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Presentation on theme: " FHA Update Florida Association of Mortgage Brokers Miami Chapter February 18, 2009 Selene Proenza FHA Customer Liaison FHA - Office of Business."— Presentation transcript:

1 FHA Update Florida Association of Mortgage Brokers Miami Chapter February 18, 2009 Selene Proenza FHA Customer Liaison FHA - Office of Business Development (305) 520-5066 1-800-Call FHA FHA - Serving Homebuyers Since 1934

2 FHA’s Role in the Mortgage Market oThe FHA-insured share of all home purchases has been above 17 percent since July 2008. oIt has not been this high since 1990. oThe FHA share of new home sales is 24 percent. oFHA’s mortgage market share is somewhere between 25 and 30 percent, based on dollar volumes. oIn 2006 it was around 2 percent.

3 FHA’s Role in the Mortgage Market ( Source: US Department of HUD, National Association of Realtors, and US Bureau of the Census)

4 FHA’s Role in the Community oHelp families achieve their “American Dream” (Homeownership) oFirst-time homebuyers oMinority groups oElderly and disabled oCreate an educated consumer – housing counseling oStabilize and rehabilitate communities oPromote economic growth oPreserve neighborhoods oHelp increase the value of the property (Equity)

5 Welcome to FHA MISSION STATEMENT “Promote affordable housing by helping people underserved in the private sector with homeownership, rental housing and health care facilities. We will accomplish this by providing consumer education, quality mortgage insurance products to the financial and real estate communities and best-in-class customer service.”

6 Welcome to FHA Office of Business Development Strategic Customer-Focused Mission “To strategically align with and tactically support FHA industry customers while educating the end user community about the value of FHA programs.” oCustomer-centric business model oCross-functional teamwork and matrix management oCoordinated approach to the market

7 Homebuyers Developers MAR-COM Team Web Portal HOC/Field/ HQ Market Research Customer/Industry Intelligence Process and Technology The Market Marketing Channels Dynamic Customer Knowledge Customer Requirements, Needs, Preferences, Expectations Evolving Industry Patterns FHA Business Processes − Business Process Reengineering CRM, Business Intelligence Apps Consumers FHA Business Model Enabling Infrastructure FHA Listening Posts K.P.I.s ► ► FHA Customers Lenders Industry Influencers Customer Liaison Team

8 FHA Outreach & Education Investments in New Programs and Infrastructure 4. Quality /BPR − Lean office BPR − Customer participation in re-engineering − Lender-focused − Geographic coverage by named customer − 4-tiered program − SAS business intelligence − Upgrading of GIS mapping capability − Co-Branding − Advertising campaign − − New Web Portal − New Customer Relationship Management (CRM) Systems 1. Customer Liaison 5. Systems 3. Marketing & Communications 2. Market Data & BI

9 Customer Liaison Program  Geographic coverage by named customer  Four-tiered program − Strategic: Senior Customer Liaison − Customer Advocate − Tactical: Customer Liaison − Day-to-day: 1-800-CALL-FHA − 24x7: Customer

10 Customer Liaison Program continued Customer  Primary point of contact for: − Strategic planning − Marketing communications and planning − Communicating customer concerns to policymakers − Training, education, and brand awareness building − Major event support − Timely FHA-related information  Handle origination, servicing, and asset management issues  Support training and education delivery  Event support  Distribute FHA information to customers  Support Senior Customer Liaisons  Solve day-to-day issues  Information source  Self-service– automated process

11 What is FHA? An FHA-insured mortgage is a viable option for all. A mortgage product tailored to the buyer's needs benefits everyone… oThe homeowner can afford the payments – low costs oThe homeowner is happy and satisfied oA happy homeowner refers family and friends to you, their real estate agent or broker 1-800-Call FHA FHA - Serving Homebuyers Since 1934 FHA - Serving Homebuyers Since 1934

12 FHA Overview oFHA was established in 1934 and became a part of the U.S. Department of Housing and Urban Development in 1965 oFHA is the U.S. Government’s largest insurer of loans - 4.68 million loans in portfolio oFHA offers mortgage insurance to protect lenders in event of borrower default oThe insurance protection allows lenders to originate mortgages to those who may not qualify under conventional guidelines FHA does not: o Originate, close, fund, or service loans o Set the interest rate o Determine fees and charges o Have income limits

13 What About FHA Loans? oLet FHA Loans Help You & Your Buyer oFind an FHA-approved Lender 1-800-Call FHA FHA - Serving Homebuyers Since 1934

14 Advantages for Buyers oSmaller Down Payment – 3½% oFlexible Down Payment Sources - evidence oNo Maximum Income or Sales Price Limits – (Subject to Maximum Loan Limits) oBuyer doesn’t need to have perfect credit oNo Prepayment Penalty oLoss Mitigation options oStandard MIP 1-800-Call FHA FHA - Serving Homebuyers Since 1934 FHA - Serving Homebuyers Since 1934

15 1-800-Call FHA FHA - Serving Homebuyers Since 1934 FHA Benefits oFully Amortizing Loans – Fixed & ARM oAutomated and Manual Underwriting oTraditional and non-traditional credit oLow Down Payment – can be Gifted or Borrowed oAssumable loan oAbility to Streamline Refinance without Credit Qualifying oLoss Mitigation options – financial incentives for lender

16 Borrower Characteristics oOwner-Occupant only oCo-borrowers (occupying and non-occupying) oCo-signers oCitizenship not required; SSN is required oNo maximum age oNo income limits

17 FHA Modernization Legislation Housing and Economic Recovery Act of 2008 oChanged Down Payment – 3½% (Loan Amount is 96.5% of SP or Appraised Value, whichever is less) oEliminated Seller-funded Down Payment Assistance oMoratorium on Implementation of Risk-Based Premiums – protect the borrower

18 FHA Modernization Legislation oCondominium Project Approvals – eliminates environmental review oTax Credit for first-time homebuyers oHECM for Purchase – seniors can purchase a home and convert to HECM in single transaction thus reducing closing costs oHECM Maximum Loan Limit - $417,000 oHECM Counseling Requirements – only trained and tested counselors who follow uniform protocols oIndependence of HECM Mortgage Originators – requires all parties participating in origination to be approved by FHA oProhibition against requirements to purchase additional products as a condition for HECM eligibility

19 FHA Modernization Legislation oEnergy Efficient Mortgages – increases amount of home modification costs that can be included in mortgage to 5% of property value oMfg. Housing (Title I) – Raised Maximum Mortgage amounts to: - $25,090 for Repair/improvements - $25,090 for Repair/improvements - $69,678 Unit - $69,678 Unit - $92,904 Unit and Lot - $92,904 Unit and Lot - $23,226 Lot only - $23,226 Lot only

20 FHA Modernization Legislation oFHA Rescue Plan – Authorizes a new FHA “Hope for Homeowners” program to refinance existing borrowers into fixed-rate FHA mortgage products (only for loans originated on or before January 1, 2008) oNeighborhood Stabilization Program – State block grant funds to be spent for the redevelopment of abandoned and foreclosed homes and residential properties

21 1-800-Call FHA FHA - Serving Homebuyers Since 1934 What This Means for You? oHigher Income Limits, Higher Sales Prices, Larger Loan Amounts oClient and Market Expansion oMore opportunities for the Industry oMore business for you! oMore Options for More Consumers oMore Sensible Mortgage Products oSimplification of Lending Process

22 FHA Mortgage Limits oEstablished by law and based on the Metropolitan Statistical Area oRevised on January of each year

23 1-800-Call FHA FHA - Serving Homebuyers Since 1934 FHA Programs/Products o203(b) - Fixed Rate/ARMs ( most popular) - Purchase - Refinance – Cash-out (95%) o234 (c) - Condominiums o203(k) - Rehabilitation - Standard -Streamlined oHECM for Purchase (“Reverse Mortgage”) oEnergy Efficient Mortgage oHUD Homes - REOs oManufactured Homes

24 FHA Programs/Products: Rehabilitation Mortgages Standard (structural) oRepairs/Improvements must be at least $5,000 oConsultant required oArchitectural Exhibits required oBorrower can make repairs/improvements if qualified Streamlined (minor) o o Facilitate uncomplicated repairs/improvements o o No consultant required o o No architect required o o Borrower can make repairs/improvements if qualified o o Include up to $35,000

25 FHA Programs/Products: Home Equity Conversion Mortgage (HECM) oBorrower – seniors age 62 or more oReverse Mortgage counseling required oProperty – 1-4 family dwellings, existing only oOwner–Occupied only; within 60 days from closing oFHA’s Property Flipping prohibitions apply oRepayment not required until home is no longer occupied by borrower (nursing home, death). At that time, if the value has declined so that there is insufficient equity to repay FHA, then FHA will take the loss. If the value has increased over and above what is owed to FHA, that excess will be distributed to the heir(s).

26 FHA Programs/Products: Energy Efficient Mortgage (EEM) oEligible for new or existing 1-4 family units oMaximum Loan in Area Can Be Exceeded by the EEM Amount oEligible for use with Rehabilitation Mortgages (203K) oAvailable for Condos and Manufactured Homes oCost of improvements that may be eligible for financing is either 5% of the property’s value (not to exceed $8,000) or $4,000, whichever is greater.


28 Selling HUD Homes oWhat are HUD Homes? oRegister to Sell HUD Homes oElectronic Internet Bidding oCurrent Listings oManagement & Marketing Contractors

29 What Are HUD Homes? oHUD-owned houses are often referred to as “HUD Homes.” HUD Homes are houses that had an FHA- insured mortgage and the homeowner defaulted. The lender then deeded the home to the Secretary of HUD in exchange for an insurance claim payment.

30 It’s Easy to Sell HUD Homes oBrokers can register with HUD’s M&M Contractor for Florida properties, National Home Management Solutions through their website, oOnce completed, the broker can show, advertise, and submit offers on HUD Homes oHUD pays the broker a commission of up to five (5) percent oHUD-registered brokers and their agents are able to submit bids 24/7 over the Internet. Electronic bidding is the only method to submit bids for HUD Homes


32 How to Become a HUD- Approved Lender FHA Lender Approval Types: (Six Types of FHA Lenders) oNonsupervised Loan Correspondent Mortgage Broker, Mortgage Lender or Correspondent Lender oNonsupervised Mortgagee Mortgage Lender & Correspondent Lender oSupervised Mortgagee Banks and Credit Unions

33 How to Become a HUD- Approved Lender oSupervised Loan Correspondent Banks and Credit Unions oInvesting Mortgagee Entities that only want to own FHA loans oGovernment Mortgagee Federal, State and Local Agencies

34 Ways Lenders Can Participate in FHA Loan Programs oOriginate All lender types can originate except Investing Mortgagees oUnderwrite Single Family Loans Supervised, Nonsupervised and Government Mortgagees can underwrite once they obtain DE (Sponsor Mortgagee) approval from one of the Single Family Homeownership Centers

35 Ways Lenders Can Participate in FHA Loan Programs oUnderwrite Mutifamily Loans Supervised, Nonsupervised and Government Mortgagees can underwrite once they obtain MAP approval from Multifamily Headquarters oService Supervised, Nonsupervised and Government Mortgagees can service all types of loans. o Hold All types of lenders can hold (own) except Loan Correspondents

36 Ways Lenders Can Participate in FHA Loan Programs Non-supervised Loan Correspondent oOnly one for mortgage brokers to originate oCorrespondent lenders and mortgage lenders who only want to originate Non-supervised Mortgagee oIn addition to origination: can underwrite, service and own any type of FHA loan

37 Ways Lenders Can Participate in FHA Loan Programs Supervised Loan Correspondent For banks, savings bank and credit unions that only want to originate FHA loans Supervised Mortgagee For banks, savings bank and credit unions that want to originate, underwrite, service and own any type of FHA loan.

38 Ways Lenders Can Participate in FHA Loan Programs Government Mortgagee Government agencies that want to originate, underwrite, service and own FHA loans Investing Mortgagee Any entity that only wants to own FHA insured loans

39 How to Become an FHA- Approved Lender oThe FHA lender approval requirements vary from different levels and types of lender participation oThe first step is to obtain an application package: –Title II Lender Application Package (for home purchases, refinances and reverse mortgages) –Title I Lender Application Package ( for home improvement loans )

40 Title II Mortgagee Application Package oCover Sheet - Payment of Title II mortgagee application fee - $1,000 fee except for Gov’t mortgagee oApplication Form for lender approval - HUD 11701 oHandbook 4060.1 - Approval requirements & procedures

41 Title II Lender Application Package – Cover Sheet APPLICATION FEE for TITLE I LENDER APPROVAL This form MUST accompany all application fee payments. Mail this form and your check to: HUD, P. O. Box 198608, Atlanta, GA 30384. A copy should be included with your application. ____________________________________________________________ Lender Name ________________________________________Federal Tax Identification Number - 10 digit _______________________________________ HUD/FHA Identification Number - 10 digit (if applicable) Type of application: (please check the appropriate box) _____ Initial Application ($1,000) _____ Additional Branch ($300) _____ Additional Sponsor ($300) _____ Conversion of Mortgagee Type ($300) Lenders seeking first time approval (initial applications) must enter their federal tax identification number in the memo portion of the check. Lenders filing all other types of applications should put their 10 digit HUD/FHA identification number in the memo portion of the check.

42 Form HUD-11701 Application for Approval: FHA Lender and/or Ginnie Mae Mortgage-Backed Securities Issuer U.S. Department of Housing and Urban Development Federal Housing Administration and Government National Mortgage Association OMB Approval No. 2503-0033 (exp. 09/30/2010) Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. The information requested on this form is required by 24 CFR Part 202 and Sec. 306(g) of the National Housing Act or by HUD Handbooks 4060.1 and 5500.3. The information collected assists FHA and Ginnie Mae in determining which lenders should be approved to participate in the FHA single and multifamily insurance programs and/or the Ginnie Mae Mortgage-Backed Securities Program. It is used to help FHA minimize its risk in insuring single-family and multifamily mortgages and Ginnie Mae to minimize its risk. Applicants are not required to respond to this collection of information unless a current OMB approval number is displayed on the form. Privacy Act Statement. Names and Social Security Numbers are requested in order for the Department to obtain positive identification of the applicant’s officers, directors, stockholders and employees who have authority to obligate the applicant. The information requested will be used solely to determine the eligibility of the individuals to participate in the Department’s mortgage insurance programs. The Department is authorized to request this information by Executive Order 9397. The information collected will not be disclosed outside the Department except as required by law. The Social Security Numbers are provided to HUD on a voluntary basis. Failure to provide this information could cause delay in processing of the applications. Instructions for Completing Form HUD-11701 Applicants seeking qualification as a FHA-approved lender/mortgagee or loan correspondent under the Title I and/or Title II programs and/or as an approved issuer with the Government National Mortgage Association (“Ginnie Mae”), must complete the appropriate sections of this form. Qualified applicants may obtain one of the following three types of approval: 1. FHA Approval Only Replaces HUD-92001, 92001-D and LD Page i form HUD-11701 (11/2008) ref. Handbooks 5500.3, Rev. 1 and 4060.1

43 FHA Title II Mortgagee Approval Handbook 4060.1, REV-2 Chapter 2 - Part A. Requirements for all Mortgagees Acceptable Business Forms oBe a Corporation, Limited Liability Company (LLC) or Partnership that meets FHA ’ s Requirements oHave State License, State DBA, if applicable

44 General FHA Approval Requirements Owners and Officers oCannot be debarred, suspended or otherwise ineligible ( Certify via Sanction Letter) o3 years of experience required (at least one officer) oCannot be self employed in the mortgage or real estate industry or related field

45 General FHA Approval Requirements Staffing oAt least two full time employees oA shared receptionist is permitted but cannot be used to meet this requirement oAll employees (except shared receptionist) must be paid by W-2 oNo outside or self employment in the mortgage or real estate industry or related field

46 General FHA Approval Requirements Office Facilities oMust be separate and apart from any other entity in commercially zoned space oCan share reception areas with other companies oMust be clearly identified to the public with a permanent business sign

47 General FHA Approval Requirements oQuality Control Plan except Investing Lender oAudited Financials and Adjusted Net Worth

48 Net Worth Requirements For Nonsupervised Applicants o$63,000 Net Worth for Nonsupervised Loan Correspondents (20% must be Liquid Assets) o$250,000 Net Worth for Nonsupervised Mortgagees (20% must be Liquid Assets)

49 Funding Requirements For Nonsupervised Applicants oDocumented $1,000,000 funding program for its originations oLoan Correspondent applicants may provide a funding letter from their Sponsoring Mortgagee

50 Additional Requirements For Loan Correspondents oMust Have a Sponsoring (DE) Mortgagee to Underwrite the Originations oSponsor (DE) can also fund the Originations oA sponsor of a loan correspondent must be a DE mortgagee. The sponsor is responsible for the actions of each of its loan correspondents in originating FHA- insured mortgages oA sponsor must supervise and perform quality control reviews of each of its loan correspondents

51 Application Submission oThe application form 11701 has all the information on what is required for each type of approval oApplication fee and copy of the application are sent to the Atlanta Office. Application is sent to the Lender Approval and Recertification Division in Washington, DC oCurrently it is taking 60 days to process an application

52 FHA Lender Approval Common Mistakes oHUD Form 11701 sections A, B, C and Supplemental must be COMPLETE, CONSISTENT and ACCURATE oNote application and application fee go to two different places oEvidence of acceptable facilities oBranch Office - remember you must have at least one full time employee in each branch oCredit reports are missing in application packages oCredit reports are needed by all except supervised institutions

53 FHA Lender Approval Common Mistakes oAudited financials, most current CPA prepared audited financial statements for the period ended not more than 12 months prior to submission of the application oReview for Fair Lending Issues/Compliance oFair Housing Act o(ECOA) Equal Credit Opportunity Act o(TILA) Truth In Lending Act oRESPA oHome Mortgage Disclosure Act

54 FHA Lender Approval Common Mistakes: Quality Control (QC) QC Plan deficient (Don’t just buy a plan) “All FHA approved mortgagees, including loan correspondents, must implement and continuously have in place a Quality Control Plan for the origination and/or servicing of insured mortgages as a condition of receiving and maintaining FHA approval.” oQuality Control for SF Origination, SF Servicing oQuality Control from Beginning to End

55 Quality Control (QC) Goals Mortgagees must design programs that meet these basic goals: oAssure compliance with FHA’s and the mortgagee’s own origination or servicing requirements throughout its operations oProtect the mortgage and FHA from unacceptable risk oGuard against errors, omissions and fraud oAssure swift and appropriate corrective action Failure to comply with specific QC requirements may result in sanctions and the imposition of Civil Money Penalties by the Mortgagee Review Board.

56 Basic Elements of QC oPlan Form and Execution oIndependence – In-house staff, outside firms oQualified Staff oTimeliness oSystem of Loan File Review oAdequate Scope and Sampling oSite Review – Items, frequency, staffing oAffiliate Review by Sponsors oReporting and Corrective Action oNotification to HUD oFile Retention oRestricted Participation

57 Helpful References oHow to Become a FHA Lender web page: oAnnual Renewal Requirements at:

58 Other Resources

59 Current Listings Listings of HUD Homes are available through: MLS M&M Internet sites 1-800-Call FHA FHA - Serving Homebuyers Since 1934

60 1-800-Call FHA FHA - Serving Homebuyers Since 1934 Help for Your Buyer oHUD Home Buying Guide oHousing Counseling oIncreased FHA Mortgage Loan Limits

61 1-800-Call FHA FHA - Serving Homebuyers Since 1934 FHA - Serving Homebuyers Since 1934 Helpful Resources –

62 1-800-Call FHA FHA - Serving Homebuyers Since 1934 FHA - Serving Homebuyers Since 1934 3

63 1-800-Call FHA FHA - Serving Homebuyers Since 1934 Contacting FHA WebsitesFHA Call Center www.fha.govwww.fha.gov800-Call FHA Live Web Chat www.espanol.hud.govwww.espanol.hud.govTBA Locate a Housing Counselor 800-569-4287 To Sign Up on FHA’s List serve

64 FHA’s Commitment to Our Partners oFHA’s goal is to provide Safe and Affordable Mortgage Products that Support Sustainable Homeownership oFHA recognizes the Key Role the Real Estate Professional and the Mortgage Brokers play in the Mortgage Finance Industry 1-800-Call FHA FHA - Serving Homebuyers Since 1934

65 Selene Proenza Customer Liaison FHA-Office of Business Development US Department of Housing & Urban Development Miami Field Office 909 SE First Avenue Miami, Fla. 33131 Phone: (305) 520-5066 Fax: (305) 536-4916

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