FHA Updates

The FHA Total Scorecard can now be used on streamline refinances, according to Mortgagee Letter 2010-19. The new policy reverses a previous mortgagee letter. The U.S. Department of Housing and Urban Development noted that such transactions do not require documentation in the case binder to verify the values used, while manual underwriting is not required for “refer” risk classifications.

But FHA streamlines without credit qualifying do require employment certification and confirmation that income is being received.

Ginnie Mae issued bulletin No. APM 10-04 indicating that its guide clearly states now that eligible borrowers include a state or local government agency under the nonprofit classification. The notice was issued to eliminate uncertainty surrounding FHA Section 203(k) loans.

HUD said in a public filing that it plans to implement an electronic lender certification process. It also seeks the ability to require reports and loan samples as well as written appeals for the loss of privilege to use the scorecard.

An earlier filing from HUD indicated that higher net worth requirements and the elimination of FHA loan correspondents have been made final. The effective date was May 20. The rule was called “a victory for consumers and small business mortgage professionals nationwide” by the National Association of Mortgage Brokers.

Mortgagee Letter 2010-11 from HUD said qualified FHA-approved servicers might be eligible for Servicer Pay for Success Payments from the U.S. Department of the Treasury. Servicers are eligible for such payments only if they have executed a new or amended servicer participation agreement with Fannie Mae by Oct. 3, and the FHA-HAMP mortgage meets all requirements for success payments.

In testimony earlier this year from HUD Secretary Shaun Donovan, he said 270 FHA mortgagees have had their approvals withdrawn since 2009.

But as FHA lenders lose their approval, Integrity Mortgage & Financial Inc. boasted that it has been approved as an FHA direct lender. The company is located in Colorado Springs, Colo.

Customers of Credit Plus Inc. can directly access FHA’s TOTAL Scorecard through its system. The Salisbury, Md.-based firm claims to be one of the first credit reporting agencies to offer this direct access.

The National Association of Realtors recently issued a statement indicating that “FHA remains financially strong” and calling for permanently higher loan limits. According to the trade group, a decrease in FHA  limits would adversely affect 612 counties in 40 states in addition to the District of Columbia.

NAR opposes any increase in FHA downpayments, as proposed in H.R. 3706. Such a move would “disenfranchise many FHA borrowers.” In addition, the Realtors oppose reducing seller concessions to 3 percent and raising up-front mortgage insurance premiums to 2.25 percent from 1.75 percent.

Instead, the group recommends stepped-up enforcement and oversight of FHA lenders.

But a working paper from the National Bureau of Economic Research indicated that, despite a recent actuarial review that said FHA will not need any government assistance, four risk factors suggest a bailout will be needed. One factor is an underestimation of negative-equity FHA borrowers, while another is measures used for house values that lower loss estimates.