Federal Housing Administration FHA

October 30, 2009

RESPA REFORM: IVY JACKSON ISSUES CLARIFICATION ON YIELD SPREAD PREMIUM CREDIT TO BORROWER ISSUE

The Director of the Office of RESPA and Interstate Land Sales for the U.S. Department of Housing and Urban Development, Ivy Jackson, clarified an major issue today that addresses industry confusion over the Yield Spread Premium “YSP”. Several wholesale lenders issued guidance that the new RESPA restrictions required anyone who is not funding their own loan to have all the YSP, any money made on the interest rate, credited to the borrower. Some wholesale lenders were under the belief that anyone who brokered a loan would not be allowed to make any money on the loans interest rate or YSP.

For example under the current rule if the par rate today was 5.5% and its paying 100.500% that the broker would make their origination of 1% plus .5% on th rate in YSP. However, some wholesale lenders have been issuing guidance to mortgage brokers throughout the country that say the new RESPA restrictions forces the loan originator to credit the .5% YSP to the borrower at closing. This is not accurate as Ivy Jackson clarifies below:

Ivy Jackson said this is not accurate and states that “while true that any YSPs are now shown as a credit to the borrower in Box 2 under “Your Adjusted Origination Charges.” The rule eliminates the 1% cap on origination charges for FHA loans.

October 28, 2009

RUMOR: RESPA REFORM BILL TO BE DELAYED SIX MONTHS: HUD DENIES DELAY

by Marx Sterbcow

The Real Estate Settlement Procedures Act “RESPA” regulations set to take place on January 1, 2010 has purportedly been delayed by HUD for six months. We are now waiting for an official announcement to take place by HUD to officially confirm the six month delay which should make the new implementation date on or around July 1, 2010.

We don’t know what precipitated this possible delay by HUD but the real estate industry has stepped up their criticisms on the new rule, including a recent letter sent to HUD by numerous trade organizations, issues with the new Truth In Lending Act form “TILA” integration, and other federal enforcement agencies concerns about the transparency of the new HUD-1 have forced HUD to re-evaluate parts of the new rule. Of course one of the other problems is that many in the real estate industry are still very much unaware or uneducated on the new RESPA Rule.

UPDATED at 10:39 PM:

August 7, 2009

THE FEDERAL HOUSING ADMINISTRATION (FHA) CONDOMINIUM APPROVAL CHANGES COULD DEVASTATE CONDOMINIUM SALES

by Marx Sterbcow

The Federal Housing Administration recently announced significant changes to FHA Condominium financing. The FHA condo approval changes go into effect on October 1, 2009 and the ramifications for developers, condominium associations, buyers, and sellers could be serious.

Some of the highlights of these changes include:
1. Any condominium development approved prior to October 1, 2008 (10/1/2008) loses its FHA approval and must formally re-apply.
2. No spot approvals, all applications must go to FHA directly but DE lenders can approve but with enormous liabilities if they miss one item.
3. Existing condominiums, regardless of whether they were FHA approved prior to October 1, 2008 or not will have to reapply for HUD approval. This means if a seller wants to sell their condominium unit, even if they received an FHA loan in 2006, that a new borrower won’t be able to get an FHA loan on your unit unless your condominium has been re-approved by HUD.

FHA’s actions could be disastrous for condominium sales across the United States especially given the fact that most loans today are FHA loans. If you think the HUD approval process is quick, think again, because most lawyers estimate that it takes them six months to get HUD approval. If this guideline change isn’t implemented then I’m sure the approval process will become inundated so fast that it could overwhelm the process even further causing delays that could quickly reach a year or more. A borrower can still qualify for a Freddie Mac, Fannie Mae, VA, or USDA loan but if Freddie and Fannie are the borrower’s only option to get condo financing they should prepare themselves to pay significantly higher fees for the same loan that FHA would have provided to them had the Condo been FHA approved.

To see if your Condominium will be affected by the new FHA Approval process please go to this website and see if your condominium is listed.

See below for the entire letter.
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July 14, 2009

MORTGAGE DISCLOSURE IMPROVEMENT ACT (MDIA) GOES INTO EFFECT ON JULY 30, 2009

by Marx Sterbcow

On July 30, 2009, some of the provisions of the Mortgage Disclosure Improvement Act of 2008 (MDIA) go into effect and lenders, mortgage brokers, title agents, real estate agents, and real estate brokerages need be alert as to these new federal governmental regulations. Here are the details for the MDIA:

1. The 3/7/3 Rule requires a seven business day waiting period once the initial disclosure is provided before closing a home loan (business days are everyday except Sundays and Holidays). This means that before a borrower can close on a transaction the borrower must receive the initial Good Faith Estimate (GFE) and initial TIL statement disclosing the final Annual Percentage Rate (APR) seven days prior to closing.

2. If the final annual percentage rate APR is off by more than .125% from the initial GFE disclosure then the lender must re-disclose and wait yet another three business days before closing on the transaction.

3. The consumer has the right to cancel and not proceed with the transaction if they so choose.

4. Lenders are forbidden from collecting money for appraisals, loan applications, etc. prior to the delivery of the Truth In Lending (TIL). Lenders can only collect from the borrower the credit report fee at the time of prior to delivery of the final TIL. No other fees are permitted to be collected at the time of application. If the TIL is sent by mail, additional charges can occur after the 3rd business day after the borrower receives the TIL in the mail.

5. The following language must be clearly written on the initial and final TIL: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”

If you are a real estate agent or title agent you need to manage the process very carefully by:

A. Making sure that you check the initial Good Faith Estimate and Truth In Lending form for your buyers and look for discrepancies in charges. The new rules were put in place to protect consumers from being low balled one figure by a loan officer only to find out at the closing table that the fees charged were much higher. The new MDIA rules will absolutely delay closings if these steps are not followed carefully.

B. Buyers, sellers, and real estate professionals should not schedule a closing until the borrower has completed the seven day waiting period as required in the initial TIL.
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July 13, 2009

THE CONSUMER FINANCIAL PROTECTION AGENCY (CFPA) PROPOSAL INCLUDES RESPA AND TILA REGULATORY GOVERNANCE

by Marx Sterbcow

U.S. Rep. Barney Frank officially introduced legislation to create the Consumer Financial Protection Agency (CFPA). The legislation, which is backed by the Obama Administration, would consolidate the consumer protection powers of the fifty various federal financial regulatory agencies by creating a single regulatory agency. The creation of this single regulatory agency is the single most important aspect of the proposed 229 page Consumer Financial Protection Agency proposal.

The current financial governing system encourages abuses in the industry to take place because of the loopholes created by an inefficient and ineffective regulatory structure. The loopholes are exploited even further by the mass infighting that many of the governmental regulatory bureaucracies regularly display. The consolidation of these various federal agencies into one rule-making and investigative federal division should provide more uniform rules for those in the real estate industry and for consumers of real estate products.

The CFPA will have sole authority to draft and interpret regulations under the existing consumer financial services and fair lending statutes. The recent Good Faith Estimate/HUD-1 Settlement Statement forms developed by HUD and the Truth In Lending Act form is a prime example of decisions being made by one federal agency without input from a completely different agency. The biggest benefit consolidation presents to the industry and to the consumer is that this will increase the number of enforcement investigators. The consolidation of regulatory investigators is crucial because quite often investigators in one agency stop investigating abuses that relate to other agencies due to a myriad of reasons.
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July 12, 2009

DAVID H. STEVENS CONFIRMED AS HEAD OF FEDERAL HOUSING ADMINISTRATION

by Marx Sterbcow

The Sterbcow Law Group would like to Congratulate Dave Stevens who was confirmed as the new Commissioner of the Federal Housing Administration (FHA) on Friday, Dave Stevens is a phenomenal choice to help turn FHA around. Long & Foster’s loss is America’s gain and judging by our experience with Mr. Stevens on the Real Estate Services Providers Council (RESPRO) the real estate industry and consumers will be better off with his policy making decisions in the near future.

David H. Stevens was the past President & COO of Long & Foster Realtors; Vice President of Mortgage, Title, and Insurance Division for Longer & Foster; Executive Vice President for Wells Fargo Home Mortgage; on the Lender’s Advisory Council for the Mortgage Bankers Association (MBA); on the Board of Directors of the National Association of Mortgage Brokers (NAMB); on the Board of Directors of the Real Estate Services Providers Council (RESPRO).