Green Mortgage Northwest

Many of you have heard that FHA condo spot approvals are now going away. While this isn’t entirely true, there are some big changes coming and they start February 1st – next Monday!

Here is an attempt to describe the changes and the impact they’re going to have:

Lenders will no longer be doing spot approvals. Instead, there are two options, both based on criteria put forth by the U.S. Department of Housing and Urban Development (HUD):

• DELRAP Approval (Direct Endorsement Lender Review and Approval Process)
• HRAP Approval (HUD Review and Approval Process) and

The big difference is this: for DELRAP, I work with the bank and their builder approval group to get an approval, which takes a couple weeks. For HRAP, it goes to HUD, this can take a month or two…if you’re lucky. And with all the new projects that will now need approval, the HRAP times will most likely increase.

Details:

DELRAP Review Eligibility and Process Requirements Process

• Brokers still have the option of working directly with HUD for an HRAP review for projects requiring a project approval (read: slow approval, harder to get)

OR

• Brokers can work with their bank’s account executive (AE) to get a DELRAP approval through the Builder Project Approval Group (BPAG). Once all required documents are received, BPAG will complete the DELRAP review or, if necessary, forward to HUD for a HRAP review and approval. BPAG will determine DELRAP eligibility based on a few additional bank overlays (underwriting rules) defined below.

Note – If an extension or recertification is requested on a project not originally processed as a DELRAP through BPAG, a full review of the project documents will be required.
BPAG DELRAP project reviews will be completed within about two weeks of a complete submission. Compared to the month-plus timeline for HRAP, which is likely to increase, that is pretty good!

DELRAP Eligibility

The following are ineligible for a DELRAP review and must be sent to HUD for an HRAP review:

1. Anything identified on the builder certification, appraisal, or other documentation obtained pertaining to environmental hazards.
2. Any unobstructed view of an oil refinery, propane distribution center, large gasoline storage tank(s), etc. Note – projects next to a gas station are eligible for DELRAP.
3. Superfunds (dumps or landfills) identified on the EPA Web site that have ongoing maintenance.
4. Project is located on wetland or national wetland and insufficient documentation approving the project’s location.
5. Historic districts and insufficient documentation approving the project’s location.
6. Budget without at least a 10% line item allocation for capital replacement unless a reserve analysis is obtained.
7. Fidelity bond coverage not in the name of the association, i.e. Management Company provided fidelity bond coverage.
8. Manufactured home projects.
9. On a case-by-case basis, any project within a potential noise issue that does not have sufficient mitigating factors.

My take on all of this: FHA condo financing is about to get tougher. If the project is not currently approved by HUD/FHA, it’s going to be difficult to get FHA financing.

Realtors – make sure you know whether a condo is FHA-approved before taking a client using FHA financing out to see it. You don’t want them to form an attachment to a property they can’t buy and set their expectations based on that.

For complete information on this, visit HUD’s press release on the topic.

If you’re a shifty loan modification company (and there are a few), look out. Today the Oregon Department of Justice announced a new enforcement effort to protect Oregon homeowners by targeting loan modification companies that engage in “deceptive and misleading business practices.”

More than half a dozen investigations related to loan modification companies and mortgage fraud have been opened by Attorney General John Kroger’s Financial Fraud and Consumer Protection Unit.

According to the article posted by the Portland Business Journal,

“The settlements are with National Homeowners Assistance Services Inc., based in Lake Forest, Calif., and American Mitigation Group, based in Newport Beach, Calif. The companies offered loan modification assistance and related services to homeowners facing foreclosure. The companies purposefully used tactics that could confuse homeowners, including implying they were affiliated with government agencies or programs, Kroger said.

American Mitigation Group has paid $1,000 in restitution to an Oregon consumer and must pay an additional $3,000 to the Oregon Department of Justice for further restitution and to cover its costs. The company is no longer doing business in the state. National Homeowners Assistance Services must pay $4,000 to cover legal costs and must change its practices in order to continue to do business in Oregon.”

This is good news. Stressed homeowners will often look to fraudulent loan modification companies as a quick fix to their situation, when that is rarely the case. If you are looking for a way out, contact your current loan servicer or visit the government’s website on the topic.

Of course, feel free to contact me with any questions you might have.

Everyone is STILL talking about HVCC, the new Home Valuation Code of Conduct, and how it affects appraisals. Fannie and Freddie put this into effect earlier this year and the negative repercussions have been striking, especially in extremely depressed markets with lots of foreclosures and short sales.

The issue is low valuations and the new rules guiding appraisers in both price-depressed and rebounding markets.  Out-of-town appraisers appointed by an Appraisal Management Company come in for a quick assessment (or don’t even go to the property and handle it online) and then dish out low valuations. Their comparables are often poor-condition short sales, distressed properties or just plain unrelated area or style-wise. A ranch home should not be compared to a vintage Victorian!

Banks are still dealing with fallout from the subprime mortgage crisis, and this post covers a few of the most recent changes stemming from that. Many of them dictate a transaction’s closing date, so make sure you know how the new laws work. Below is a synopsis of the recent changes.

First up is the Home Valuation Code of Conduct (HVCC), which was recently adopted by Fannie Mae and Freddie Mac. When you hear HVCC, think “appraisals.” Effective May 1, 2009, appraisers are “shielded” from the influence of 3rd parties who have an interest in the transaction.

The new process for ordering appraisals involves an independent third party who acts as a broker between the lender and the appraiser. Also, the borrower must receive the appraisal at least 3 days prior to the loan closing (unless they sign a waiver, which I see happening frequently if time is crunched).

Another recent act is the Housing and Economic Recovery Act (HERA), which, effective July 30th, 2009, changes requirements about when disclosures and initial fees can be charged to the buyer.

A summary of these two acts:

1. The earliest any transaction can close is 7 business days after initial disclosures are sent to the buyer.
2. Upfront fees cannot be collected until 3 days after initial disclosures are issued. This means appraisals will have to wait at least 3 days after the initial loan application.
3. The borrower must get a copy of their appraisal at least 3 days prior to close.
4. If the Annual Percentage Rate (APR) increases more than .125% compared to the initial Truth in Lending (TIL) disclosure, the borrower will need to sign a revised form at least 3 days before closing…and a TIL disclosure isn’t considered “received” until 3 days after mailing, so it’s really a week!

Any of the following can impact the APR, so watch out for them:

• Unlocked rate
• Change in loan amount
• Closing date change
• Change in the loan product
• Changes to fees

The biggest thing to take away? 10 day closes are NOT going to happen any more – negotiate for at least a 30 day close, and probably closer to 45 days. The positive side to all this is that it is getting rid of the lending practices and shenanigans that got us here in the first place, which I definitely see as a good thing.