We had some very sad news recently. The founder of Taco Bell passed away at the age of 86. There is still no word on whether he’s going to have a funeral or a funeral supreme.
Some FHA lenders out there had feared that the potential changes that HUD and FHA could make to their program would be their funeral. That turned out not to be the case, and there has been a good amount of analysis of the changes. The underwriting changes by the FHA include increases in the MI premium, an increased down-payment requirement for low FICO borrowers, a reduction in the ability to roll closing costs into the loan, and increased lender recourse to FHA lenders. What they don’t include, of course, is a program-wide minimum FICO, or program-wide increase in the down payment. Generally speaking, most agree that the changes announced to FHA underwriting seem to be less restrictive than anticipated and more supportive of mortgage credit availability and the housing market at the expense of minimizing losses to the MI fund.
There continues to be confusion on broker compensation. One lender in California, Reunion Mortgage, sent out their policies, set to match regulatory changes, which will hopefully clear things up for their clients. “The maximum broker compensation allowed is: The broker’s origination Fee (including all broker fees): < 3.5% for Conventional, 4.5% for FHA; the broker’s Origination Fee (including all broker and lender fees): < 4% for VA; the total of all fees paid to broker if the loan amount is greater than $500,000, the greater of < 2% or $22,500; YSP is capped at 3%, unless otherwise indicated on rate sheet.” Reunion goes on to say that “all fees must be reasonable and customary, all fees must comply with State, Federal and agency requirements, individual loan programs may have additional restrictions, and broker funds are sent to title for disbursement at funding.” There you have it!
Originators are still grappling with the GFE and RESPA changes. One wrote and said, “This week we sat down with a borrower that is doing an FHA loan. The seller is paying all of the closing costs and as usual the borrower is financing the upfront MIP. Essentially the borrower is coming in with their 3.5% down payment. Our GFE was filled out correctly and yet it showed that the borrower needed $13,850 for closing. Unfortunately the new form does not take into account the fact that the borrower is financing the MIP or the seller credit of $10,000. When we arrived at the bottom line on the GFE form, the client saw they needed $13,850 to close; they were shocked to say the least. They looked us right in the eye and said, ‘You want us to sign this official looking form, and you’re telling us to trust you that what is written here is not correct?’ We were speechless and must have looked equally as shocked as the borrower seeing a number that was not part of the discussion. All we could think about was HUD put us in this very uncomfortable position. Ultimately we had to show the borrower a version of the old GFE that shows the seller credit and the upfront MIP being offset by the loan amount. The only benefit for the consumer on this new form is the information on the lock expiration; otherwise we have taken about two steps backward with respect to making the closing process more understandable.” Well said.