This report is part of our on-going effort to assist Basis Points readers in keeping up-to-date with developments affecting FHA loan programs. This month’s report covers recent mortgagee letters issued by FHA addressing the HOPE for Homeowners Program, FHA’s new training application for its loss mitigation programs, the condominium approval process, and the HECM Counselor Roster.
HOPE for Homeowners Program
In ML 2009 43 (October 20, 2009), FHA amends it guidance regarding the HOPE for Homeowners (H4H) Program in accordance with provisions of the Helping Families Save Their Homes Act of 2009. The H4H Program is effective for endorsements on or before September 30, 2011. ML 2009 43 is effective for endorsements on or after January 1, 2010, and the letter supersedes Mortgagee Letters 2008 29, 2008 30, and 2009 03 in their entirety.
ML 2009 43 contains comprehensive guidance in connection with the H4H Program. Key changes to the H4H program include matters related to the borrower’s eligibility based on net worth, the default status of the borrower’s other debts, revised loan-to-value and debt-to-income ratios, elimination of the requirement to obtain tax returns for the most recent two years, elimination of the special lender and underwriter certification, reduced mortgage insurance premiums, replacement of the shared equity feature with an exit premium, and elimination of the shared appreciation feature. The guidance also includes revised forms and documents, including a new note and mortgage to replace the previous shared equity and shared appreciation notes and mortgages.
FHA - HAMP
In ML 2009 45 (October 27, 2009), FHA announces the availability of its on-line, web-based training application – EClass. The EClass System provides training and continuing education on FHA’s loss mitigation programs, including FHA’s Home Affordable Modification Program (FHA HAMP). FHA expects that servicers will utilize the training to ensure that they are well-informed of FHA’s loss mitigation policies and procedures.
In addition, in ML 2009 39 (October 9, 2009), FHA updates its claim filing and delinquency/default reporting requirements for FHA-HAMP. The changes, which include new status codes, are the result of system enhancements by FHA. Mortgagees must use the updated status codes beginning no later than the January 2010 reporting cycle.
Condominium Approval Process
In ML 2009 46B (November 6, 2009), FHA revises and consolidates existing guidance regarding the approval process for condominium projects and insurance requirements for mortgages on individual units. ML 2009-46B replaces ML 2009-19 (June 12, 2009), which provided similar guidance. ML 2009 46B is effective for all case numbers assigned on or after December 7, 2009, except as noted in the letter.
FHA allows certain lenders to determine condominium project eligibility, review project documentation, and provide the required certifications under the National Housing Act and FHA’s regulations. This new approval process is available only to lenders that have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects. Lenders continue to have the option of submitting a condominium project for review and approval by HUD. ML 2009 46B outlines the process and requirements for approval of a condominium project by a lender or by HUD.
In addition, in ML 2009 46A (November 6, 2009), FHA temporarily modifies several of the provisions set forth in ML 2009-46B to address current housing market conditions. The temporary guidance impacts requirements related to the process for “spot loan” approvals, FHA concentration requirements, owner-occupancy requirements, pre-sale requirements, and approvals of condominium projects located in Florida. The guidance is effective for all case numbers assigned on or after December 7, 2009, through December 31, 2010, except as noted in the letter.
HECM - Counselors
In ML 2009 47 (November 6, 2009), FHA provides guidance concerning the Counselor Roster for FHA’s Home Equity Conversion Mortgage (HECM) program. The guidance is effective October 2, 2009. Among other things, the letter addresses eligibility requirements for placement on the HECM Counselor Roster (including education and testing requirements), maintenance of the counselor’s profile on the roster, monitoring of the counselor’s job performance by HUD, removal of a counselor from the roster, and the lender’s obligation to provide potential HECM borrowers with a list of HECM counseling providers.
Sharon Bangert is a partner in the Washington, D.C., office of Hudson Cook, LLP. Basis Points readers can reach Sharon at 202-327-9703 or by email at sjbangert@hudco.com.