allregs academy welcomes you to servicing fha loans the session will begin at 2:00 pm est allregs...

AllRegs Academy Welcomes you to AllRegs Academy Welcomes you to Servicing FHA LoansServicing FHA Loans

The session will begin at 2:00 PM ESTThe session will begin at 2:00 PM ESTAllRegs Customer Service: (800) 848-4904AllRegs Customer Service: (800) 848-4904

Know it all. © 2009 AllRegs

Welcome to this training event hosted by AllRegs Academy

www.allregs.com or http://academy.allregs.com


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Your InstructorsYour Instructors


Robert Maddox, Esq., CMB®Mortgages & Title InsuranceBradley Arant Boult Cummings LLP

Servicing FHA LoansServicing FHA Loans


Course ObjectivesCourse Objectives

By the end of the course participants will be able to:

– Discuss FHA requirements, systems and terms involved in servicing FHA loans

– Ensure all servicing processes and procedures are in compliance with FHA requirements

– Recognize the trends in loan administration and loss mitigation

– Analyze the five (5) approved loss mitigation options


Session OneSession One

Introduction and FHA BasicsIntroduction and FHA Basics


Session One TopicsSession One Topics

FHA Basics

FHA Terms

FHA Mortgage Facts– Loan Limits– Mortgage Insurance Premium– Mortgage Insurance Fund– Fees– FHA Connection– Neighborhood Watch– TOTAL Scorecard– FHA Lending Programs


FHA BasicsFHA Basics



The Federal Housing AdministrationThe Federal Housing Administration

Established in 1934 by the National Housing Act

Currently a part of the Department of Housing and Urban Development (HUD)

FHA programs help people who could not otherwise afford to own a home become homeowners

Operates entirely from self-generated income


The History of the FHAThe History of the FHA

When FHA created, the housing industry was struggling

During the 1940s, FHA programs helped finance military housing and homes for returning veterans

In the 1950s through 1970s, the FHA helped the production of privately-owned apartments for elderly, handicapped and lower income individuals


The History of the FHAThe History of the FHA

In the 1980s, FHA made it possible for potential homebuyers to get financing when recession prompted private mortgage insurers to pull out of oil producing states

By 2001, the nation's homeownership rate had soared to an all time high


Prevalence of FHAPrevalence of FHA

Insured over 35 million home mortgages

Insured over 47,205 multifamily projects

Currently has 4.8 million insured single-family mortgages and 13,000 insured multifamily projects

Insured $30 billion in mortgages for 367 hospitals and over 4,000 long term care facilities


What is a FHA-Insured Loan?What is a FHA-Insured Loan?

FHA Loan is a mortgage loan insured by the FHA and made by a bank, savings and loan association, mortgage company, credit union, or other FHA-approved lender

In the event of a default, the lender can seek recourse from the FHA

Lowers the lender’s risk and allows more liberal mortgage terms to individuals who could not otherwise afford a home


Borrower EligibilityBorrower Eligibility

Valid Social Security Number

Be a legal resident of the United States

Be of legal age to obtain a mortgage in your state


Borrower EligibilityBorrower Eligibility

Have ability to afford mortgage payments

Money for down payment

Home EligibilityHome Eligibility Usually must be applicant’s primary

home, including condominiums, manufactured homes, and mobile homes

FHA loans cannot be used to acquire business or commercial properties

Applicant may purchase multi-family property (up to four units) if one of units is primary home

Home must be in the United States, Virgin Islands or Guam


Benefits for HomeownersBenefits for Homeowners

Low down payment

Low closing costs

Easier qualifying


Benefits for HomeownersBenefits for Homeowners

Lower overall costs

Avoiding foreclosure

Close faster



Benefits for LendersBenefits for Lenders

More security and less risk

More qualified buyers

Foreclosure less likely

FHA TermsFHA Terms


AcronymsAcronyms

A43C – HUD’s Single Family Claims System

EDI – Electronic Data Interchange

SFDMS/F42D – HUD’s Single Family Default Monitoring System

SFIS/A43 – HUD’s Single Family Insurance in Force System

OUI – Oldest Unpaid Installment

DDS – Default Status Code


Failure to Engage in Loss MitigationFailure to Engage in Loss Mitigation

HUD defines failure to engage in loss mitigation as: – A servicing lender's failure to: evaluate a loan for loss mitigation

before four full monthly mortgage installments are due and unpaid; determine which, if any, loss-mitigation techniques are appropriate; and take appropriate loss-mitigation actions

TRS - Tier Ranking System – Measures a lender's loss mitigation efforts on a portfolio-wide

basis and ranks the lender based on ratio of loss-mitigation actions to foreclosure actions


Know it all. Know it all. © 2009 AllRegs

QuestionsQuestions

FHA Mortgage FactsFHA Mortgage Facts



Loan LimitsLoan Limits

Limit on the maximum mortgage FHA will insure

Determined by geographical location

To counteract housing crisis, Economic Stimulus Act of 2008 temporarily increased FHA loan limits

2009 Loan Limits2009 Loan Limits



Loan LimitsLoan Limits

Currently, loan limits for single-family homes range anywhere from $271,050 to $625,500

FHA’s loan limits for a particular area can be found at https://entp.hud.gov/idapp/html/hicostlook.cfm/


Mortgage InsuranceMortgage Insurance

FHA loans require mortgage insurance

Lender collects Mortgage Insurance Premium (MIP) at closing and sends to FHA

MIP can be rolled into the mortgage


Mortgage InsuranceMortgage Insurance

MIP is usually 1.75% for purchases

MIP is used to assist FHA in covering losses in event of default


Termination of Mortgage InsuranceTermination of Mortgage Insurance

Mortgages with 15 year terms and less that have a LTV of 90% and greater, annual premiums cancel when LTV reaches 78%

Mortgages with more than 15 year terms, annual premiums cancel with LTV reaches 78%, provided the mortgagor has paid annual premium for at least 5 years

Mortgages with 15 year terms and less and with LTV of 89.99% and less, no annual mortgage insurance premium will be charged


FHA Insurance FundFHA Insurance Fund

One-time payment to help bring FHA mortgage up to date

Mortgage loan must be at least 4 months, but no more than one-year, delinquent

Borrower must show ability to make full payments after assistance from fund


FHA Loan Fees FHA Loan Fees

Origination fee (capped at 1%)

Loan discount

Appraisal fee

Credit report fee


Prohibited Loan FeesProhibited Loan Fees Certain fees are prohibited by the FHA in

an effort to keep closing costs fair and reasonable to the borrowers

“Unearned fees” are prohibited

Borrowers and lenders need to be conscious of any potentially prohibited fees

Contact attorney with specific questions


Active Duty MilitaryActive Duty Military

Service Members Civil Relief Act passed in 1940s

Allows active military people to qualify for interest rate reduction up to 6%

Applies to FHA mortgages

Borrowers must actively request relief

FHA ConnectionFHA Connection


FHA ConnectionFHA Connection

Provides FHA-approved lenders with free online access to HUD computer systems for:

– FHA-approved lenders to originate loans

– FHA-approved servicers to service loans

– HUD personnel and other FHA-approved business partners


Neighborhood WatchNeighborhood Watch

https://entp.hud.gov/sfnw/public/



Available through FHA Connection– Is a web-based software application that displays loan

performance data for lenders and appraisers, by loan types and geographic areas using FHA-insured single family loan information

Internet site: https://entp.hud.gov/sfnw/public/

The loan information is displayed for a two-year origination period and is updated on a monthly basis



The default data includes current defaults, and defaults within the first year and first two years from endorsement

Loans that go delinquent after ninety days within the first three years are trackable

Users generate reports that identify problems and unusual patterns of behavior in FHA insured single-family loans


Neighborhood Watch Compare RatiosNeighborhood Watch Compare Ratios

A lender’s compare ratio is a percentage value that compares a lender to a group of lenders

– A compare ratio of 100 is average performance

– For example, if a lender has a 10% default rate in Florida and the average default rate for all lenders in Florida is 5%, then the lenders compare ratio is 200

A lender is subject to termination if their ratio is 200 or greater

– Based on default performance for the preceding 24 months compared to all lenders in the same geographic area


TOTAL ScorecardTOTAL Scorecard


FHA TOTAL ScorecardFHA TOTAL Scorecard

Technology Open to Approved Lenders Scorecard:

– Makes this process easier

– Evaluates the overall credit risk of FHA loans that are submitted to an automated underwriting system (AUS)

– Insures that each applicant is reviewed with the identical process

– It provides real-time responses to evaluations of mortgage credit and makes recommendations of “Accept/Approve” or “Refer”

– It also provides FHA with useful data to analyze trends in the industry

– It is FHA’s policy that no borrower is denied a FHA-insured mortgage solely on the basis of a risk assessment generated by the TOTAL Mortgage Scorecard


What TOTAL does not do…What TOTAL does not do…

Reject any applications

Review property eligibility

Review maximum mortgage amounts

Review LTV

Review the loan for compliance with other FHA program requirements


FHA ProgramsFHA Programs


FHA Lending ProgramsFHA Lending Programs

Programs identified by section numbers

Regulations in Code of Federal Regulations

Handbook and Mortgagee letters provide instructions



Various ProgramsVarious Programs

Section 203(b) – Home Mortgage Insurance

Section 234(c) – Single-Family Mortgage Insurance for Condos

Section 203(k) – Rehabilitation Home Mortgage Insurance

Section 245 – Graduated Payment Mortgage Program

Section 251 – Adjustable Rate Mortgage Program

FHA General ProgramsFHA General Programs

Section 203(b)

Section 234(c)

Section 251


Program DetailsProgram Details

The program parameters of these three programs are identical when considering:

Borrower eligibility Maximum insurable mortgage Minimum investment Mortgage term Mortgage insurance premium


Program DetailsProgram Details

203(b) – Purchase and refinance transactions– Existing 1- to 4-family dwelling– Home proposed or under construction

234(c) – Purchase and refinance transactions– Condominium unit

251 – Adjustable Rate Mortgage (ARM)

– Purchase and refinance transactions – Existing 1- to 4-family dwelling, condominiums, proposed homes

and homes under construction


.

Adjustable Rate Product InformationAdjustable Rate Product Information

Adjustable-Rate Mortgage (ARM) products

1% annual interest rate adjustment with 5% lifetime cap:– 1 year– 3 year– 5 year

2% annual interest rate adjustment with 6% lifetime cap:– 7 year– 10 year


Adjustable Rate Product InformationAdjustable Rate Product Information

Adjustable-Rate Mortgage (ARM) products

Indexes used - U.S. Treasury Security and the LIBOR

– Negotiated initial interest rate and margin

– Margin is constant for the entire term

Used in conjunction with Sections 203(b), 234(c), and 203(k)


Adjustable Rate Product Adjustable Rate Product StructureStructure

ARM components:

Index

Margin

Interest rate cap structure

Initial interest rate period


ARM Qualifying RateARM Qualifying Rate

One-year ARM

– Borrowers must qualify for payments based on the contract or initial rate plus one percentage point (1%)

Three-, five-, seven- and ten-year ARM

– Borrowers are to be qualified at the entry level (note) rate


Section 203(k) ProgramSection 203(k) Program


Section 203(k) ProgramSection 203(k) Program

To accomplish rehabilitation and/or improvement of an existing 1- to 4-four unit dwelling in one of three ways:

– To purchase a dwelling and the land on which the dwelling is located and rehabilitate it

– To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it

– To refinance existing indebtedness and rehabilitate a dwelling


Eligible PropertiesEligible Properties

1-4 family dwellings completed for at least one year

Demolished homes – with some foundation remaining in place

Properties increasing or decreasing in unit size

Existing home being moved to the mortgage property


Section 203(k) Streamline ProgramSection 203(k) Streamline Program


203(k) Streamline 203(k) Streamline ProgramProgram

Mortgagee Letter 2005-19 announced program

Modification of the 203(k) program

Property in need of minor rehab– With basic repairs costing between $5,000 and $15,000


Good Neighbor Next Door Program Good Neighbor Next Door Program (GNND)(GNND)


Good Neighbor Next Door Program Good Neighbor Next Door Program (GNND)(GNND)

Commitment to improving neighborhoods– 50% discount from the listing prices– Properties located in HUD-designated revitalization areas

To find the listing of HUD homes visit:http://www.hud.gov/homes/index.cfm


Officer of the Law RequirementsOfficer of the Law Requirements

Officer of the Law

– Employed full-time

– Employer is a law enforcement agency of:

• The federal government• A state• A unit of general local government• An Indian tribal government

– Must be sworn to uphold, and make arrests for violations of, federal, state, tribal, county, township, or municipal laws


Teacher RequirementsTeacher Requirements

Teacher

– Employed full-time by a:• State-accredited public school • Private school

– Provides direct services to students in pre-kindergarten through 12th grade serving the area where the home is located

– Neither the teacher nor his/her spouse may not have• Owned residential real property • Purchased a home under the:

– Good Neighbor Next Door– Officer Next Door– Teacher Next Door


Firefighter and EMT RequirementsFirefighter and EMT Requirements

Firefighter Emergency Medical Technician

– Employed full-time

– Firefighter or emergency medical technician serving the area where the home is located and employed by:

• A fire department

• Federal government

• State government

• Local government

• Indian tribal government


Reverse MortgageReverse Mortgage


Home Equity Conversion MortgageHome Equity Conversion Mortgage

Available since 1989– 90% of the reverse mortgage market

Low rates

Many fees are capped by FHA

Maximum loan amount varies based on:– Borrower’s age– Home appraised value– Current interest rates– Location of home



Equity distribution features:

Growing line of credit

Flexible payment options:– Lump sum– Term– Tenure– Line of credit– Combo



Features:

2% UFMIP added to loan

.50% added monthly for MIP

Available for home purchases

HUD approved third-party counseling required for all borrowers

If the lender is unable to service the loan or administer the distributions, HUD will step in and take over the loan

Offers a non-recourse feature protecting the borrower



Other FHA Mortgage ProgramsOther FHA Mortgage Programs

Energy Efficient Mortgages

203(h) Mortgage Insurance for Disaster Victims

203(i) Mortgage Insurance for Outlying Area Properties

245 Graduated Payment Mortgages

184 Indian Home Loan Guarantee Program

184(a) Native Hawaiian Housing Program

248 Indian Reservation and Restricted Lands

238(c) Mortgage Insurance in Military Impacted Area

245(a) Growing Equity Mortgages

Session ObjectivesSession Objectives

As the first session concludes, you are now able to: Identify FHA Basics

Recognize FHA Terms

Analyze and interpret FHA Mortgage Facts– Loan Limits– Mortgage Insurance Premium– Mortgage Insurance Fund– Fees– FHA Connection– Neighborhood Watch– TOTAL Scorecard– FHA Lending Programs


HomeworkHomework

Assignment 1:

Review the Case Study on John Doe and answer the questions regarding the scenario


Case Study 1Case Study 1

Lender - ABC Mortgage Company

Customer – John Doe

1. What are the basic terms and characteristics of a FHA loan?

2. What are the benefits of a FHA loan?

3. What are the basic eligibility requirements?

4. What are some potential FHA loan programs that could provide him the funds to purchase his very first home?


Case Study DiscussionCase Study Discussion

How would you respond?

1. Basic terms and characteristics of a FHA loan

2. Benefits of a FHA loan

3. Basic eligibility requirements

4. Potential FHA loan programs


Thanks for your participation!Thanks for your participation!Looking forward Session Two

Session Two Topics:

– General Info– Objectives of Servicing

– HUD approval and monitoring

– Record retention

– Ginnie Mae Specific Requirements– Homeownership Counseling– Administration of Mortgage Loans– Delinquency and Default

– Relief

– Loss Mitigation Issues


allregs academy welcomes you to servicing fha loans the session will begin at 2:00 pm est allregs...

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