Compliance News

The final rule published in the Federal Register on September 4, amends the Department of Housing and Urban Development’s Home Equity Conversion Mortgage program by making two technical changes.

• Determination of Maximum Claim Amount: extends the date for calculating the maximum claim amount from the date of the underwriter’s receipt of the appraisal report to the date of closing.
• Eligibility for Discounted Mortgage Insurance Premium: HECM loans are eligible to be refinanced with a discounted initial mortgage insurance premium, if they are not in default and they have been assigned pursuant to regulatory provisions and remain in effect.

The California Department of Real Estate revised the following disclosure forms:

• Mortgage Loan Disclosure Statement (Borrower) (RE 882)
• Mortgage Loan Disclosure Statement / Good Faith Estimate (RE 883) Informational Sheet
• Mortgage Loan Disclosure Statement / Good Faith Estimate, Nontraditional Mortgage Product (RE 885)

First American Loan Production Solutions (“LPS”) has the revised disclosures available for client use.

The Department of Banking and Finance adopted rules on August 4, 2008 that eliminate an interest only amortization provision. Previously, the rules allowed interest only loans for single family owner-occupied residential loans for a period not to exceed ten (10) years. The Department recommends caution regarding the usage of interest only loans, noting that they should only be extended to appropriate credit-worthy borrowers after a proper financial and credit analysis.

In addition, the adopted regulations amend requirements for licensee’s books and records.

All mortgage lenders, including banks, credit unions and consumer loan companies are required to provide the Kentucky Homeownership Protection Center Notification to New Homeowners effective January 1, 2009. The notification must be given at closing and together with the final signed loan documents. However, lenders are encouraged to provide the disclosure prior to January 1, 2009.

LPS has the disclosure available for client use.

House Bill 2188 revises the definition of “threshold” from total points and fees “payable by the borrower at or before the loan closing” to include fees payable after closing. In addition, during the brokering or making of a rate-spread home loan, no lender may provide or receive any compensation that changes based on the terms of the loan. This does not prohibit compensation based on the principal balance of the loan.

Pennsylvania enacted House Bill 2179 which creates the Mortgage Act to combine the Mortgage Bankers and Brokers and Consumer Equity Protection Act (“MBBCEPA”) Chapter 3 and the Secondary Mortgage Loan Act (“SMLA”). Chapter 5 of the MBBCEPA which addresses consumer equity protection was not repealed by the Mortgage Act. Mortgage originators employed by licensees under the Mortgage Act must be licensed.

Effective November 5, 2008 licensees currently under the MBBCEPA and SMLA and all persons applying for licenses under the Mortgage Act will be required to use the Nationwide Mortgage Licensing System. No individual may engage in the mortgage loan business without being licensed as a mortgage broker, mortgage lender, mortgage loan correspondent or mortgage originator. A mortgage originator must be employed and supervised by a licensed mortgage broker, mortgage lender or mortgage loan correspondent.

Fannie Mae has announced they will no longer purchase New York loans that can be categorized as a “subprime home loan”. This will take affect on all loans dated on or after September 1, 2008.

Fannie Mae has announced, they will no longer purchase Home Keeper mortgages effective December 31, 2008. This announcement is due to the Housing and Economic Recovery Act of 2008 (HERA) signed into law by the president. Fannie Mae has asked that Home Keeper product materials, lender guides, loan documents, calculations, consumer materials, and communications associated with the Home Keeper and trademark be discontinued from use.

The Housing and Economic Recovery Act of 2008 (HERA) provides for a one-year moratorium on the implementation of FHA’s risk-based premiums beginning October 1, 2008. Consequently, effective with new FHA case number assignments on or after that date, FHA will no longer base its mortgage insurance premiums on a combination of credit bureau score and loan-to-value ratio. The new premiums (upfront and annual) to be implemented for all loans for which a case number is assigned on or after October 1, 2008, are described in the mortgagee letter.

This mortgagee letter provides guidance to mortgagees regarding the revised downpayment and maximum mortgage requirements for single family mortgage to be insured by FHA. Consistent with HERA, revised downpayment requirements are set to change commencing October 1, 2008. HUD anticipates that mortgages under the prior downpayment requirements that are already in the pipeline will likely be processed before January 1, 2009. Accordingly, purchase money mortgages with new FHA case numbers assigned on or after January 1, 2009 must meet the revised downpayment requirements of HERA, as set forth in this mortgagee letter.

This mortgagee letter rescinds, in their entirety, the following: ML 2003-01; 2000-44; and 98-29. These instructions also replace the maximum loan-to-value percentage charts on page 1-7, 1-20, and 1-24 of handbook HUD-4155.1 REV-5, and page 4 of ML 2008-13.

HUD’s mortgagee letter specifies new requirements for Home Equity Conversion Mortgage (HECM) mortgage originators under the Housing and Economic Recovery Act of 2008 (HERA). A HECM mortgage originator shall (1) not participate in, or be associated with, or employ any party that participates in or is associated with, any other financial or insurance activity; or (2) demonstrate to the Secretary of HUD that the mortgagee or other party maintains, or will maintain, firewalls and other safeguards designed to ensure that (i) individuals participating in the origination of a HECM mortgage have no involvement with, or incentive to provide the mortgagor with, any other financial or insurance product; and (ii) the mortgagor shall not be required, directly or indirectly, as a condition of obtaining a mortgage under this section, to purchase any other financial or insurance product.

HUD advises that FHA intends to seek comments from the industry before providing definitive guidance. Until the definitive guidance is issued, FHA advises that mortgagees must not condition a HECM mortgage on the purchase of any other financial or insurance product, and should strive to establish firewalls and other safeguards to ensure there is no undue pressure or appearance of pressure for a mortgagor to purchase another product.

In addition, loan origination must be performed by FHA approved (1) loan correspondents and sponsors; (2) mortgagees through their retail channel; or (3) mortgagees working with other FHA-approved mortgagees. These requirements are effective October 1, 2008 and Mortgagee Letter 2008-14 is rescinded.

The guidance emphasizes that OTS-regulated financial institutions who curtail, suspend, or terminate a customer’s home equity line of credit due to declining home prices must comply with federal laws and rules designed to protect customers.

This circular establishes requirements for VA acceptance of Homebuyer Assistance Programs (HAP) for use by veteran-homebuyers in conjunction with VA-guaranteed home financing.

Unless Congress extends the Department of Veterans Affairs’ authority to guarantee adjustable rate mortgages (ARMs) and hybrid adjustable rate mortgages (HARMs), these loan types will expire on September 30, 2008. Lenders should not accept applications for VA-guaranteed ARMs and HARMs after September 30, 2008. Lenders with an ARM or HARM application dated September 30, 2008 or earlier may obtain a VA Loan Guaranty Certificate so long as the loan closes within a reasonable time and satisfies all other VA program requirements.

Section 2201 of the Housing and Economic Recovery Act of 2008 provides a temporary increase in VA’s maximum guaranty amount through December 31, 2008. This temporary increase was detailed in VA Circular 26-08-11. Effective January 1, 2009, VA’s maximum guaranty amount remains unchanged for loans where the original principal loan amount is $417,000 or less. For loans over $417,000, originated on or after January 1, 2009, VA’s maximum guaranty amount is 25 percent of the Freddie Mac conforming loan limit for a single-family home in the county in which the property securing the loan is located. The Freddie Mac conforming loan limits for each county are the same as the FHA mortgage limits. Please note that, if a veteran has previously used entitlement that has not been restored, the guaranty amount for that veteran must be reduced accordingly.

The VA announces the elimination of certain certifications and requirements in the processing of VA guaranteed home loans. It also provides a consolidated certification (exhibit A) for use in originating VA loans. These changes will help lenders by eliminating redundancies and consolidating mandatory certifications into a single certification.

Print this Page

• Solutions / Industries
  • Reverse Mortgage
  • Home Equity
  • Mail Fulfillment
  • Mortgage Origination
  • Mortgage Servicing
• Technology Platforms
  • DocConnect Online
  • DOCWeb
  • QuickMods
  • Review & Release
• Products & Services
  • 3-Day Disclosure Packages
  • eDisclosures
  • FirstMail
  • Closing Documents
  • Portfolio Retention
  • Lien Release
  • Assignment Preparation
  • Loan Modifications
  • Partial-Claims Preparation
  • Direct Mail
• Compliance
  • News
• Security / Technology
• Sign-up
• Support
• About Us
  • Office Directory
  • Contact Us
  • Partners/Industry Links
  • Legal Information
    • Rules and Regulations
    • Privacy Practices
    • Procedures Manual Login