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On Behalf of HUD & FHA DE Lender & DE Underwriter Roles and Responsibilities

On Behalf of HUD & FHA DE Lender & DE Underwriter Roles and Responsibilities . Housekeeping Phone lines ~ Q&A ~ Polling Activities. Phone lines – muted Questions – Q&A panel Interactivity – voting tools and polling questions. 2. About Your Instructor…. Theresa Ballard. 3.

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On Behalf of HUD & FHA DE Lender & DE Underwriter Roles and Responsibilities

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  1. On Behalf of HUD & FHA DE Lender & DE Underwriter Roles and Responsibilities

  2. Housekeeping Phone lines ~ Q&A ~ Polling Activities • Phone lines – muted • Questions – Q&A panel • Interactivity – voting tools and polling questions 2

  3. About Your Instructor… Theresa Ballard 3

  4. FHA Subject Matter Expert Welcome to our guest from the FHA – Lisa Ellis who will be responding to participant questions and offering additional guidance during today’s webinar. 4

  5. DE Lender & DE Underwriter Roles and Responsibilities 5

  6. State the role and responsibilities of the DE Lender. • Eligibility requirements and types of qualifications. • Explain the DE Lender Approval Process. • Key Factors to Quality Control and Neighborhood Watch. • Explain monitoring, measuring and corrective action. • Why monitoring, measuring and corrective action is important. • State the role of the DE Underwriter and responsibilities. • Discuss the importance of the DE Underwriting, including the National Underwriter File in CHUMS. Course Objectives 6

  7. DE Lender Approval Process: • Pre-closing review phase • Unconditional approval • Post-endorsement technical reviews • Adding an underwriter and/or Principal/Agent. • Third-Party Originators (TPOs). • DE Lender Responsibilities: • Quality Control and Neighborhood Watch • Monitoring, Measurement, Corrective action. • DE Underwriter Role. • Review the DE Lender Certifications, Requirements, Responsibilities. Course Overview 7

  8. Polling Questions How long have you worked with FHA loans? Have you worked with the DE program before? 8

  9. DE Lender Application and Approval Process 9

  10. Participation as a DE lender is a privilege. Conduct and business operations must: • Follow accepted sound mortgage lending practices; • Demonstrate a code of ethics, standards, and quality control; • Comply with all federal and state laws; • Understand FHA guidelines and systems; • Have a DE Underwriter on staff at all times; and • File a DE lender application and submit test cases for review. DE Considerations 10

  11. A lender must be an FHA approved mortgagee to apply for Direct Endorsed approval. To start: • Have employed on staff a DE Underwriter; • Letter of Request; • Provide DE Underwriter’s name and CHUMS number; • Copy of the HUD approval letter from HUD Headquarters Office of Lender Approval granting basic approval; and • Submit to area HOC office. DE Overview http://portal.hud.gov/hudportal/documents/huddoc?id=4155-2_2_secB.pdf 11

  12. An eligible lender must be either a: • Supervised or non-supervised mortgage lender. • Governmental institution. • A third-party originator may participate in FHA programs only by establishing a sponsorship relationship with an FHA-approved Lender. Basic Lender Eligibility Requirements NOTE: Principal/Authorized agents roles and authorization are allowed under FHA guidelines. 4155.2 2.A.2.a; 2.B.6 12

  13. Principal/Authorized Agent Roles and Relationship • Principal must originate the loan; • Authorized Agent must underwrite the loan; • Loan may close in either party’s name; • Either may submit the loan for insurance endorsement; and • TPOs may not act as Principal or Authorized Agent. 4155.2 2.B.5.d; ML 2010-20 13

  14. Five years’ experience in originating single family mortgages; • A principal officer with minimum of five years’ managerial experience in originating single family mortgages; • A full-time DE qualified Underwriter with CHUMS number; • Develop/implement a Quality Control Plan; • Meet net worth requirements listed by HUD Eligible DE Lender Requirements HUD Handbook 4060.1, REV-2; ML 2010-20 14

  15. PHASE 1: • Pre-closing “test case” review. • PHASE 2: • Unconditional approval. Two Phases of DE Lender Approval 4155.2 2.B.1.a 15

  16. HOC Test Case Review Requirements HOC will review how the DE Underwriter approached: • Property appraisal & value determination; • Mortgage credit analysis; • Specific compliance requirements for the mortgage insurance program; and • Selection of test cases (self-employed, manual, condo’s, prior credit issues, AUS files, etc.) 4155.2 2.B.3.c 16

  17. ACCEPTABLE Underwriting: • FHA issues a firm commitment to the Lender to insure any of the eligible test cases. • The approval process continues • OR • UNACCEPTABLE Underwriting: • Additional test cases will be required. • HOC will establish the total number of test cases required or allowed. DE Underwriting NOTE: Information on loan status is posted in FHA connection for lenders to review. 4155.2 2.B.3.d 17

  18. After 30 test cases, HOC may: • Require additional Lender and Underwriter training; • Allow no additional test cases to be submitted for 180 days; or • Discontinue accepting cases from the Lender. Unacceptable Underwriting on Test Cases 4155.2 2.B.3.e 18

  19. HOC will perform a Post-Endorsement Technical Review (PETR): • First 30 cases submitted by the Lender. • Percentage of subsequent cases. After DE Approval 4155.2 9.B.1 19

  20. Unconditional Approval Acceptance by other HOCs: • Once unconditional DE approval received. • All other HOCs will recognize that approval. 4155.2 2.B.4.d 20

  21. Polling Questions Can a lender close a FHA loan without receiving a FIRM commitment while they are in test case phase? 21

  22. Questions 22

  23. Direct Endorsement Lender Responsibilities 23

  24. DE Lenders and their sponsored Third-Party Originators (TPOs) must comply with: • Fair Housing Act; • Equal Credit Opportunity Act (ECOA); • Real Estate Settlement Procedures Act; • Home Mortgage Disclosure Act; • Helping Families Save Their Home Act; and • Program statutory, regulatory and handbook requirements. Compliance Performance Requirements 4155.2 1.B.3-7 24

  25. Compliance Reports and Examinations • Lender must maintain and have available all: • Mortgage loan files reports; • Records; • Books; and • Accounts related to FHA operations. http://portal.hud.gov/hudportal/documents/huddoc?id=41552HSGH.pdf 25

  26. Mortgagee must ensure that no one employed by the DE Lender or TPO has been: Quality Control Restricted Participation • Debarred or Suspended; • Subject to a LDP/EPLS; • Not listed on CAIVRS; • No delinquent federal debt or sanctions; and • Otherwise restricted from participation in HUD/FHA programs. NOTE: DE Lender must periodically check employee lists, but at minimum semi-annually. • HUD 4155.2 1.B.7.d and HUD 4155.14.A.2.c. 26

  27. Quality control should specifically address sound underwriting practices and review: • Knowledge and compliance with HUD underwriting requirements; • Sufficient loan file documentation; • Reasonable underwriting judgment when making decisions. Underwriting Decisions – Quality Control 4060.1 Rev 2 7-6 F 27

  28. TPO - Sponsoring Lender’s Responsibility for FHA Compliance • DE Lender is responsible for: • Registering a sponsored TPO; • Compliance with ALL aspects of FHA requirements for a loan transaction; and • Quality control review over TPOs activities Note: Unless applicable law or regulation governing the violation(s) in question requires specific knowledge on the part of the party to be held responsible. 4155.2 2.B.6.d; 1.D.6; ML 10-20; ML 11-02 28

  29. TPO - Sponsoring Lender’s Responsibility for Legal Compliance • TPOs must follow all applicable federal, state and local requirements: • FHA loan origination; • Processing activities; and • Obtain and maintain a unique identifier from the Nationwide Mortgage Licensing System and Registry (NMLS ID). 4155.2 2.B.6.e 29

  30. DE Lender is responsible for performing quality control reviews of their sponsored TPO. • Procedures used to review and monitor sponsored TPO must be included in a Lenders FHA-approved Quality Control Plan. Quality Control for TPOs 4155.2 2.B.6.g; ML 2011-02 30

  31. Quality Control Early Payment Defaults • DE Lenders must review all loans originated or underwritten that go into default within the first six payments. • Early payment defaults (EPDs) are defined as: • Loans that become 60 days’ past due within the first six payments. 4060.1 Rev.-2, Paragraph 7-6 (E) ; ML 2011-02 31

  32. DE Lender is responsible for completing Mortgage Record Change in FHA Connection: • Servicing transfers. • Sale of loans. Quality Control Sale and Transfer of Loans ML 2011-02 32

  33. Quality Control FHA Loan Rejections • DE Lender must review: • Rejected applications within 90 days from the end of the month in which the decision was made. 4060.1, REV-2, Paragraph 7-8 (A); ML 2011-02 33

  34. Quality Control Reporting and Corrective Action • Review findings must be reported to DE Lenders senior management within: • • One month of initial report completion. • • Prompt action on any material findings. • Final report or an addendum must identify: • Actions being taken. • Timetable for completion. • Any planned follow-up activities. 4060.1 REV-2; ML 11-02 34

  35. Quality Control Notification to HUD • QC Program must ensure HUD is notified within 60 days of initial discovery of any fraud or other serious findings. • Notification is made to: • Director of the Quality Assurance. • Division in the HOC having jurisdiction. 4060.1 REV-2; ML 11-02 35

  36. DE Lender must maintain the following records for a period of two years: • QC review report; • Follow-up documentation; • Review findings; • Actions taken; and • Procedural information. Quality Control – File Retention 4060.1 REV-2; ML 11-02 36

  37. Pre-endorsement reviews performed by: • FHA staff or contractors. • Lender staff (if in the Lender Insurance (LI) program). • Post-endorsement technical reviews (called PETRs): • After loan closing and endorsement. • By FHA staff or contractors. DE Lender Compliance Monitoring 4155.2 8.C.1.c 37

  38. HUD HOC monitors performance of Lender by: • Conducting on-site and remote Lender reviews; • Conducting PETRs of insured loans; • Analyzing Mortgagee Performance Reports; • Underwriting Report System Reports in FHAC; • Analyzing default and claims data from Neighborhood Watch Early Warning System; • Following up on construction or consumer complaints; and • Sharing information among themselves, FHA Headquarters, and the Mortgagee Review Board. Types of Lender Monitoring Tools 4155.2 9.A.1.b 38

  39. Post-EndorsementTechnical Review (PETR) • Purpose of the PETR. • PETR on selected cases to evaluate: • Risk to FHA’s insurance funds. • Lender’s compliance in underwriting and documentation. http://www.hud.gov/offices/adm/hudclips/forms/files/54118mcr.pdf 4155.2 8.C.1.e 39

  40. Property underwriting: • A field review of the appraiser/appraisal may be generated as a result of the property underwriting/desk review). • Credit underwriting and loan approval criteria; • Risk analysis; • Closing in accordance with loan approval; • Documentation; and • Data integrity (FHAC and AUS, if applicable). What is Reviewed in a PETR? 4155.2 9.B.1.b 40

  41. Questions 41

  42. Direct Endorsement Mortgagee Performance Report 42

  43. Monitoring Tool – Mortgagee Performance Report • Summary information based on PETRs. • Performance of each branch office within the local jurisdiction. • Lender’s overall performance, both locally and nationally. NOTE: Monthly statistical reports available by FHA detailing performance of DE Lender’s Underwriters and Appraisers. 4155.2 9.B.2.a 43

  44. Mortgage Performance Report

  45. Section 2Mortgagee Performance Report Underwriting ratings for active DE Underwriters employed by the DE Lender based on: Underwriting Performance; Appraisal Underwriting; and Mortgage Credit Technical Reviews. 4155.2 9.B.2.b 45

  46. Section 2 – Underwriting Data

  47. Section 3 Mortgagee Performance Report Cases Rated “Unacceptable” for either: Appraisal Underwriting. Mortgage Credit (MC) technical review. Also lists the following information: Names of the Underwriters; Reason codes for the “Unacceptable” ratings; and Names of the borrowers. 4155.2 9.B.2.b 47

  48. Section 3 – Unacceptable Ratings

  49. Section 4Mortgagee Performance Report Cases Rated “Mitigated” – Underwriting for either: Appraisal Underwriting. Mortgage Credit (MC) technical review. Also lists the following information: Names of the Underwriters. Reason codes for the “Mitigated” ratings. Names of the borrowers. 4155.2 9.B.2.b 49

  50. Section 4 - Mitigated

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