisal 
  – Without appraisal 
  – Credit‐qualifying
  – Maximum mortgage lesser of
        97.75% of appraised value or current 
        insured mortgage
        existing indebtedness

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   Refinance Transactions
• Cash‐Out
  – Mortgagee Letter 2009‐08
  – Maximum mortgage of 85%
  – Subordinate liens
  – Ownership
       12 months
       less than 12 months
  – Delinquent borrowers
  – Three‐ and four‐unit properties
  – Second appraisal

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Refinance Transactions




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          Energy Efficient Mortgage
              Danny Mendez
    HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
  Energy Efficient Mortgage
• Energy efficient mortgage
  –Existing properties ‐ Retrofit
  –New construction
  –Stretch ratios not necessarily applicable
• Energy Efficient Home (EEH)
  –Meets the 2000 International Energy 
  Conservation Code (IECC)
  –“Stretch” ratios (33/45) apply 



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   Energy Efficient Mortgage
• Energy Efficient Mortgage (EEM)
  –Eligible loan types
  –Eligible properties 
  –Appraisal considerations
  –Eligible Improvements
        up to 100% financed
        lowest of 3 calculations
        EEM calculator (FHAC)
  –Home Energy Reporting System (HERS) report



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    Energy Efficient Mortgage
• Mortgage calculation
  –Statutory limit
  –3.5% required minimum cash investment
• Underwriting criteria
  –Credit history
  –Assets
  –Income/ratios (improvement costs not included  
  in ratios)




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       Rehabilitation Financing 203(k) 
               Gerald Glavey
    HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
Rehabilitation Financing 203(k) 
• Types
   –Standard
   –Streamlined
   –Differences
• Eligibility
   –Minimum/maximum rehab $$$
   –Purchase or refinance
   –1 to 4 units 
   –Condominium
   –Commercial space
   –Manufactured home
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Rehabilitation Financing 203(k) 
• Property
  – Inspections 
  – Contractor
  – Repairs/Rehabilitation
       eligible
       ineligible
• Credit
  – Borrower/loan qualification
  – Maximum mortgage basis
  – Required minimum cash investment

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          Manufactured Housing
                Daniel Gomez Jr.
    HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
      Manufactured Housing
•   HERA
•   Mortgagee Letter 2009‐16
•   Definitions
•   Data integrity
•   Loan closing
•   Warehouse lines‐of‐credit



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        Manufactured Housing
• Property eligibility (Title II)
   –   Foundation
   –   Engineer certification
   –   Flood zone
   –   Inspections
   –   Enclosures
   –   Termite 
   –   Condominium
   –   Title issues



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     Manufactured Housing
• Credit underwriting eligibility
  – Cash investment
  – Gift funds
  – Construction‐Permanent mortgage 
    program
  – Cash back to borrower
  – Refinances (existing construction)
  – Maximum insurable mortgage
       property considerations
       formula for determining value
       additional calculation considerations   36
                Condominiums
                 Joanne Kuczma
    HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
          Condominiums
• Effective date
• Mortgagee Letter 2009‐19
• Approval processing options
  – HUD review and approval process
     (HRAP)
  – DE lender review & approval process 
    (DELRAP)



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          Condominiums
• Eligible projects
• Ineligible projects
• General requirements
  – Site condos
  – “Spot” loan approval
  – FHA‐to‐FHA transactions
  – Environmental review



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              Condominiums
• Project eligibility requirements
    – Applicable to ALL project approvals
    – FHA concentration
    – Reserve study
• Manufactured housing condo projects
• Condo conversions
• FHA Connection modifications
• New construction pre‐approval and 
  inspection
• General (approval) processing steps
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          Condominiums
• Certification of initial approval
• Certification of previously approved 
  projects
• Quality assurance
• False certifications
• Insurance of individual units
• Attachments to ML 09‐19


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           Insurance Endorsement
                  Joanne Kuczma
     HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
       Insurance Endorsement
            Common Deficiencies
• UFMIP not posted/showing in FHAC
• Borrower failed SSN validation
• Note and Security Instrument not certified as 
  a true copy
• Incomplete files and documents
   –   Late letters
   –   Assets
   –   92900‐LT not fully completed
   –   92900‐A

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      Insurance Endorsement
•   Final HUD‐1 missing
•   HUD‐1 Addendum not executed
•   Inaccurate data
•   Automated Underwriting System (AUS) 
    files
    – Data  integrity
    – Final Feedback Certificate



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     Insurance Endorsement
• Transfer of cases (FHAC)
  – Prior to closing–origination menu 
  – Post closing/servicing–servicing menu




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Home Equity Conversion Mortgage HECM 
             Erica Jessup
     HUD FHA 2009 National Lender Training Conference




September 21‐22, 2009
 Home Equity Conversion Mortgage 
              HECM
            What is a HECM? 
• A loan that allows seniors
  – to convert the equity in their homes into 
    cash
  – to purchase a home
• There is no monthly repayment 
  obligation


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Home Equity Conversion Mortgage

• Available to individuals age 62 or older
• Must occupy home as principal 
  residence; 60‐day occupancy rule 
  applies for purchases
• Must complete HECM counseling




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Home Equity Conversion Mortgage

• HECM Types
  – Traditional
  – Purchase
  – Refinance
• Fixed and adjustable
• Payment plans
• Maturity date


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Home Equity Conversion Mortgage

• National HECM loan limit applies to all 
  classes of property
  – Single family, 1‐ to 4‐unit homes
  – Manufactured homes
  – PUDs
  – Condominiums




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Home Equity Conversion Mortgage

• All properties must meet MPR/MPS 
  Minimum Property Requirements/Standards
• Property is appraised exactly the same as 
  forward mortgages (except repair cost 
  estimate required)
• Existing properties
  – Construction complete
  – Habitable




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Home Equity Conversion Mortgage

• Recent program changes
  – Elimination of HECM Advisor option
  – Origination fee calculation
  – HECM refinance guidelines
  – HECM purchase
  – HECM counseling




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Home Equity Conversion Mortgage
             Fraud
• Schemes
  – Equity theft
  – Foreclosure rescue
  – Investment
• Recruitment
  – Local churches
  – Investment seminars
  – Media advertising

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Home Equity Conversion Mortgage
              Reporting Fraud
• HUD’s Office of Inspector General
   – Toll free:  1‐800‐347‐3735
     (Monday–Friday 10:00 a.m.–4:30 p.m. EST)
   – E‐mail:  Hotline@hudoig.gov
   – Write:  HUD Office of Inspector General
             451 7th Street SW, Room 8254
             Washington, DC  20410
• State Attorney General’s Office


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Home Equity Conversion Mortgage
        FHA Insurance Coverage
• Allows lenders to offer higher principal 
  limits
• HUD pays mortgagor when lender is 
  unable or unwilling
• Covers shortfall when outstanding 
  balance exceeds net sale 
  proceeds/appraised value


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