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Financial Services Law Insights and Observations

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  • HUD Issues Three Mortgagee Letters

    Lending

    On August 15, HUD issued three mortgagee letters to announce various changes related to the origination of FHA-insured mortgage loans. Effective for case numbers assigned on or after October 15, 2013, Mortgagee Letter 2013-24 (i) sets forth documentation requirements for conducting credit analysis of collections and judgments, (ii) requires a specified capacity analysis of collection accounts with an aggregate balance equal to or greater than $2,000, (iii) details the required treatment of judgments, and (iv) revises the FHA’s policy on manual downgrades for applications with disputed accounts to reflect the risk associated with derogatory and non-derogatory disputed accounts for factors such as age and size of outstanding balance. In Mortgagee Letter 2013-25, HUD updates FHA’s TOTAL Mortgage Scorecard User Guide to reflect the changes announced in Mortgagee Letter 2013-24. Finally, Mortgagee Letter 2013-26 loosens eligibility requirements for certain borrowers adversely impacted by the recession. Specifically, the letter allows for the consideration of borrowers who have experienced a loss of employment or income, or a combination of both, and can document that: (i) certain credit impairments were the result of a loss of employment or a significant loss of household income beyond the borrower’s control, (ii) the borrower has demonstrated full recovery from the event, and (iii) the borrower has completed housing counseling.

    Mortgage Origination HUD FHA Mortgagee Letters

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  • FHA Commissioner Issues Statement on Insurance Premiums and HPMLs

    Lending

    On June 3, FHA Commissioner Carol Galante issued a statement in response to lenders’ concern that new monthly mortgage insurance premium requirements will increase the APR on FHA mortgages resulting in more mortgages exceeding Regulation Z’s high priced mortgage loan (HPML) threshold. Mortgagee Letter 2013-04 requires most borrowers to continue paying annual premiums for the life of their mortgage loan, reversing a policy adopted in 2001 under which the FHA cancelled premium requirements on loans when the outstanding principal balance reached 78 percent of the original principal balance. Commissioner Galante’s statement acknowledges the concern, but states that all lenders are expected to comply with existing Regulation Z requirement for HPMLs. Her statement provides guidance, based on consultation with the CFPB, as to how HPML requirements differ from FHA requirements related to escrow accounts, appraisals, ability to repay, and prepayment penalties. Commissioner Galante also stated that the FHA continues to work on defining an FHA qualified mortgage standard to address these issues.

    TILA FHA Qualified Mortgage Mortgagee Letters

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  • HUD Issues Mortgagee Letters on Title Approval at Conveyance, Partial Claim Documentation

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    On May 31, HUD issued two mortgagee letters to update and clarify certain mortgagee requirements. In Mortgagee Letter 2013-18, HUD replaced prior, delayed guidance related to title approval at conveyance, and explained that, effective August 29, 2013 for single-family REO properties, mortgagees must pay in full prior to conveyance to HUD all taxes, homeowners’ association fees, and water, sewer or other assessments. The letter also details documentation requirements for such payments. With Mortgagee Letter 2013-19, HUD reminded mortgagees about procedures for preparing partial claim documents, calculating claim amounts, and submitting partial claims to HUD. The letter explains that, if a mortgagee does not provide HUD with the original promissory note and security instruments related to the partial claim within prescribed deadlines, the mortgagee will be required to reimburse the full claim amount, including the incentive fee. After the letter takes effect on July 30, 2013, HUD will begin issuing demand letters for the full reimbursement of all amounts associated with overdue partial claim documents.

    Mortgage Origination HUD FHA Mortgagee Letters

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