Issue Date 9/17/10 Effective Date As Noted WPA

Transcription

1 Various Topics Purpose This communication Reminds Sellers that FHA has announced changes to the Mortgage Insurance Premiums, effective for case numbers assigned on/after 10/04/10. Provides clarification/revisions for LPMI. Provides clarification for some HVCC issues. Provides guidelines for the purchase of short sale properties. Provides additional clarification to Third Party Contributions regarding Sales Abatements. Provides clarification and MSI guidance regarding Property Flopping, a short sale scheme. Revision to qualification with HELOC payments. FHA MIP Effective for FHA Case Numbers Assigned on/after 10/04/10. In Mortgagee Letter ( ) FHA announced changes to FHA Mortgage Insurance Premiums (MIP). MSI does not publish current MIP s in our Seller Guide, but have provided the matrix below for your convenience. FHA MIP Schedule Effective for Case Numbers Assigned on/after 10/04/10 LTV Current Up Front MIP (UFMIP) Revised Up Front MIP (UFMIP) All LTVs 2.25% 1.00% LTV Current Annual MIP (AMIP) Revised Annual MIP (AMIP) >95.00% 0.55% 0.90% 95.00% 0.50% 0.85% LPMI Effective Immediately The following corrections will be made to the LPMI guidelines in the Seller Guide: LPMI is available for Rate/Term Refinance loans to 95.00% LTV. LPMI is available for Second Homes. LPMI is not available for investment properties. Note: All MSI guidelines for LPMI are superseded by any current more restrictive guidelines of the Mortgage Insurance Company. WPA Page 1 of 6

2 MSI Mortgage Services III, LLC Wholesale Partner Announcement A Subsidiary of First State Bank Member FDIC HVCC Issues Effective Immediately - Clarification The following topics have been questioned and will be added to an updated HVCC FAQ document on the Web Site. Q-In whose name should the appraisal be ordered? A-The appraisal should always be ordered in the name of the lender (the lender is the entity providing funds for closing the loan). Note that FHA loans must meet FHA Appraisal Portability rules. Q-Will MSI accept an appraisal transferred from another lender? A-NO. MSI will not accept a conventional appraisal transferred from one lender to another. See the question above regarding in whose name the appraisal should be ordered. As a side note, MSI will transfer appraisals if the new lender permits; contact your MSI underwriter. Q-Can just anyone contact the appraiser or AMC? A-NO. Section III-B of the HVCC, prohibits any person in loan production, or who is compensated on a commission basis upon the successful completion of a loan, or who reports ultimately to any officer of the Lender (Seller) not independent of the loan production staff and process, from having any substantive communication with an appraiser relating to or having an impact on valuation. WPA Page 2 of 6

3 Short Sale Properties Effective Immediately MSI will permit the purchase of properties involved in a short sale situation. However, the following guidelines regarding fees and any abatements paid during the transaction. These guidelines are effective for all Conventional, FHA and VA products and will be provided in the Underwriting Chapter. In an increasing number of purchase transactions, the industry is seeing property sellers engaging the services of short sale negotiators who will then approach the underlying lien holders and negotiate payoff figures less than the outstanding balances owed. The short sale negotiator expects a fee for providing this service and those fees are paid by the seller and/or the buyer as part of the new purchase transaction. Property buyers are agreeing to pay fees in connection with the purchase that have traditionally been considered the responsibility of the seller. Some examples include but are not limited to: Short sale processing fees (also negotiation fees, buyer discount fees, buyer short sale fees); Payment(s) to subordinate lien holder(s); and Payment of delinquent taxes or HOA dues These expenses do not represent a common and customary charge and therefore must be treated as a sales concession if any portion is reimbursed (to the buyer) by an interested party to the transaction. If a buyer agrees to pay any fees or sums due of this nature and is further reimbursed by the seller or any other interested party to the transaction, MSI will consider the amount being reimbursed as a sales concession. The amount reimbursed will not be considered an allowable financing concession and will not be included in acceptable seller-paid closing costs. The amount of determined sales concession must reduce the sales price or value of the property from an underwriting standpoint and a reduction in the requested loan amount may be necessary. Further, the buyer s payment of short sale fees and amounts traditionally associated with the seller may not be included as part of the buyer s acquisition cost. Note: See Property Flopping for additional guidance and restrictions. WPA Page 3 of 6

4 Third Party Contributions Sales Abatement Effective Immediately For Conventional, FHA and VA loans this will be added to the Underwriting Chapter. Loans with any abatement (that is, funds provided to a lender or third party by an interested party to pay or reimburse in whole or in part a certain number of monthly mortgage payments of principal, interest, taxes, insurance and assessments on the Borrower s behalf in excess of Prepaids/Escrows associated with the Mortgage closing) are not acceptable. This means that they simply are not permitted; there is no calculation of sales concession and reduction to the sales price or value of the property; MSI will not permit an interested third party to provide funds to make a borrower s payment. Property Flopping Guidance and Clarification for Property Flopping Effective Immediately: Background: MSI s decision to permit (accept/purchase) the temporary waiver for property flips allowed by FHA was with the intention of supporting private investor money into the marketplace for the acquisition and possible rehabilitation of distressed and/or vacant properties and bringing them back to the market as viable housing. The intent never was to allow for what has basically become short sale negotiations with currently distressed borrowers and huge increases with a resale to an FHA borrower with absolutely nothing to support the increase except stepping in the middle of the transaction. In this type of transaction, we run the risk of there being a value issue at either the short sale negotiation price or a potentially inflated price on the resale to our applicant. WPA Page 4 of 6

5 Property Flopping, Continued MSI Guidance/Guidelines: FHA Loans For FHA loans involved in any short sale negotiation and resale with an interim purchaser/seller to our applicant, MSI requires: A copy of the HUD-1 from the purchase showing it was a legitimate nonarms length transaction and The loan must include the contact information to the short sale lender, and Evidence/verification from the title company that all terms and requirements of the short sale/lender seller have been met, and The increase in property value is limited to a maximum of 20% without exception. For all other FHA properties that meet the temporary property flipping waiver: Defined as any legitimate sale of a property (without a foreclosure or BK filing on title), any lender REO sale, HUD or VA foreclosure, GSE property sale or any property where the foreclosure has been completed and all redemption rights are exhausted are exempt including from any MSI maximum percentage increase that the seller may gain from the re-sale. Conventional Loans For Conventional loans involved in any short sale negotiation and resale with an interim purchaser/seller to our applicant, MSI requires: A copy of the HUD-1 from the purchase showing it was a legitimate nonarms length transaction and The loan must include the contact information to the short sale lender, and Evidence/verification from the title company that all terms and requirements of the short sale/lender seller have been met, and MSI requires that the interim short-sale purchase occur a minimum of 120-days prior to the final sale to our borrower. o If the short sale is purchased directly from a Bank or Agency (Fannie or Freddie), with no interim buyer, MSI will waive the 120-day requirement. Important Reminder for all loan types: MSI would like to remind Sellers that under no condition are double escrows allowed. If someone wishes to purchase a property and re-sell it, they must consummate that transaction with their own funds and cannot utilize our borrower s loan proceeds to accomplish their purchase. WPA Page 5 of 6

6 HELOC Payments Effective Immediately for Conventional Loans MSI is revising the HELOC payment used to qualify borrowers for conventional loans: If the HELOC payment is not shown on the credit report MSI requires the following for qualification purposes: Calculate the payment as a minimum 1% of the current outstanding balance shown on the credit report. o Note: It is important that the underwriter use a reasonable figure when including a HELOC payment in the qualification. A $20.00 payment on a $20, line of credit is not reasonable (even if shown on the credit report) and the underwriter should use the 1% of the outstanding credit or the high credit rule to ensure realistic calculation of debt for the borrower. If there is no outstanding balance, use 1% of the high credit (full line of credit) as shown on the credit report. o If the borrower cannot qualify with that payment, the credit line must be reduced or closed to permit qualification for the loan. o See the Seller Guide/Underwriting/HELOCs for acceptable documentation to evidence reduction/closing of a home equity line of credit. Effective Date As Noted. Seller guide The Seller Guide and any other applicable posted documents will be updated within 2 business days of the effective date of each topic. Questions If you have questions, contact your Account Executive. WPA Page 6 of 6