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FHA Lending Insight

HUD and FHA fine tune requirements, add energy loan program

Jan. 30, 2012

By JERRY DeMUTH MortgageDaily.com


A number of recent enhancements and updates to Federal Housing Administration programs impact loans to finance energy-efficient improvements, the sale of foreclosed properties and rehabilitation mortgages. FHA mortgagees looking to avoid enforcement actions might want to participate in an upcoming conference call.

FHA Enforcement: Myths, Misconceptions and Facts is the title of a conference call being held on Feb. 9 by The Collingwood Group. The free event will focus on FHA enforcement, quality assurance and inspector general reviews, and the Mortgagee Review Board.

Former FHA commissioner and Collingwood Chairman Brian D. Montgomery will lead the call. He will also moderate a discussion that includes David Hintz, former secretary to the Department of Housing and Urban Development's Mortgagee Review Board.

The call is part of a planned series of upcoming calls being developed in conjunction with Collingwood's recent acquisition of GWN Consulting LLC. The acquisition enabled Collingwood to launch a new compliance division.

HUD and FHA, in a series of mortgagee letters, have made changes that affect origination fee caps, homebuyer transaction costs, and other loan requirements.

And HUD has initiated a two-year pilot program that is offering qualified homeowners living in certain parts of the country low-cost loans up to $25,000 to make energy-efficient improvements. Those improvements can include the installation of insulation, duct sealing, replacement doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems. Seventeen banks, credit unions and mortgage companies and one city are participating in the PowerSaver loan program.

FHA mortgage insurance will cover up to 90 percent of the PowerSaver loan amounts in the event of default. Lenders will retain the remaining risk on each loan, incentivizing responsible underwriting and lending standards, according to HUD.

PowerSaver was designed to meet a marketplace need for borrowers who have the ability and motivation to take on modest additional debt to realize the savings over time from home energy improvements. The loans are only available to borrowers with good credit, manageable debt and at least some equity in their home (maximum 100 percent combined loan-to-value).

HUD developed PowerSaver as part of the Recovery Through Retrofit initiative launched in May 2009 by Vice President Joseph Biden's Middle Class Task Force to develop federal actions that would expand green job opportunities in the United States and boost energy savings by improving home energy efficiency.

HUD has eliminated the one percent origination fee cap for its 203(k) Rehabilitation Mortgage Insurance and home-equity conversion mortgage programs. That cap had already been eliminated for standard FHA insurance programs. This change does not affect the supplemental origination fee that is permitted under the 203(k) program. And the established limits for the HECM also remain unchanged.

New FHA guidance has been issued regarding the financing of homebuyer transaction costs for homebuyers who acquire HUD real-estate-owned single-family properties under a specially authorized sales incentive that requires only a $100 minimum cash investment. Under this incentive, homebuyer acquisition costs that may be financed for eligible homebuyers now are limited to up-front mortgage insurance premiums.

Not impacted by the mortgagee letter are FHA financing policies and requirements for the Good Neighbor Next Door program, which are governed by mortgagee letter 00-27, "Appraising and Financing HUD Real Estate Owned Properties with FHA-Insured Financing - Single Family Loan Production."

Minor changes have been made through a series of FHA mortgagee letters to the HOPE for Homeowners program, the condominium approval process for single-family housing, second appraisal reporting, short sales and short payoffs, appraisal update and/or completion reports and minimum credit scores and loan-to-value ratios.

Requirements for Combined Loan Amounts and the Market Conditions Addendum to VA Appraisal and Fannie Mae's Desktop Underwriter have been updated to support all of them.

The effective dates of mortgagee letters, according to a HUD clarification, may vary depending on whether the policy section clarifies existing guidance; issues new guidance; or combines a clarification of existing guidance with new guidance.

Regarding 203(k) lending, Ross Mortgage Corp. has been named the top 203(k) mortgage lender in the state of Michigan and No. 10 in the country by the Federal Housing Administration, according to Ross Mortgage President Tim Ross. The Royal Oak, Mich.-based lender has branch locations in Michigan, Ohio, Kentucky, and Florida.

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Jerry DeMuth is an award winning journalist who has been reporting for four decades.

e-mail Jerry at [email protected]


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