Filed under: Warehouse Lines of Credit | Tags: FHA approvals, FHA audits, FHA compliance, FHA guidelines, FHA QC
At the annual National Reverse Mortgage Lenders Association (NRMLA) meeting in October, 2010, David Keeney, managing director, of Clayton, Shelton, Conn, spoke about the current availability of a Warehouse Lines of Credit. The following is a exert of his speech:
‘Posing an impediment to all lenders, according to David Keeney, managing director, Clayton, Shelton, Conn., is the skittishness felt by warehouse lenders. “It’s amazing to me the concerns and fear on the part of the credit department related to the counter-party on issues like headline risk,” Keeney remarks. “There is still a huge fear on the part of these lenders. They want robust QC compliance processes,” he explains, “not just a lot of small talk, they want to see it. A lot of the better capitalized companies have state-of-the-art loan processing systems. If you don’t have that automated environment – all the necessary fraud checks, compliance checks – it’s going to be extremely difficult to pass that part of the review.”
Keeney continues: “They want to see well-written workflow processes; policies and procedures.” That does not mean “just going into the HUD manual and Xeroxing the QC plan; that doesn’t work anymore,” according to Keeney. “They want to see adequate loan loss reserves and a culture of doing what’s best for the borrower…not ‘what’s my fee’? [They’re asking:] What’s the business plan? That’s the new world order,” declares Keeney’.
This is why as a lender you need to create a Quality Control Policy and Program that is consistent with your business model and reflects how you currently do your business. In addition, I strongly recommend a professional outside company is contracted to perform your Quality Control funded and declined loan file reviews, unless, your company has the ability to create an independent Quality Control department.
The year of 2011 will be the year for FHA and Investors to make sure that all lenders are performing the necessary compliance reviews to ensure loan quality. The best way for any company to prove that they are taking the necessary steps to ensure quality is to have a robust Quality Control Policy and Program.
Filed under: FHA Loan Correspondents Termination | Tags: FHA approvals, FHA audits, FHA compliance, FHA guidelines, FHA QC
The FHA Loan Correspondent lending approval is coming to a close on December 31, 2010. As of January 1, 2011, there will no longer be a Loan Correspondent (Broker) approval category. The latest information from HUD is as follows:
To All Loan Correspondents:
On May 20, 2010, FHA revised its lender approval policy to eliminate the approval of Loan Correspondents effective December 31, 2010. On January 1, 2011, Loan Correspondents will no longer have access to HUD’s secure system, the FHA Connection. Loan Correspondents will be permitted to continue their participation in FHA programs by establishing a sponsorship relationship with an FHA-approved Mortgagee.
Loan Correspondents that wish to continue participating in FHA programs after December 31, 2010, must be registered as Sponsored Originators in the FHA Connection by a sponsoring Mortgagee. Mortgagees may register a Sponsored Originator via the new Sponsored Originator Maintenance screen in the FHA Connection. It is recommended that Loan Correspondents be registered prior to January 1, 2011, as only registered Sponsored Originators will be permitted to participate in the origination of FHA loans.
As a reminder, Final Rule FR 5356-F-02, “Federal Housing Administration: Continuation of FHA Reform—Strengthening Risk Management through Responsible FHA-Approved Lenders,” which went into effect on May 20, 2010, stated that effective January 1, 2011, entities without explicit FHA lender approval (including Sponsored Third Party Originators and former FHA-approved Loan Correspondents) may no longer close mortgages submitted for FHA insurance in their own names, regardless of when the case number was assigned or the current status of the case (e.g. approved, closed). FHA continues to explore options to remedy this issue, but at present, enactment of such a remedy prior to the January 1, 2011 effective date of this provision cannot be assured.
If you are currently a Loan Correspondent, you need to start to prepare and make sure you have an avenue for funding your loans.
If you need help, please let me know.
Filed under: New Risks to all FHA Lenders | Tags: FHA approvals, FHA audits, FHA compliance, FHA guidelines, FHA QC
FHA Assistant Director for Housing/Federal Housing Commissioner, David H. Stevens, has just posted a letter (attached) concerning HUD’s new Risk enforcement that will directly affect all Lenders that fund FHA insured loans. Even though the letter specifically mentions those Lenders that insure loans through the LI program, this will affect all FHA lenders as almost all the loans currently funded usually end up either being funded or purchased by one the big FHA servicers, BofA, Wells, Chase, etc, all of which insure through the LI program.
This letter outlines four specific reasons that HUD will indemnify a loan through the LI insuring process. The appraisal issues that are mentioned are basic to the insurability of the loan and will cover all omissions by the appraisers such as “head and shoulders inspections” etc.
For those of you that have not had the privilege of trying to fight an indemnification letter from HUD, it is very time-consuming and at times very trying dealing with either the HOC offices or the Office of the Inspector General. I have personally won most of the battles, but, I have also lost a few. And, in my opinion, this is going to be HUD’s way of reducing the drain on the insurance fund. So, you need to be aware and make sure that compliance with all FHA guidelines are adhered to as a practical course of your day-to-day business.
Risk Letter from David H. Stevens October 21, 2010
Filed under: Time is Running Out on FHA reform | Tags: FHA approvals, FHA audits, FHA compliance, FHA guidelines, FHA QC
Most of the clients I assist in the mortgage industry are being asked for their Quality Control reports on a quarterly or monthly basis. I had one client that was questioned about their Quality Control report by Wells Fargo and I was requested to write a letter on their behave to add more detail.
The review of Quality Control reports is going to increase over the next several months as the FHA “broker” approval process goes away. If you are either a current FHA approved “broker” or a non-approved mortgage company that is planning on participating in the FHA program now that the approval process has been changed effective June 20, 2010, you need to prepare to have your Quality Control program analysed by investors. The best way to be compliant with your FHA investors is to have an outside company perform Quality Control audits on a sampling of your funded FHA loans. The cost will be minimal to perform these audits. And, the bonus will be that your Investor will know that you care about your loan quality.
So, do not let your time run out as we approach December 31, 2010. When the new year comes and all of the brokers will be in the same status as it relates to FHA lending, you will have to distinguish your company from the many companies that will want to get into or continue brokering FHA loans. A very easy way of distinguishing your company from other companies is to have a Quality Control program in place.
Filed under: FHA Underwriting Enforcement | Tags: FHA approvals, FHA audits, FHA compliance, FHA guidelines, FHA QC
As you can see from this Letter posted (below) by FHA from David H. Stevens, Assistant Secretary for Housing/Federal Housing Commissioner, FHA is stepping up its enforcement of the underwriting rules. As I have written on August 1, 2010, FHA has to same amount of auditors for about 20% of the companies now that they are no longer reviewing those lenders in the “Broker” category.
The only way that I know to protect your investment is to stay on top of your Qualify Control program. You need to keep your Quality Control program guidelines up to date with all the new Mortgagee Letters and make sure your reports to Management and responses from Management are current.
I recently attended a three-day workshop on underwriting sponsored by FHA which included an appraisal review a session that last one full day. There are many unwritten and new interpretations of the guidelines that as a lender you should be aware of as you underwrite your files.
If you are not current on your Quality Control, you need to get current. If your Qualify Control Policy has not been updated lately, then you need to have someone review for relevancy. If you are handling your Qualify Control in-house, make sure that the person reviewing your files is completely independent of the Operations and Lending part of the business. My preference has always been to have someone on the outside of the company that is independent to review files for your Quality Control program. This allows for a clear independent review of your files.
FHA Letter from David H. Stevens
Filed under: FHA Reform | Tags: FHA approvals, FHA audit, FHA compliance, FHA guidelines, FHA QC
Since FHA has published their “Final Rule: Strengthening Risk Management Through Responsible FHA-Approved Lenders” on May 20, 2010, there is a whole new world for the FHA marketplace. The first thing that all lenders need to know is that FHA will reduce their lender responsiblity for oversight effectively 1/1/11 from approximately 11,000 lender and correspondents, to approximately 3,000 by eliminating 8.000 correspondents. The second thing that a lender needs to know is that FHA has not reduced their staff for this oversight. So, you can do the math.
If you have not seen the latest list of Mortgagee Review Board sanctions, then, you can go to this link, http://edocket.access.gpo.gov/2010/pdf/2010-18156.pdf to view some of them. You will note that 9 of these sanctioned companies were for Quality Control Plan deficiencies. And, I believe this is only the start. If you have not had someone with knowledge review your Quality Control Plan, I would strongly suggest that you do that today. I believe that 2011 will be the year of the HUD audit.
Filed under: FHA Reform | Tags: FHA approvals, FHA audits, FHA compliance, FHA guidelines, FHA QC
As the first official Blog post, I want to welcome you to the FHA Partners’ Blog. I hope through my 25 years of dealing with FHA and my working knowledge along with my FHA contacts that I can impart worthwhile information that could be of value to you. I will try to keep you current on the issues that will really affect what you do in the business of FHA lending and of course, express my opinions. As we all know, FHA guidelines leave a lot to be desired when it comes to lending as there are many “grey” areas that need to be interpreted or at least experienced to make sure we are all in compliance. That is where I may be able to help as I have seen or experienced almost everything possible it seems when it comes to FHA. Welcome to the Blog and I do appreciate comments in the future.
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