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					N EBRASKA        Mortgage Monitor                                                                   www.NebraskaMortgageAssociation.org



                                                                                                                           January , 2008
            2007-2008                              President Signs Omnibus Spending
             Officers                              Bill; Increases FHA MF Loan Limits
                                                  On Wednesday, December 26, President Bush signed H.R. 2764, the "Consoli-
  President, Mark Johnson
                                                  dated Appropriations Act," that will fund the federal government for the
  CBSHome Mortgage, Omaha
                                                  remainder of FY 2008. The omnibus spending bill includes an increase in the
  402/964-4612 Fax 402/964-4677
                                                  FHA multifamily loan limits, which are determined by the size of the unit, the
  Vice President, Gina Jerauld                    type of structure and the project location. H.R. 2764 increases the limit to 170
  Bank of the West, Omaha                         percent in high cost areas and 215 percent on a case-by-case basis. HUD will
  402-918-2860 Fax 402/918-8859                   need to amend its current factors and issue a Mortgagee Letter to provide appro-
                                                  priate percentages for each office. The Special limit areas (Alaska, Hawaii and
  Treasurer, David Olson
                                                  the Virgin Islands) will remain at 260 percent.
  Equitable Mortgage of NE, Blair
                                                                                      Steve O'Connor, MBA SVP Government Affairs
  402/426-3537 Fax 402/426-3562
  Secretary, Sherri O’Callaghan
  TierOne Bank, Grand Island                         MBA Writes OFHEO in Support of
  308/381-8900 Fax 308/381-6347
  Board of Directors
                                                     Temporary Increase in GSE Loan
  E. Dean Neidan Sheree Brooks Forgue
  Jacalyn Ayoub Mary Jo McClurg
                                                                 Limits
  Jack Hobbie     Scott Jensen                     On Wednesday, January 2, MBA sent a letter (attached) to OFHEO Director,
  Tony Johnson    Guy Griffith                     James B. Lockhart, III, regarding a temporary increase in GSE conforming
  Cindy Muhlbach Jan Meister                       loan limits in an effort to increase liquidity in the mortgage market. MBA
                                                   continues to believe that enactment of GSE oversight reform legislation is im-
  Education Chair
                                                   portant for restoring confidence in the mortgage market and ensuring its
  Jo Lewis, Lincoln
                                                   health in the future. Notwithstanding that view, MBA's Residential Board of
  Legal Counsel, John Boehm                        Governors supports, separate from the oversight reform effort, a temporary
  Butler, Galter & O’Brien Law Firm,               increase in the maximum loan limit that the GSEs may purchase from lend-
  Lincoln                                          ers, subject to the following conditions: the increase should be in effect for no
  402/475-0811 Fax 402/475-6416                    less than 12 months, and up to 24 months if market conditions warrant; the
                                                   temporary cap for a single family property should be set at no more than 150
  Editor, Jo Lewis
                                                   percent of the current loan limit ($625,500) and should be available nation-
  HomeServices Lending, LLC. Lincoln
                                                   wide; and expanded loan limits should be available for purchase loans and
  402/441-3203 Fax 402/441-3202
                                                   refinancing.
                                                                                     Steve O'Connor, MBA SVP Government Affairs

 Also in this issue…
                                                       Nationwide Mortgage Licensing
 NIFA Clarification of FNMA Announcement
 07-16 and Seller Contributions (Page 2)               System Goes Live in Seven States
 Office of the Attorney General Guidance          On Wednesday, January 2, the Conference of State Bank Supervisors (CSBS) and
 With Respect to 940 CMR 8.00 et. seq. (Page 2)   the American Association of Residential Mortgage Regulators (AARMR)
 FHA Modernization Bills: 110th Congress
                                                  launched a Nationwide Mortgage Licensing System (NMLS). States can utilize
 Comparison Chart (Page 5–8)                      NMLS as a tool to reinforce mortgage regulation and increase supervision. Cur-
                                                  rently, seven states are using NMLS: Idaho, Iowa, Kentucky, Massachusetts,
 Statement by HUD Secretary Alphonso              Nebraska, New York, and Rhode Island. All 50 states are expected to eventually
 Jackson on Passage of FHA Modernization          adopt the system, along with 500,000 company and professional licensees. The
 Legislation by the U.S. Senate (Page 8)          system will help efforts to coordinate mortgage supervision and improve regula-
                                                  tory practices.
                                                                                      Steve O'Connor, MBA SVP Government Affairs
NEBRASKA        Mortgage Monitor                                                                                        January , 2008


                NIFA Clarification of FNMA Announcement 07-16
                            and Seller Contributions
   (1) 6% Seller Contributions – NIFA continues to have a spe-           DU using the MCM product or in LP using the Home Possible
   cial waiver from Fannie Mae in connection with                        (HP) product regardless of the LTV. There is no minimum LTV
   MyCommunityMortgage (MCM) loans that does allow a maxi-               requirement when using the MCM or HP loan product guide-
   mum of 6% seller contributions. Lenders can continue to               lines. NIFA Memorandum from Jacki Young dated 1/14/2008
   ignore the messaging in DU as long as you are using the MCM                Editors Note: NIFA is working diligently on trying to best
   product. We will notify lenders immediately if anything               implement a workable solution to the new Fannie Mae/Freddie
   changes with this requirement.                                        Mac Adverse Market Delivery Charge. Implementations being
   (2) Fannie Announcement 07-16 dated November 6, 2007 –                reviewed are - the current line item to the GFE and HUD1s;
   Please note that the loan-level price adjustment (LLPA) does          and a possibility of rolling in of the fee to the pricing platform.
   not apply to any of the MCM loan products. However, the               NIFA is making every effort to keep their pricing structure on a
   LLPA does apply to the standard Fannie Mae product (standard          simplified level. A decision regarding price inclusion of any
   95%) and the standard Freddie Mac product (standard 95%).             Adverse Market Delivery Charges will be made as soon as
   Therefore, lenders are strongly encouraged to run borrowers in        possible.


    Office of the Attorney General Guidance with 940 CMR 8.00
                           et. seq. (as amended)
  Editors Note: The following is an excerpt from a lengthy docu-         2, 2008, in order to provide industry participants additional time
  ment. For space reasons, we are not able to include the entire         to understand, and prepare implementation of, the new regula-
  document, but members who would like the entire document can           tions. All regulations are effective January 2, 2008.
  email Nebraska Mortgage Association at                                 Q. Do the regulations affect mortgage loans that are Òin the
  nebrmortassn@neb.rr.com requesting to have a copy of the en-           pipelineÓ prior to January 2, 2008 but have not closed by the
  tire pdf file emailed to them.                                         effective date?
  On October 17, 2007 the Office of the Attorney General                       No. In order to provide certainty to lenders and brokers and
  amended 940 CMR 8.00 et. seq., the regulation under the Con-           in order to prevent disrupting loan transactions that were planned
  sumer Protection Act that identifies unfair and deceptive acts or      in 2007 but still await consummation or Òclosing,Ó the regula-
  practices in connection with mortgage brokering and mortgage           tions will apply only to loan applications received on or after
  lending. The new amended regulations were issued following an          January 2, 2008. If a borrower provides a complete loan applica-
  extensive comment period and after four hearings were held             tion to a broker or lender in advance of January 2, 2008, then
  statewide between September 18 and 21, 2007. The new regula-           these regulations will not apply to that prospective loan.
  tions will take effect on January 2, 2008.                                   Changes in the Regulations Since their Announcement in
       Since the regulations were promulgated, the Office of the         October
  Attorney General has received inquiries concerning the scope of              Q. What has changed since these regulations were first
  certain regulations and questions relating to implementation of        announced on October 17, 2007?
  the regulations. The Office of the Attorney General has changed              Three things have changed since these regulations were
  certain parts of the regulation, first by extending the effective      first announced on October 17. First, the effective date changed.
  date (which occurred in November); second, by changing Sec-            The effective date initially was November 15, 2007 for most of
  tion 8.05 which requires certain disclosures to be provided to         the regulations. In November, the Attorney General changed the
  consumers; and third, by revising Section 8.06(16) to account for      effective date to January 2, 2008 for all regulations. Second, the
  so-called “No Income” products. Also, in order to provide clarity      office of the Attorney General changed the originally announced
  on the issues raised in communications with the Office of the Attor-   regulation by revising Section 8.05 governing disclosures to bor-
  ney General, and to assist in the implementation of the regulations,   rowers. The original revised regulation required two disclosure
  the Office of the Attorney General issues this guidance.               forms—one for brokers and one for lenders—that were required
  Effective Date                                                         to be provided to borrowers. As of the filing of the final regula-
  Q. When are the new regulations effective?                             tion, those new forms are no longer required. Instead, Section
       All the revised regulations are effective January 2, 2008.        8.05 provides that it is unfair or deceptive for a lender or broker
  When the regulations were first announced, certain parts were          to fail to provide to a borrower a disclosure required by federal
  effective January 2, 2008, while most parts were effective No-         or state law. Third, Section 8.06(16), which restricts the use of
  vember 15, 2007. On November 12, 2007, the Attorney General            so-called “stated income” products, has been revised to account
  announced that all of the regulations would be effective January                                                       Continued Page -3-

        N EBRASKA M ORTGAGE A SSOCIATION                                                           www.NebraskaMortgageAssociation.org         2
NEBRASKA        Mortgage Monitor                                                                                          January , 2008

  Office of the Attorney General… from Page -2-
  for so-called “No Income” loan products. These products—                      The overarching principle set forth in Section 8.06(15), set
  where a lender in no way considers employment status or in-              forth in the first sentence, is that lenders and brokers, based on
  come because the lender’s decision is based on other                     information known at the time the loan is made, must “reason-
  criteria—no longer require a borrower’s signed statement of in-          ably believe” that “the borrower will be able to repay the loan.”
  come. See Sections 8.03 (definition of “No Income Loan                   The second sentence then requires that the determination of a
  Product”) and 8.06(16).                                                  borrower’s ability to repay “shall take into account, without limi-
   Scope of Regulations                                                    tation, . . . the borrower’s ability to repay at the fully indexed
  Q. Do these regulations apply only to “subprime” mortgage loans?         rate . . . .” Therefore, lenders and brokers must take into account
       Sections 8.02 and 8.03 exempt reverse mortgages and open-           upward adjusting terms and their impact on scheduled payments.
  end home equity lines of credit from these regulations, as well as       Accordingly, with respect to a two year fixed/twenty-eight year
  reduced interest rate mortgage originated under governmental af-         adjustable loan, a lender could not qualify a borrower based on
  fordable housing programs. See Sections 8.02 (Scope) and 8.03            the two year introductory terms alone, without taking into ac-
  (definition of mortgage loan). Beyond those exemptions, the              count the predictable increase in payments two years after loan
  regulations apply to all residential mortgage loans, not any par-        origination. Likewise with an ARM loan that features a much
  ticular subset of loans. The application of the regulations is not       longer fixed rate period (for instance, five, seven or as long as
  limited to loans known as “subprime,” high cost, or                      ten years), the lender still must take into account the future in-
  nonconventional loans.                                                   crease in interest rate and its impact on monthly payments. The
  Q. Are banks or depository institutions excluded from the                regulation does not dictate precisely how lenders and brokers
  regulations?                                                             must underwrite ARM loans to account for those upward adjust-
       No. Banks and depository institutions are not exempt from           ments. But the regulation plainly prohibits lenders and brokers
  the regulations. Banks and depository institutions, presuming            from ignoring those upward adjustments and increased pay-
  they make residential mortgage loans, are “mortgage lenders”             ments—qualifying borrowers based only on a short term, low
  under the regulations.                                                   interest rate and artificially low monthly payment.
  Q. Do the regulations apply to commercial loans or only resi-                 In determining how to take into account increased rates,
  dential mortgage loans?                                                  changed terms or increased payments following an ARM adjust-
       The regulations apply only to residential mortgage loans,           ment, it is expected that lenders and brokers would reasonably
  not to commercial loans. The definitions for “mortgage broker,”          take into account, for example: i) the duration of the introduc-
  “mortgage lender,” “mortgage loan,” and “residential property”           tory, fixed rate period; ii) the magnitude of the ARM adjustment
  in the regulations all reflect the application of the regulations to     when it occurs; iii) subsequent ARM adjustments, accounting for
  residential mortgage loans.                                              caps applicable to periodic adjustments as well as overall caps;
  Assessment of Reasonable Ability to Pay (Section 8.06(15)                iv) the resulting impact on the borrower’s expected monthly
  Q. Under subsection 8.06(15), may a lender or broker qualify             payment obligation; and v) other underwriting criteria used by
  a borrower for an adjustable rate mortgage with a fixed                  the lender to reasonably determine whether the borrower will be
  starter rate based on the borrower’s ability to repay only at            able to repay the loan both during the introductory period and
  the fixed starter rate?                                                  after the ARM adjustments.
       No, the lender or broker must also take into account the loan            Q. Does this regulation require all lenders to collect an
  rates and terms that adjust following the fixed rate period. Sec-        escrow for property tax or insurance payments?
  tion 8.06(15) requires that lenders or brokers must reasonably                No. This regulation does not mandate that lenders collect
  determine the borrower’s ability to repay the loan. That determi-        property tax or insurance escrows. The regulation does require
  nation must take into account the borrower’s ability to pay at the       that lenders, when determining a borrower’s ability to repay,
  fully-indexed rate. If the duration of the fixed starter rate is rela-   must take into account property taxes and insurance based on tax
  tively short (such as 2 or 3 years for 2/28 or 3/27 ARM loans),          and insurance costs on the property at the time of the loan, re-
  then in order to comply with Section 8.06(15) the lender cer-            gardless of whether the lender collects them.
  tainly should determine the borrower’s ability to pay the                Restrictions on Stated Income or No-Doc Loans (Section
  monthly payments at the fully indexed rate, following the ARM            8.06(16))
  adjustment. If the duration of the fixed starter rate is consider-       Q. Does subsection 8.06(16) ban the use of “no–doc” or
  ably longer (such as 5, 7 or 10 years), then the lender has              “stated income” loans?
  increased flexibility in taking into account the fully indexed rate           No, those loan products may still be offered and used. In or-
  in reasonably assessing the borrower’s ability to repay. (See fur-       der to curtail abuse of these products, this subsection requires
  ther discussion immediately below).                                      lenders to obtain a signed statement from the borrower stating
  Q. Does this regulation mean that the borrower must be                   borrower’s income, even though a lender may choose not to
  qualified for the loan based on the ability to pay at the inter-         verify or document the income so stated by the borrower. The
  est rate that adjusts upward in the future, even if the initial          signed statement also must disclose the impact of the no- or low-
  interest rate is fixed (and the adjustment does not occur) for           documentation feature on the loan terms and costs.
  five, seven or ten years?                                                                                                   Continued Page -4-

        N EBRASKA M ORTGAGE A SSOCIATION                                                             www.NebraskaMortgageAssociation.org           3
NEBRASKA         Mortgage Monitor                                                                                           January , 2008

  Office of the Attorney General… from Page -3-
  Q. Are there exemptions from this part of the regulation?                       flict of interest because a borrower may be able to pay less
  For instance, for loans with low loan-to-value ratios, or                       by using a competing broker?
  where an existing borrower is obtaining a refinancing to de-               Q.   If a person holds both a mortgage broker license and a mort-
  crease the interest rate or to improve other terms?                             gage lender license, when does Section 8.06(17) apply and
        Section 8.06(16) provides one exception from part of the                  when does section 8.06(18) apply?
  regulation, for “No Income Loan Products.” A “No Income Loan               Q.   Are lenders allowed to offer special pricing or special loan
  Product” is one where the lender, pursuant to its written under-                terms for particular categories of borrowers? For instance,
  writing or origination policy, in no way considers a borrower’s                 can a lender offer a better interest rate, or better loan terms:
  income or employment status. If a broker arranges or a lender                   a) to a borrower that has multiple accounts with a lending
  makes a loan using a No Income Loan Product, then he or she                     bank? b) to a borrower that has a successful payment history
  need not collect a signed statement of the borrower’s income as                 on other accounts with the same lender? c) to a borrower
  required by clause (a) of Section 8.06(16). The broker or lender                that agrees to make monthly payments using an automatic
  still must disclose how the No Income Loan Product increases                    debit feature?
  the applicable interest rate or other costs, if that is the case.          Q.   Under Section 8.06(18), can a borrower pay a discount point
        Beyond that exception, Section 8.06(16) does not include                  to reduce the loan’s interest rate, without violating the re-
  exemptions for certain loans or borrower characteristics. For any               quirement that pricing models and cost features be based on
  loan where the broker or lender considers income but does not                   credit or bona fide qualification criteria?
  require documentation to verify the borrower’s income, the bro-            Q.   Does Section 8.06(18) prevent a lender from carrying out its
  ker or lender must have the borrower sign a document that (i)                   goals under the Community Reinvestment Act or other pro-
  identifies income and source of income and (ii) discloses the im-               grams designed to target lending to communities or
  pact of the low-documentation or no-documentation loan                          borrowers that are in need?
  product on the loan terms.                                                 Q.   Does Section 8.06(18) limit the flexibility of mortgage lend-
  Q. Has the Office of the Attorney General issued a form to                      ers or community banks to offer special or favorable terms
  comply with Section 8.06(16)?                                                   to borrowers? For instance, if a homeowner currently has a
        No. The regulation does not specify or require a particular form.         subprime loan and faces potential default and the home-
                                                                                  owner would not qualify for a conventional loan, can a
  As noted at the beginning of this article, this is only an excerpt              lender offer special terms to help the borrower refinance? Or
  from the entire FAQ document. The following questins were also                  if a local teacher has difficulty affording payments on a con-
  answered in the original document. NMA members who would                        ventional loan, can a lender offer special terms to help make
  like a copy of the entire document can email Nebraska Mortgage                  housing affordable??
  Association at nebrmortassn@neb.rr.com requesting to have a                Q.   Does Section 8.06(18) prohibit lenders from “meeting the
  copy of the pdf file emailed to them.                                           competition” to make a loan? For instance, if a potential
  Q. Does Section 8.06(17) of the regulation ban all Yield Spread                 borrower provides a quote from a competitor at a 1⁄4 point
       Premiums, or YSP’s?                                                        lower interest rate, can a lender reduce its rate to try to meet
  Q. Must YSP’s be disclosed to the borrower?                                     the competition and win the customer’s business?
  Q. Do these regulations mean that a mortgage broker can no                 Q.   Why did the Attorney General change the disclosure regula-
       longer arrange a loan with no closing costs/no points, and in-             tion in Section 8.05 from the version announced on October
       stead must collect any fees or points directly at the closing?             17, 2007?
  Q. How can a broker determine when the broker’s compensation gen-          Q.   Does this new Section 8.05 supersede the old Section 8.05, which
       erates a conflict with the interests of their client, the borrower?        required form disclosures for certain home equity loans?
  Q. Can the Office of the Attorney General provide an example               Q.   Does this regulation demand that a lender or broker translate
       of what YSP’s are permissible and what YSP’s would vio-                    disclosures into all possible languages, regardless of costs?
       late the regulation?                                                       And must a lender or broker provide an adult interpreter for
  Q. If a conflict exists between the broker’s financial interest                 all languages, regardless of costs?
       and the borrower’s interest, can the loan transaction go for-         Q.   How do these regulations change the law? Is this the first
       ward so long as the conflict is disclosed to the borrower?                 time chapter 93A has been applied to mortgage lenders and
  Q. If a conflict exists, can the loan transaction go forward if the             mortgage brokers?
       broker gets the borrower to sign a form that acknowledges             Q.   Are these regulations related to the Massachusetts law
       the conflict and waives any objection?                                     passed in November 2007 that contains new provisions re-
  Q. If one broker, generally speaking, charges 1.5 points per                    lated to certain mortgage loans, mortgage originators and
       loan transaction, whether compensated in points or charges                 foreclosure protection?
       at closing or compensated via a YSP, but another broker in            Q.   Why is the Attorney General implementing these regulations
       the same locality charges only about 1 point per loan, is the              now, when federal regulators also are considering new stan-
       first broker obligated to change his pricing to avoid a con-               dards to protect consumers who purchase mortgage loans?


        N EBRASKA M ORTGAGE A SSOCIATION                                                               www.NebraskaMortgageAssociation.org           4
NEBRASKA        Mortgage Monitor                                                                                January , 2008

    FHA Modernization Bills: 110th Congress Comparison Chart
  Here is a comparison between the recently passed House and Senate version of FHA Modernization. Now they just have to come to-
  gether and get it over to the President for signature… we’re hoping for mid-February!


                             FHA Modernization Bills: 110th Congress
   Topic                                    H. R. 1852                                             S. 2338
                                 Financial Services Committee Bill                      Senate Banking Committee Bill

   Status                The Expanding American Homeownership Act of            The FHA Modernization Act of 2007 passed the
                         2007 passed the full House on September 18, 2007       Senate on December 14, 2007 by a vote of 93 to 1.
                         by a vote of 348 to 72.

   Loan limits           Maximum FHA loan set at the lower of (a) 125% of       Raises the maximum insurable loan amount to the
                         the local area median home price, or (b) 175% of       lesser of (a) 100% of local median home price; or
                         the GSE conforming loan limit ($729,750 based on       (b) the GSE conforming loan limit.
                         $417,000 limit in 2007). Provides additional
                         authority to HUD to raise limits additional
                         $100,000 if market conditions warrant.

                         Floor raised from 48% to 65% of the GSE
                         conforming loan limit. Provides additional authority   Same floor as H.R. 1852; does not include market
                         to HUD to increase floor if market conditions          distress provision.
                         warrant

   Loan term             Extended to 40 years.
   extension                                                                    Not included.

   Change to Limits      Sets limit on mortgage amount to 97.75% of
   on mortgage           appraised value, except for zero down payment          Not included.
   amount as percent     mortgages, where it can be the appraised value plus
   of appraised value    allowable fees.

   Cash investment       Requires three percent down payment for most           Requires minimum of 1.5%; prohibits seller-
   requirement           mortgages; gifts from family members, government       funded downpayment assistance from providing
                         agencies or nonprofits with at least $4m in assets     any of the required downpayment.
                         shall count towards that requirement; first time
                         homebuyers and certain other borrowers eligible for
                         insurance on lower- or zero-downpayment
                         mortgages.

   Creation of           Directs the Secretary to establish underwriting        Not included.
   “Higher Risk”         standards for “Higher Risk” borrowers with FICO
   category of           scores below 560.
   borrowers

   Risk-based            Permits Secretary to establish premium structure for   Implementation of HUD’s proposed risk-based
   premiums              upfront or annual premiums, or both. Premium           premium rule (FR-5171-N-01) delayed by one
                         rates may vary over loan term if basis for change is   year.
                         determined at origination. Authorizes premiums to
                         be determined based on product (e.g. adjustable rate
                         mortgage) risk.


                                                                                                     Continued Pages -6 through 8-


       N EBRASKA M ORTGAGE A SSOCIATION                                                      www.NebraskaMortgageAssociation.org     5
NEBRASKA    Mortgage Monitor                                                                               January , 2008


                         FHA Modernization Bills: 110th Congress
  Topic                                 H. R. 1852                                            S. 2338
                             Financial Services Committee Bill                     Senate Banking Committee Bill

  Change to          2.25% for Standard-Risk mortgages; 3.0% on            3.0%, or 2.75% for first time homebuyers with
  Maximum            Higher-Risk mortgages and Zero- and Lower-            approved homeownership counseling.
  upfront premium    Downpayment (Zero Down) mortgages for first-
  amounts            time homebuyers.

  Change to          0.5% for Standard and Higher-Risk mortgages;          Not included.
  Maximum annual     0.75% for Zero Down mortgages.
  premium amounts

  Annual reporting   — Requires annual report on default and               Requires annual independent actuarial review of
  requirement          foreclosure rates for Higher-Risk and Zero          the MMIF and quarterly reports on loan
                       Down mortgages and use of loss mitigation.          performance.
                     — Requires annual independent actuarial review
                       of the MMIF and quarterly reports on loan
                       performance.
                     — Requires annual report on risk-based premiums
                       and how they were determined.

  Foreclosure        If mortgagee becomes sixty days delinquent,           If borrower becomes 30 days delinquent, the
  prevention         mortgagor will notify approved housing counseling     mortgagee will notify the borrower of foreclosure
  counseling         entity and provide contact information for            prevention counseling. If borrower becomes 90
                     mortgagor. The entity will notify the mortgagor of    days delinquent and does not respond to
                     both such delinquency and availability of             mortgagee’s attempts to contact the borrower, the
                     foreclosure prevention counseling. The bill does      mortgagee will provide sufficient information to a
                     not state how counseling would be funded.             designated housing counseling entity to contact
                                                                           the borrower. The borrower may opt out of this
                                                                           agreement. The bill does not state how
                                                                           counseling would be funded.

  Pre-purchase       Requires homeownership counseling be provided         Creates three-year pilot program to test
  counseling         by approved third party prior to closing. For zero    effectiveness of pre-purchase homeownership
                     down mortgages, counseling must cover other           counseling for borrowers who put less than 3%
                     mortgage options; property appreciation needed to     down.
                     cover cost of the mortgage on second, fifth and
                     tenth anniversaries; relative cost of Zero Down
                     mortgage. Must include real estate property
                     management in case of 2- or 3-unit properties.
                     Counseling would be funded by using increase in
                     premium revenue due to legislation.

                     Requires mortgagees to disclose, at application, a
                     list of counseling agencies approved by the
                     Secretary; at execution, the terms of the mandatory
                     payment incentive premium reduction, and a
                     statement that the mortgagor has the right to loss
                     mitigation.




     N EBRASKA M ORTGAGE A SSOCIATION                                                  www.NebraskaMortgageAssociation.org      6
NEBRASKA      Mortgage Monitor                                                                                   January , 2008


                            FHA Modernization Bills: 110th Congress
  Topic                                    H. R. 1852                                              S. 2338
                                Financial Services Committee Bill                       Senate Banking Committee Bill

   Borrowers            Creates Pilot program to establish automated           Same.
   without Sufficient   process for providing alternative credit rating
   Credit History       information for borrowers with insufficient
                        traditional credit histories; program limited to 5%
                        of number of loans in previous year; GAO required
                        to study program’s impact.

   Broker eligibility   Allows mortgage brokers to post surety bond worth      Does not alter existing net worth or annual
   requirements         between $50,000 and $100,000 in lieu of net worth      financial auditing requirements.
                        and annual financial auditing requirements.

   Condominium          Limits Section 234(c) loans to projects with blanket   Amends definition of “mortgage” to include
   loans                mortgages and makes loans secured by                   condominium mortgages so that they can be
                        condominiums eligible for insurance under Section      insured under Section 203.
                        203(b).

   Adjustment of        Authorizes Secretary to adjust premiums if actuarial   Same.
   premiums             study shows that MMIF will not meet or maintain
                        its target subsidy rate. Authorizes annual re-
                        determination of premiums and increases
                        commensurate with additional credit risk.

   Expansion of         Moves HECM, rehabilitation, homeownership              Same.
   programs             voucher, Hawaiian Homelands, and Indian
   covered by           Reservations programs to MMIF.
   MMIF

   Home equity          Limits origination fees to 1.5%.                       Same; also requires study on how limiting fees
   conversion                                                                  affects cost and availability of credit, as wells
   mortgage                                                                    program’s safety and soundness.
   (HECM)
   origination fees

   HECM caps            Removes limit on number of HECM loans and              Same.
                        raises maximum insurable amount to conforming
                        loan limit.

   HECM                 Permits HECM mortgages to be secured by                Same.
   mortgages for        cooperatives.
   cooperatives

   HECM for home        Authorizes insurance of home purchase mortgages.       Authorizes insurance of home purchase mortgages;
   purchase                                                                    so long as it is the primary residence

   HECM study           Requires study of effects of reducing HECM             Same.
                        mortgage insurance premium on both the cost to
                        mortgagor and financial soundness of the program.

   Implementation       Authorizes implementation by a notice that is          Same.
                        effective upon issuance.



      N EBRASKA M ORTGAGE A SSOCIATION                                                       www.NebraskaMortgageAssociation.org   7
NEBRASKA       Mortgage Monitor                                                                                      January , 2008


                              FHA Modernization Bills: 110th Congress
  Topic                                      H. R. 1852                                                S. 2338
                                  Financial Services Committee Bill                         Senate Banking Committee Bill

  Information            Authorizes FHA to use $25 million from excess             Same; also requires HUD report on updating FHA
  technology/            premium collection for technology and salary              processes and technology so FHA origination,
  Human resources        improvements                                              insurance and servicing procedures conform with
  investment                                                                       secondary market

  Multifamily Loan       The bill increases the FHA multifamily loan limit         Not included.
  Limits                 high cost factors from 140% to 170% in high cost
                         areas and from 170% to 215% on a case-by-case
                         basis.

  Limitation on          The bill prohibits HUD from increasing the MIP on         Similar to H.R. 1852 except it is limited to
  increase in            any FHA program (single family or multifamily)            multifamily programs and sunsets October 1, 2009.
  mortgage               unless the Secretary determines that, without the         This would prohibit an MIP increase in FY 2008
  insurance              increase, the program will require an appropriation       and FY 2009, but does not extend into FY 2010 or
  premium                of credit subsidy.                                        beyond.

  Additional             • Creates affordable housing grant fund, using            • Requires fraud prevention quality control
  provisions               increase in premium revenue due to legislation            prevention screening within eighteen months of
                           for grants for affordable rental housing and              date of enactment; expands existing federal
                           homeownership opportunities.                              statute criminalizing fraud against federal
                         • Authorizes FHA to establish refinancing                   agencies to include FHA.
                           underwriting standards for both borrowers in            • Expands eligibility for post-purchase
                           loans with adverse terms and borrowers in                 homeownership counseling to include
                           default.                                                  borrowers having trouble meeting monthly
                         • Allows the Secretary to hold loan servicers               obligations due to death, divorce, medical
                           responsible for failure to pay taxes, insurance           expenses; significant property damage or large
                           premiums and other charges from escrow                    property tax increase.
                           accounts by due date, and for reporting such            • Creates pilot program with new limits for cost
                           failure to pay information to credit reporting            of energy efficiency improvements to be
                           agencies.                                                 included in mortgage amount; pilot program
                         • Authorizes discretionary annual premium                   limited to 5% of loans originated in previous
                           reduction after three years of own time payments          year.
                           by the borrower and mandatory reduction after
                           five years. Requires refund of excess upfront
                           premium charged Higher-Risk mortgagors.
                         • Requires HUD to consider of cost of repairs and
                           maintaining existing affordability restrictions in
                           determining market value of multifamily
                           properties in noncompetitive sales to states and
                           localities.




  “         Statement by HUD Secretary Alphonso Jackson on Passage of FHA
                       ModernizationLegislation by the U.S. Senate
          I applaud the Senate's overwhelming passage today of an FHA Modernization bill that will provide hundreds of
          thousands of hard working American families a safer mortgage option — whether they're looking to purchase a
          home or refinance an existing mortgage. HUD's Federal Housing Administration can provide many homeowners
          with a fairer, more affordable, and more sustainable alternative to costly subprime loans. I especially appreciate the
                                                                                                                                   ”
          bipartisan leadership of Senators Chris Dodd and Mel Martinez in our effort to reform FHA.


     N EBRASKA M ORTGAGE A SSOCIATION                                                              www.NebraskaMortgageAssociation.org   8

				
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