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toolonginmtgbiz
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Joined: 01 Oct 2009
Posts: 14

FHA Streamline - quit the whining
PostPosted: Mon Nov 15, 2010 7:04 pm Reply with quoteBack to top

you CAN 'roll in costs' on a streamline refi without an appraisal. simply have the servicer to subtract out the current escrow balance, but you still do the max mortgage calculation based on the (higher) principal balance, one month's interest and one month's MIP premium - VOILA, borrower only needs a few hundred dollars at closing. we've been closing, selling and getting them insured this way for MONTHS.

now go market this and close some loans.
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Do_the_math
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Joined: 14 Mar 2007
Posts: 2564
Location: Groovy Town

Re: FHA Streamline - quit the whining
PostPosted: Tue Nov 16, 2010 5:19 pm Reply with quoteBack to top

Please forward the mortgagee letter or HOC circular that approves using the initial payoff demand vs. the actual payoff to calculate the new streamline loan amount (on FHA streamlines without an appraisal).

ML 2009-32 is clear that the new base loan amount is calculated using the existing principal balance plus allowable interest less MIP refund. There is no provision for allowing the servicer net out the existing impound balance in order to finance the new impound account. However, ML 2009-32 specifically addresses the ability to continue to add the new impound account to a FHA streamlines with an appraisal.

I understand that some companies are netting out the impound balance on the payoff if the demand shows the account balance. I would advise against this practice without first receiving clarification from HUD or without the express permission of the DE underwriter.

I, personally, would never do that to a company or underwriter myself because I would hate to intentionally create an underwriting deficiency. HUD auditors don't just look at the payoff statement. They look at the payoff statement, mortgage rating, and HUD-1. Ultimately, the loan balance reported in the HUD-1 is what will be used to verify the accuracy of the new loan loan amount. I know if I was the DE underwriter and I received a final HUD-1 where the closing agent/title company/mortgage broker unilaterally decided that they could net out the impound balance, I would demand that the loan balance be paid down to the correct amount even if it required the broker to do so out of their broker check (provided it was allowed in the broker agreement).

Don't mess with an underwriters livelihood or company's FHA approval agreement by circumventing guidelines. Now, if the company is dumb enough to do this (or has HOC office blessing), then have it at.

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toolonginmtgbiz
Dud?


Joined: 01 Oct 2009
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Re: FHA Streamline - quit the whining
PostPosted: Tue Nov 16, 2010 6:18 pm Reply with quoteBack to top

I know what the mortgagee letter says . . . . and we ARE using the formula you lay out to calculate the max. mtge. . . . . . I'm not saying that HUD has approved this methodology . . . . only that we have been doing it this way and NO ONE (not our investors and not HUD) has had one problem or comment - we have gotten every one of these insured and purchased. we have indeed asked HUD (Philly HOC) for clarification and have gotten differing answers, impossible to get anything in writing. again, I'm not saying this is what HUD had in mind, but we're doing them this way and have been for MONTHS with not a problem. and we're not the only ones (in this market anyhow). totally your risk to take - we chose to take it.
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Do_the_math
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Re: FHA Streamline - quit the whining
PostPosted: Tue Nov 16, 2010 7:38 pm Reply with quoteBack to top

I am not surprised that the loans are getting insured and bought. I would expect this work out just fine initially. The problems come later. I am curious whether the closing department is allowing the loans to close differently than they were underwritten or whether the underwriters are using the impound refund in the loan amount and cash to close calculation. Based on the fact that there has been communication with the Philadelphia HOC, I'm guessing that this has/is being addressed in underwriting. My primary concern was that the loan wasn't restructured after underwriting during closing.

If the loans are being underwritten this way, it would be wise to include the impound balance in the borrower's assets to close, and verify that there are no transactions that could impact the balance impound account- such as tax or insurance payment. I would also recommend that the underwriter make note the file to indication that the subtraction of the impound account from the payoff is merely an accounting function to accommodate the borrower in applying their own funds to the closing instead of having to bring in their own funds and wait for reimbursement. An important document to obtain in this instance would be the borrowers request for assignment of funds from their impound account to the new transaction via subtraction of the fund balance from the payoff. This would include an acknowledge by the borrower that they are aware that they would not be receiving a refund from their existing lender after closing of the amount credited.

Understand that I want to be able to net out impound accounts as it is appropriate. I just want to make sure (now that I am jumping back into origination) that I have my underwriters and lenders backs. Also, since I will be laying out money for advertising, I don't want to sell loans one way and then have the rug jerked out from under me. If there are any West Coast wholesale lenders that will allow borrowers to net out the impound account, I'd really, really appreciate the info. Feel free to PM me.

While we are on the subject of FHA streamlines, I understand that some lenders are excluding tax and insurance impounds from the 5% payment reduction calculation. I've also heard that some lenders are using P & I only. On BO one poster claims to have received an email from the Philadelphia HOC. I would appreciate information on whether anyone has received clarification on this issue.

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toolonginmtgbiz
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Re: FHA Streamline - quit the whining
PostPosted: Tue Nov 16, 2010 8:25 pm Reply with quoteBack to top

per Philly HOC - the 5% reduction is based on TOTAL payment (just like the guideline states). had one this week that was $1.50 short of 5% (thus the call to HUD) . . . we reduced the loan amount. as for the other . . . . the underwriter is aware. HUD must view the escrow as you postulate - as the borrowers' own funds.
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Do_the_math
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Joined: 14 Mar 2007
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Re: FHA Streamline - quit the whining
PostPosted: Tue Nov 16, 2010 10:17 pm Reply with quoteBack to top

I thought it was odd that they would exclude the impounds as I did not see where the HOC would have the authority to override the Asst. Secretary/Commissioner.

Can you clarify policy on impound account revisions- such as when the existing lender is over or under collecting?

I made a worksheet to calculate the maximum interest rate required to achieve the 5% PITI reduction. I personally think that HUD should have based the reduction based on P & I and MI or at least clarified the issue so that changes in impound accounts don't adversely impact the borrowers ability to refinance or unreasonably complicate the process.

Thank you for your input. I appreciate it.

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