Compliance Calendar

Search for current regulatory changes & updates from Fannie, Freddie, FHA, VA, and USDA.

Compliance Calendar for April 2019

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Loss Draft Proceeds and Other Unapplied Funds in Taxes and Insurance Custodial Accounts

Effective: April 1, 2019
Industry: Mortgage Servicing
Source: Fannie Mae   SCV-2018-09 →
Tags: Insurance, Escrow-Impounds
View Details

In response to servicer feedback and to provide greater clarity, we updated our requirements for managing loss draft proceeds and other unapplied funds being held in the taxes and insurance (T&I) custodial account by 

  • removing ambiguous language regarding monthly monitoring activities, and
  • requiring the servicer to have written policies and procedures in place to actively identify and monitor unapplied funds until resolution. 

Multiple Servicers for Fannie Majors

Effective: April 1, 2019
Industry: Mortgage Lending
Source: Fannie Mae   SEL-2019-03 →
Tag: Secondary
View Details

To provide flexibility to lenders delivering into Fannie Majors, any combination of seller/servicer numbers will now be accepted. This change will allow for the delivery of multiple servicer numbers per seller number.

Effective Date

Lenders can take advantage of this change for pools with issue dates beginning April 1, 2019.

Assignment Forms for non-MERS loans​

Effective: April 1, 2019
Industry: Mortgage Servicing
Source: Fannie Mae   Alert →
Tags: Servicing Transfers, Loan Boarding
View Details

Include new Fannie Mae corporate address in all assignment forms after March 31 

Fannie Mae has extended the effective date for mortgage assignment forms to April 1 to give lenders more time to update their assignments, and additional flexibility for document custodians to certify loans that still have the previous address. All loans with notes dated on or after April 1 must have the new Fannie Mae address on the associated assignment. 

In December 2018, we announced that our corporate address had changed and updated the following mortgage assignment forms with the new address: 

1100 15th Street, NW 

Washington, DC 20005 

  • Form 3741
  • Form 3742 
  • Form 3743 
  • Form 3744 
  • Form 3745 
  • Form 3746 

However, to avoid potential certification delays, lenders should begin using our new corporate address as soon as possible. 

NOTE: Document custodians have until March 31 to certify loans with assignments with the previous address. New assignments are mandatory for loans with notes dated on or after April 1. 

NOTE: Mortgage assignments are used for non-MERS loans

VA Lenders Handbook, Chapter 5, How to Process VA Loans and Submit Them to VA

Effective: April 1, 2019
Industry: Mortgage Lending
Source: VA   VA Pamphlet 26-7, Revised Change 30 →
Tags: Underwriting, Certification, Endorsement, and Delivery
View Details

Chapter 5 has been revised to reflect updates to VA systems, facilitate expeditious processing of VA-guaranteed loans and incorporate all appropriate Circulars. Key changes include:

  • Chapter 5, Topic 3 has been updated to reflect the documents that must be submitted to VA for prior approval of loans. 
  • Chapter 5, Topic 3 provides an updated list of the documents required to request a Loan Guaranty Certificate following the closing of a prior approval loan.
  • Chapter 5, Topic 4 lists the documents that must be submitted when a loan is selected for Full File Loan Review.   

Prepaid Account Rule

Effective: April 1, 2019
Industry: Consumer Lending
Source: CFPB   Prepaid Rule →
Tag: Banking
View Details
  • Disclosures
  • Limited liability and error resolution
  • Periodic statements
  • Posting of account agreements
  • Overdraft credit features

Modified rule published January 2018.

Self-Report Process

Effective: April 3, 2019
Industry: Mortgage Lending
Source: Fannie Mae   SEL-2019-03 →
Tag: Investor Reporting
View Details

We require lenders to self-report several matters to us, including breaches of selling warranties, suspected misrepresentation or fraud, loan data and eligibility issues, and issues related to the quality control function. Previously, all self-reporting was done via an email mailbox. With the transition to our new and improved loan quality management system, Loan Quality Connect, the process for self-reporting will now occur more efficiently within that system. The Guide has been updated to remove references to the mailbox and replace them with references to Loan Quality Connect.

HomeReady® Mortgage Loans - Automated Underwriting

Effective: April 3, 2019
Industry: Mortgage Lending
Source: Fannie Mae   SEL-2019-03 →
Tags: Underwriting, Income, MIP-PMI
View Details

HomeReady mortgage is our premier affordable lending product designed for creditworthy low- to moderate-income borrowers, offering expanded eligibility for financing homes in low-income communities. We have updated our HomeReady policies to include the following: 

  • Multiple financed properties: We are imposing a maximum limit of two financed properties, including the subject property, for all HomeReady mortgage loans. Financed properties owned by a non-occupant borrower do not have to be included. The additional reserves required for multiple financed properties are not applicable to HomeReady loans.
  • Boarder income: Our current policy states that a boarder may not be obligated on the mortgage loan. We are clarifying that the boarder may also not have an ownership interest in the property.
  • Mortgage insurance coverage: We are clarifying that HomeReady loans combined with HomeStyle® Renovation may be delivered with the lower level of mortgage insurance coverage permitted for HomeReady.

Effective Date

Lenders may implement these policies immediately. Desktop Underwriter® (DU®) will be updated to include the multiple financed property policy and boarder ownership policy in a future release, at which time these will be required for DU loan casefiles. For manually underwritten loans, lenders must apply these policies for loans with application dates or after June 15, 2019.

Freddie Mac Selling Bulletin 2019-7

Effective: April 3, 2019
Industry: Mortgage Lending
Source: Freddie Mac   Second home Mortgages, Income documentation requirements, Lender-paid mortgage insurance →
Tags: Underwriting, Income, Insurance, Property - Appraisal
View Details

SECOND HOME MORTGAGES

In response to Seller feedback, we are updating our requirements for second home Mortgages to:

  • Permit second homes with seasonal limitations on year-round occupancy (e.g., lack of winter accessibility) to be eligible for sale to Freddie Mac provided the appraiser includes at least one comparable sale with similar seasonal limitations to demonstrate the marketability of the subject property
  • Specify that the property may be rented out on a short-term basis provided that:
    • The Borrower keeps the property securing the second home Mortgage available primarily (i.e., more than half of the calendar year) as a residence for the Borrower's personal use and enjoyment; and
    • The property is not subject to any rental pools or agreements that require the Borrower to rent the property, give a management company or entity control over the occupancy of the property or involve revenue sharing between any owners and developer or another party

Guide impacts: Sections 4201.15 and 5601.2

Multistate Second Home Rider Uniform Instrument

Freddie Mac and Fannie Mae have revised the Multistate Second Home Rider-Single-Family – Fannie Mae/Freddie Mac Form 3890 (rev. 4/19). For more information, visit Freddie Mac's Uniform Instrument News & Updates web page.

As a result, we are updating Guide Exhibit 4, Single Family Uniform Instruments, to reflect the revised Second Home Rider.

Guide impact: Exhibit 4

INCOME DOCUMENTATION REQUIREMENTS

In response to Seller feedback, we are updating the documentation requirements language for retirement income, survivor and dependent benefit income, long-term disability income and Social Security Supplemental Security Income to specify that one or more of the required documents (i.e., benefit verification letter, award letter, pay statement, 1099 and bank statement(s)) can be used to verify income type, source, payment frequency, payment amount and current receipt of the income. As a result, separate verification of current receipt of income is not required if the documentation obtained to support income type, source, payment frequency and predetermined payment amount also verifies current receipt of income.

The applicable Loan Product Advisor feedback messages will be updated to reflect these changes.

Guide impact: Section 5305.2

Lender-paid mortgage insurance

We are revising the Guide sections related to the sale of fixed-rate Mortgages with annual- and monthly-premium lender-paid mortgage insurance to reflect a 50 basis points maximum Minimum Contract Servicing Spread for Mortgages sold under the fixed-rate Guarantor and MultiLender Swap programs.

Guide impact: Section 4701.2

Virginia Stay of Eviction and Foreclosure Proceedings to Furloughed Federal Employees and Contractors

Effective: April 3, 2019
Industry: Mortgage Servicing
Source: Virginia   Alert →
Tags: Virginia, Foreclosure
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On April 3, the Virginia governor signed SB 1737, which provides a 30-day stay of eviction and foreclosure proceedings for furloughed federal employees and contractors during a partial closure of the federal government. 

The law grants a tenant or homeowner who defaults on a housing payment after December 22, 2018, a 30-day stay on eviction or foreclosure proceedings. 

The tenant or homeowner must provide “written proof” that they were subject to a furlough, or were not otherwise receiving wages, as a result of the partial government shutdown that began on December 22, 2018. The tenant or homeowner must be an 

(i) employee of the federal government; 

(ii) a federal government contractor; or 

(iii) an employee of a contractor for the federal government. 

The law is effective immediately and expires on September 30 [2019].

Servicing Guide Updates

Effective: April 10, 2019
Industry: Mortgage Servicing
Source: Fannie Mae   SVC-2019-02 →
Tags: Disaster, Foreclosure, Cash Management, Bankruptcy, Loss Mitigation
View Details

Evaluating Property Damage After a Disaster Event for Current Mortgage Loans

  • We are updating the Servicing Guide D1-3-01 to authorize, but no longer require, servicers to make contact attempts and perform property inspections for a mortgage loan that is current at the time of the disaster event and remains current following the disaster event. 
  • Servicers remain responsible for inspections and borrower outreach in accordance with existing Servicing Guide requirements if the mortgage loans subsequently become delinquent.

Allowable Foreclosure Fees for New Hampshire, Maine and Washington, and Fee Proration Related to Milestone Billing

  • We are updating the Allowable Foreclosure Attorney Fees Exhibit to
    • increase the maximum allowable foreclosure attorney fees for New Hampshire and Maine, 
    • add an additional $200 allowable fee in Maine for processing a third-party foreclosure sale, and 
    • create a new allowable fee for Washington e-Note judicial foreclosure actions.
  • E-5-05 is being updated to clarify that servicers must compensate the law firm for the amount of work actually performed if the foreclosure action is cancelled and not completed, regardless of whether the first or any subsequent milestone invoicing event has been reached. 
    • Servicers must ensure the fees are reasonably prorated to the services rendered.
  • These policy changes are effective as follows:
    • The new allowable foreclosure fees apply to all matters referred to counsel for initiation of foreclosure proceedings, regardless of referral date, as long as the matter is still active as of April 10, 2019. 
    • The Maine third-party foreclosure sale fee applies to third-party sales that take place on or after April 10, 2019. 
    • The fee proration clarification applies to the law firm’s services invoiced on or after April 10, 2019. We are not requiring servicers to re-open and review compensation for matters in which a law firm’s invoice was previously denied because the next milestone invoicing event had not yet been reached.

Mortgage Electronic Registration Systems (MERS®) Policy Consolidation

  • We have consolidated shared requirements for sellers and servicers related to the use of MERS in Part B of the Selling Guide.

Custodial Accounts Update

  • As outlined in F-1-03, Establishing and Implementing Custodial Accounts, the following have been updated to align with the language for how custodial accounts must be titled: 
    • Letter of Authorization for P&I Custodial Account (Form 1013) 
    • Letter of Authorization for T&I Custodial Account (Form 1014)

QAS Transition to LQC

  • In accordance with Announcement SEL-2019-01, the Servicing Guide has been updated to remove references to the Quality Assurance System (QAS) in anticipation of the upcoming transition to Loan Quality Connect (LQC).

AAA Matrix Updates

Effective: April 10, 2019
Industry: Mortgage Servicing
Source: Fannie Mae   Excess Attorney Fee/Cost Guidelines →
Tags: Fees, Foreclosure
View Details
  • We’ve updated the Pro Rata Fees and Milestone Invoicing language across all AAA matrices and also updated the Maine, New Hampshire, and Washington (judicial e-Note) allowable foreclosure fees. 
  • In addition, we removed the legal review requirement and note for New York settlement conferences.

Servicing Guide Updates

Effective: April 10, 2019
Industry: Mortgage Servicing
Source: Freddie Mac   Guide Bulletin 2019-8 →
Tags: Disaster, Claims Processing, Property Preservation
View Details

Disaster-related requirements for current Mortgages

Previously, in the event of an Eligible Disaster, Servicers were required to ascertain the number of Mortgages impacted and the extent of damages caused to each Mortgaged Premises, which Servicers may determine through discussions with the Borrower and/or a property inspection. This requirement may be unnecessarily burdensome in situations where a Mortgage was current or no more than 30 days delinquent at the time of the Eligible Disaster and does not become more than 30 days delinquent following the event.

To provide flexibility for Servicers so they can focus their efforts on assisting Borrowers who are or become more than 30 days delinquent, Servicers may, but are no longer required to, determine the extent of damages caused to the Mortgaged Premises where the Mortgage was current or 30 or fewer days delinquent at the time of the Eligible Disaster. However, should such a Mortgage subsequently become more than 30 days delinquent, Servicers must initiate collection efforts in accordance with Guide Chapters 9101 and 9102 and order property inspections as required by Section 9202.12.

Guide impact: Section 8404.2

Exhibit 57 updates

In Bulletin 2018-26, we announced that Servicers could maintain and execute winterization and yard maintenance without seasonal time frame restrictions.

In response to Servicer inquiries, we are revising Exhibits 57 and 74 to simplify the winterization and yard maintenance expense amount descriptions.

Guide impacts: Exhibits 57 and 74

 

Single Security Initiative

In Bulletin 2019-7, we updated the Guide to reflect updated requirements to the Note Rate to Coupon spreads and a reduction in the maximum Servicing Spread for Mortgages serving as collateral for Uniform Mortgage-Backed Security and Mortgage-Backed Security (MBS), effective for Mortgages sold under Freddie Mac’s fixed-rate Guarantor or MultiLender Swap program with Settlement Dates on or after June 3, 2019.

Additionally, we revised Guide sections related to the sale of fixed-rate Mortgages with annual- and monthly-premium lender-paid mortgage insurance to reflect the 50 basis points maximum Minimum Contract Servicing Spread for Mortgages sold under the fixed-rate Guarantor and MultiLender Swap programs.

As a reminder, the FHFA has instructed Freddie Mac and Fannie Mae to monitor the Weighted Average Coupon (WAC) of MBS and take actions as appropriate such that MBS WAC would be generally consistent with historical WAC levels. The FHFA, Freddie Mac and Fannie Mae are working to determine an appropriate target MBS WAC, such as 80 basis points or slightly higher (given current guarantee fees and minimum servicing levels).

Document Custody Procedures Handbook

Based on comments and questions received and as part of our annual review, on March 13, 2019, we updated the Document Custody Procedures Handbook to add clarification around Note exceptions regarding affidavits, powers of attorney, and to make other revisions and clarifications.

Documentation Requirements for Governmental Entities Providing Downpayment Assistance to FHA Borrowers

Effective: April 18, 2019
Industry: Mortgage Lending
Source: FHA   Mortgagee Letter (ML) 2019-06 →
Tags: Underwriting, Assets
View Details

This guidance is effective for case numbers assigned on or after April 18, 2019, and will be incorporated into a forthcoming update of the HUD Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1).

This guidance applies to transactions where a person or entity is providing any portion of a Borrower’s MRI.

Source Requirements for the Borrower’s Minimum Required Investment

II.A.4.d.ii (TOTAL) and II.A.5.c.ii (Manual). 

  • Definitions
  • Standard

Minimum Required Investment (MRI) refers to the Borrower’s contribution in cash or its equivalent required by Section 203(b)(9)(A) of the National Housing Act, which represents at least 3.5 percent of the Adjusted Value of the Property.

The Mortgagee must ensure that the Borrower’s MRI is from a permissible source and meets the following requirements.

The Mortgagee must ensure that the source of funds for the Borrower’s MRI to be provided fully complies with the Source Requirements for the Borrower’s Minimum Required Investment.

The Mortgagee must ensure that no portion of the Borrower’s MRI is provided by:

(1) the seller of the Property;

(2) any other person or Entity who financially benefits from the transaction (directly or indirectly); or

(3) anyone who is or will be reimbursed, directly or indirectly, by any party included in (1) or (2) above.

While additional funds to close may be provided by one of these sources if permitted under the relevant Sources of Funds (II.A.4.d.iii (TOTAL) and II.A.5.c.iii (Manual)) requirements, none of the Borrower’s MRI may come from these sources.

(1) Special Requirements for Family Members 

A Family Member may provide the Borrower’s MRI in accordance with Section 203(b)(9)(B) of the National Housing Act.

(2) Special Requirements for Government Entities

In accordance with the Prohibited Sources of Minimum Cash Investment Under the National Housing Act – Interpretive Rule, HUD does not interpret Section 203(b)(9)(C) of the National Housing Act to prohibit Governmental Entities, when acting in their governmental capacity, from providing the Borrower’s MRI where the Mortgage is being originated as part of a Governmental Entity homeownership program.

(C) Required Documentation

Where any portion of the Borrower’s MRI is provided by a person or entity other than the Borrower, the Mortgagee must also obtain documentation to support the permissible nature of the source of those funds.

The Mortgagee must document that all portions of the Borrower’s MRI come from an acceptable Source of Funds (II.A.4.d.iii (TOTAL) and II.A.5.c.iii (Manual)) in accordance with both the source requirements for the specific type of funds used, and the specific documentation requirements under the additional Source Requirements for the Borrower’s MRI set forth in this section.

Governmental Entity Funds

The Mortgagee must document that the Borrower’s MRI was provided by the Governmental Entity, as either a gift or through Secondary Financing, in a manner consistent with the National Housing Act and the additional provisions of this section. The Mortgagee must document that the Governmental Entity incurred prior to or at closing an enforceable legal liability or obligation to fund the Borrower’s MRI in its governmental capacity. It is not sufficient to document that the Governmental Entity has agreed to reimburse the Mortgagee for the use of funds legally belonging to the Mortgagee to fund the Borrower’s MRI.

The Mortgagee must obtain:

  • for federal, state or local government agencies, a copy of documentation from a jurisdiction in which the Property is located, which granted governmental authority to the entity; 
  • a legal opinion signed and dated within two years of closing of the transaction by attorneys for the Governmental Entity stating: 
  • the attorney has reviewed the Governmental Entity’s downpayment assistance program; and 
  • either
  • the Governmental Entity is considered within the jurisdiction in which the Property is located  to be either a federal, state (as defined in Section 201(d) of the  National Housing Act (12 U.S.C.  §1707(d)), or local  government or agency or instrumentality thereof, as  provided in Section 528  of the National Housing Act  (12 U.S.C §1735f-6), and 24 CFR 203.32(b) and  further clarified in  the SF Handbook.;  
  • the Governmental Entity is a federally recognized  Indian Tribe operating on tribal land in  which the  Property is located or to enrolled members of the tribe;  or 
  • the Governmental Entity is a Federal Home Loan  Bank;          
  • evidence that the downpayment assistance is being provided by the  Governmental Entity by  collecting either:  
  • a letter from the Governmental Entity, signed by an authorized  government official, establishing  that the funds provided towards the Borrower’s MRI were provided in the  Governmental Entity’s governmental capacity in the  jurisdiction in which the Property is located  consistent with its  downpayment assistance program and that the provision of  such funds is not  contingent upon any future transfer of the  insured Mortgage to a specific entity, and a canceled  check, evidence of wire transfer or other draw request showing that prior to or at the time of  closing the Governmental Entity had authorized a draw of the funds provided towards the Borrower’s  MRI from the Governmental Entity’s account; or 
  • a letter from the Governmental Entity, signed by an authorized official, establishing that the  funds provided towards the Borrower’s MRI were funds legally belonging to the Governmental Entity  and were provided in the Governmental   Entity’s governmental capacity in the jurisdiction in which the  Property is located or for the  federally recognized Indian   Tribe’s enrolled member, consistent with its downpayment  assistance program, at or before  closing. The letter must make clear that the provision of the downpayment assistance is not contingent upon any future transfer of the insured Mortgage. Where such a letter from the  Governmental Entity is submitted, the precise language of the letter may vary, but must demonstrate that the funds provided for the Borrower’s MRI legally belonged to the  Governmental Entity at or before closing, by stating: 
  • the Governmental Entity has, at or before closing, incurred a legally enforceable liability as  a result of its agreement to provide the funds towards the Borrower’s MRI; 
  • the Governmental Entity has, at or before closing, incurred a legally enforceable obligation  to provide the funds towards the Borrower’s MRI; or 
  • the Governmental Entity has, at or before closing, authorized a draw on its account to provide  the funds towards the Borrower’s MRI.

The Mortgagee must either document the actual transfer of funds in satisfaction of the obligation or liability by the Governmental Entity prior to the submission of the Mortgage for insurance or obtain documentation of the satisfaction of the obligation or liability by the Governmental Entity after submission and maintain such documentation in the Mortgagee’s files.

The failure of the Mortgagee to demonstrate the downpayment assistance  provider has transferred the funds, the failure of the Governmental Entity to  satisfy the obligation or liability, or any demand for reimbursement or  indemnification for such funds by the Governmental Entity may call into  question whether FHA requirements have been met and result in a determination that the funds were, in fact, provided by a prohibited source.

Servicer Reimbursement Amounts

Effective: April 18, 2019
Industry: Mortgage Servicing
Source: Freddie Mac   Guide Bulletin 2019-8 →
Tag: Claims Processing
View Details

Effective for reimbursement claims submitted in the Freddie Mac Reimbursement System on and after April 18, 2019

We are revising our attorney fee reimbursement amounts and certain Servicer requirements related to: 

  • Uncontested foreclosures
  • Bankruptcy services
  • Other legal expense items

Uncontested foreclosures

We are increasing the approved Servicer reimbursement amounts for attorney fees associated with uncontested foreclosures in the States listed in Guide Exhibit 57A.

Bankruptcy services

In response to numerous changes made when Servicing Mortgages where the Borrower has filed for bankruptcy protection, we are increasing the approved Servicer reimbursement amounts for attorney fees associated with certain bankruptcy services as follows:

[See bulletin for table]

Other legal expense items

We are increasing the limit for expense code 600021 (Skip Trace/Investigative Report) from $90 to $160.

Reminder on reasonable and customary fees and costs

As a reminder, Servicers must verify that legal fees and costs incurred are reasonable and customary for the area in which the Mortgaged Premises is located. For reimbursement of expenses that exceed the current expense limits in Exhibit 57A, Servicers must request Freddie Mac's approval prior to incurring the expense.

Guide impacts

We are updating Exhibits 57A and 74 to reflect these changes.

Loans to Members and Lines of Credit to Members

Effective: April 24, 2019
Industry: Consumer Lending
Source: Other   NCUA Final Rule →
Tag: Consumer
View Details

The clarifying amendments in this final rule are largely technical in nature.

Section 701.20 Suretyship and guaranty.

(c) Requirements.

The final rule makes minor conforming amendments to § 701.20(c).

(c)(2).

The final rule makes conforming amendments to the section governing requirements for suretyship or guaranty agreements by removing outdated cross-citations to the loans to one borrower or group of associated borrowers limit in §§ 723.2 and 723.8 of the member business lending regulation and adding an updated cross-citation to § 723.4(c).

Section 701.21

(c) General rules.

(c)(4) Maturity.

The final rule divides § 701.21(c)(4) into two new paragraphs. One paragraph, § 701.21(c)(4)(i), states the general rule that loans carry a 15-year maturity. The other, § 701.21(c)(4)(ii), makes more explicit that there are exceptions to the general 15-year maturity limit in § 701.21(e) through (g) for various types of credit union loans.

(c)(4)(i) General rules.

The final rule maintains all of current § 701.21(c)(4) in § 701.21(c)(4)(i), which articulates the general 15-year maturity limit that exists on FCU loans. However, the final rule also adds language to clarify that the maturity for a new loan under GAAP is calculated from the new date of origination.

(c)(4)(ii) Exceptions.

Section 701.21(c)(4)(ii) of the final rule explicitly states, in three paragraphs ((c)(4)(ii)(A), (B), and (C)), that there are three exceptions to the general 15-year maturity limit and cross-cites to § 701.21(e) through (g) as follows:

(c)(4)(ii)(A).

Section 701.21(c)(4)(ii)(A) of the final rule cross-cites to the exception to the general 15-year maturity limit in § 701.21(e) regarding covered loans secured, in full or in part, by the insurance or guarantee of, or with an advance commitment to purchase the loan, in full or in part, by the Federal Government, a State Government or any agency of either.

(c)(4)(ii)(B).

Section 701.21(c)(4)(ii)(B) of the final rule cross-cites to the exception to the general 15-year maturity limit in § 701.21(f) regarding covered home improvement, mobile home, and second mortgage loans.

(c)(4)(ii)(C).

Section 701.21(c)(4)(ii)(C) of the final rule cross-cites to the exception to the general 15-year maturity limit in § 701.21(g) regarding covered 1-4 family real estate loans.

(c)(5) Ten percent limit.

The final rule revises § 701.21(c)(5) to add cross-citations to the specific requirements on loans to a single borrower or group of associated borrowers in the loan participation rule, § 701.22(b)(5)(iv), and member business lending rule, § 723.4(c).

(e) Insured, Guaranteed, and Advance Commitment Loans.

The final rule revises § 701.21(e) to make more explicit that the maturity limits applicable to loans covered by paragraph (e) are notwithstanding the general 15-year limit in paragraph (c)(4). The final rule also adds a cross-citation to paragraph (c)(4).

(f) 20-Year Loans.

The final rule retains almost all of current § 701.21(f), but inserts some additional language to improve clarity.

(f)(1).

The final rule revises § 701.21(f)(1) to make more explicit that the maturity limit applicable to loans covered by paragraph (f) is notwithstanding the general 15-year limit in paragraph (c)(4). The final rule also adds a cross-citation to paragraph (c)(4).

(g) Long-Term Mortgage Loans.

The final rule retains almost all of § 701.21(g), but inserts some additional language to improve clarity.

(g)(1).

The final rule revises § 701.21(g)(1) to make more explicit that the maturity limit applicable to loans covered by paragraph (g) is notwithstanding the general 15-year limit in paragraph (c)(4). The final rule also adds a cross-citation to paragraph (c)(4).

Section 701.22

(b).

As described in more detail below, the final rule makes minor conforming amendments to § 701.22(b) regarding loan participations.

(b)(1).

The final rule updates the cross-citation in § 701.22(b)(1), which provides that for a federally insured credit union to purchase a participation interest in a loan, the loan must comply with all regulatory requirements to the same extent as if the purchasing federally insured credit union had originated the loan. Specifically, the final rule changes the outdated cross-citation in § 701.22(b)(1) from § 723.8 to § 723.4(c).

FHA Revises Handbook 4000.1

Effective: April 29, 2019
Industry: Mortgage Lending
Source:   FHA INFO #19-09 →
View Details

Changes identified in Section II.A may be implemented immediately (March 27, 2019), but must be implemented for mortgages with case numbers assigned on or after April 29, 2019.

Section II – Origination through Post-Closing/Endorsement

II.A.1.a.i(E)(1)(a)(iii) Property Assessed Clean Energy

Updated sales guidance for properties encumbered with a PACE obligation to require the sales contract to specify satisfaction of the PACE obligation by the seller at or prior to the closing to reflect ML 2017-18.

118

II.A.1.a.iii(B)(6)(e) Additional Requirements When Ordering an Appraisal 

Updated guidance to require lender to notify the appraiser that the PACE obligation will be paid off as a condition of loan approval to reflect ML 2017-18.

127

II.A.1.b.ii(A)(13)(b) Tax Liens

Clarified that a subordination agreement is not required for federal tax liens (in repayment).

137

II.A.1.b.iii(A)(2)(c) Exceptions to the FHA Policy Limiting the Number of Mortgages per Borrower

Updated guidance for non-occupying co-Borrowers with existing FHA-insured Mortgages.

141

II.A.1.b.iv(A)(6) Property Assessed Clean Energy

Updated guidance to clarify that properties that remain encumbered with a PACE obligation are not eligible for FHA Mortgage insurance to reflect ML 2017-18.

148

II.A.1.b.v Legal Restrictions on Conveyance (Free Assumability)

Added guidance on determining reasonable share of appreciation.

152-153

II.A.4.a.iii(A)(1) Automated Underwriting System Data Entry Requirements – Mortgagees; II.A.5.d.vii(B) Calculating Total Mortgage Payment; II.A.6.a.viii(A) Monthly Escrow Obligations

Updated Borrower’s total Mortgage Payment to make any PACE obligation classified as a special assessment ineligible to reflect ML 2017-18.

177, 324, 342

II.A.4.c.ii(C) Employment Related Income (TOTAL) – Required Documentation; II.A.4.d.i(A) Earnest Money Deposit (TOTAL); II.a.4.d.iii(A)(3)(a) Checking and Savings Accounts (TOTAL) – Required Documentation – Traditional Documentation; II.A.5.b.ii(C) Employment Related Income (Manual) – Required Documentation; II.A.5.c.i(A) Earnest Money Deposit (Manual); II.a.5.c.iii(a) Checking and Savings Accounts (Manual) – Required Documentation – Traditional Documentation

Provided guidance on the use of Third Party Verification (TPV) services to verify a borrower’s employment, income, and asset information, to reflect ML 2019-01.

197-198, 221, 227, 271-272, 296, 301

II.A.4.c.ii(C)(3) Past Employment Documentation; II.A.4.c.v Overtime, Bonus and Tip Income (TOTAL); II.A.5.b.ii(C)(3) Past Employment Documentation; II.A.5.b.v Overtime, Bonus and Tip Income (Manual)

Added clarifying guidance to treat Tip Income the same as Overtime or Bonus Income.

198, 199-200, 272, 274

II.A.4.c.xii(I)(2)(c) Rental Income Received from the Subject Property (TOTAL) – Calculation of Effective Income

Added clarifying language for calculation of Effective Income.

214

II.A.4.c.xii(I)(2)(c)(i) Limited or No History of Rental Income; II.A.4.c.xii(I)(3)(c)(i) Limited or No History of Rental Income; II.A.5.b.xii(I)(2)(c)(i) Limited or No History of Rental Income; II.A.5.b.xii(I)(3)(c)(i) Limited or No History of Rental Income

Edited mentions of Fannie Mae Form 216/Freddie Mac Form 998 for consistency.

214, 216, 289, 290

II.A.4.d.iii(F)(3) Required Documentation – Documenting the Transfer of Gifts; II.A.5.c.iii(F)(3) Required Documentation – Documenting the Transfer of Gifts

Updated documentation guidance for evidencing transfer of gifts to the Borrower or settlement agent.

230-231, 305

II.A.4.d.iii(J) Secondary Financing (TOTAL); II.A.5.c.iii(J) Secondary Financing (Manual)

Replaced “loan instruments” with “Mortgage and Note” to provide more specific guidance.

236, 237, 238, 239, 310, 312, 313, 314

II.A.5.d.ix(A)(1) Energy Efficient Homes – Standard; II.A.8.a.vi(A)(2)(a) General Improvement Standards; II.A.8.c.iii(B) Cost-effective Test for New Construction; II.A.8.c.iv(C) Home Energy Report for New Construction

Updated link and removed specific reference to 2006 International Energy Conservation Code (IECC) to ensure continuous access to the most recent IECC approved by HUD.

326, 368, 401, 402

II.A.5.d.x(B) Documentation of Final Underwriting Review Decision (Manual)

Clarified the timeframe, for pre-closing or post-closing, for submitting final underwriting review decision documents to reflect ML 2016-21.

329

II.A.6.a.vii Mortgagee Closing Requirements – Certifications; II.A.7.b v Closing Disclosure and Settlement Certification

Updated guidance to distinguish which certifications are required for purchase or refinance transactions.

341, 349

II.A.7.b.xii Secondary Financing Documentation

Replaced “subordinate loan agreement” with “Mortgage” and “Note” to provide specific guidance for documentation requirement.

350

II.A.7.d.ii(B) Uniform Case Binder Format

Implemented a change in the test case binder colors, and added a timeframe for Mortgagees entering the Direct Endorsement Test Case process to reflect ML 2016-21.

354

II.A.7.d.iii(C) After Receipt of a Notice of Return

Added definition for “Notice of Return.”

358

II.A.7.d.vii Mortgagee with Conditional Direct Endorsement Approval (Test Case)

Implemented timeframe changes for documents that are submitted for review from pre-closing to post-closing to reflect ML 2016-21.

360-361

II.A.8.c.iii Standard – Energy Package

Replaced “general contractor” with “project manager” to reflect how work is being completed.

400

II.A.8.c.xii Energy Efficient Mortgages – Inspection; II.A.8.i.ii New Construction – Inspections or Warranties for Maximum Financing; II.A.8.l.i(D) Weatherization – Eligibility – Maximum Dollar Amount

Removed requirements to use an FHA Roster Inspector, to reflect ML 2019-04.

405, 438-439, 451

II.A.8.d.vi(A)(2)(b)(i) Calculating Maximum Mortgage Amount – Standard; II.A.8.d.vi(B)(3)(a) Calculating Maximum Mortgage Amount for Simple Refinance Transactions – Standard

Updated language to clarify PACE obligations meeting certain requirements as eligible debt under the “Rate and Term” and “Simple Refinances,” to reflect ML 2017-18.

412, 415

II.A.8.d.vi(C)(4)(h) Funds to Close

Clarified that evidence of funds to close must follow the “applicable sections” of Source of Funds.

421

II.A.8.d.vi(C)(4)(j)(i) Maximum Mortgage Calculation for Streamline Refinances - Standard

Removed language regarding UFMIP refund applying only when the Mortgage included financed UFMIP. [This change was first published in Handbook 4000.1 with the 09/30/2016 publication but was inadvertently left off the transmittal.] 

422

II.A.8.i New Construction – Definitions

Removed definition for ten-year warranty.

438

II.A.8.i.ii(A)(3) Existing for Less than One Year (100 Percent Complete)

Clarified that for properties existing for less than one year both a building permit or final inspection and an appraisal evidencing property is 100 percent complete are required to reflect ML 2019-04.

439

II.A.8.i.ii Inspections or Warranties for Maximum Financing; II.A.8.i.iii Required Documentation for Maximum Financing; II.A.8.i.iv Financing LTV Limit

Removed requirements for a 10-year warranty, to reflect ML 2019-05.

439, 440