HUD Confirms Appraisal Changes Feb 15, 2010

HUD Confirms Appraisal Changes Feb 15, 2010

FHA announced today that the February 15,2010 Appraisal compliance changes WILL NOT CHANGE
As indicated in the industry email of December 22, 2009, enactment of ML 2009-28 (Appraiser Independence) WILL be implemented February 15, 2010. ML 2009-28 (originally planned for a January 1, 2010 implementation) has two parts:

a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and

b) appraiser selection in FHA Connection. The effective date for both sections of this guidance will take effect for all case numbers assigned on or after February 15, 2010.

This extension has allowed FHA and lenders additional time to adjust systems to accommodate the changes. Detailed instructions on changes to FHA Connection will be issued in a new mortgagee letter, which was delayed due to federal offices being shut down the week of February the 8th and will be released the week of February 15th.

However, lenders will be able to secure a case number assignment in FHA Connection via the Case Number Assignment Screen without inputting the appraiser information. The Case Number Assignment Screen will no longer capture the assignment choice, license ID and assignment date. Instead, lenders will be required to enter all appraisal data, including the appraiser ID, in the Appraisal Logging Screen once the completed appraisal is received by the lender and prior to closing the loan.

FHA has increased Upfront Mortgage Insurance Premiums (“UFMIP”) for most FHA programs to 2.25 percent. Purchase money and full credit qualifying refinance transactions have increased from 1.75 percent to 2.25 percent. Streamline refinances, with or without an appraisal, have increased from 1.50 percent to 2.25 percent.
The UFMIP for the H4H program will remain at 2.00 percent and the UFMIP for HECM (reverse mortgages) will also remain at 2.00 percent. In addition, UFMIP for Title I, Section 247, Section 248, Section 223(e) and Section 238(c) programs have not changed.
At this point in time, there are no changes to the annual mortgage insurance premium (“MIP”). FHA reserves the right to make changes, but it will require legislative action. The annual premiums, which are remitted on a monthly basis, are a factor of the loan term and loan-to-value ratio. For now, these factors continue to be:
Terms > 15 years
LTV > 95% 0.55%
LTV < 95% 0.50%
Terms < 15 years
LTV > 90% 0.25%
LTV < 90% None
How does it change or benefit the industry:
The UFMIP 50 basis points increase for full credit qualifying transactions and the 75basis points increase for streamline refinance transactions will have an immediate impact on improving FHA’s capital reserve funds, which dipped below the two percent threshold at the end of the last fiscal year. FHA says it intends to seek legislative authority to increase the annual MIP. If this authority is granted, FHA may consider shifting some of the UFMIP premium increase to the annual MIP.