August 4, 2015
There is a group of rules in HUD 4155.2 that describes payments and loans that are not permitted under the FHA single-family home loan program. Chapter Six, Section A has a description of the rules preventing the payment of “unearned fees”, below market-rate loans and other practices.
For example, Chapter Six instructs the lender:
“A lender is not permitted to pay any fee, compensation, or thing of value other than for services actually performed, including
–kick back fees
–fees above that actually paid for the service
–finders fees or payments to any party referring the loan
–payment to a party that has received, or will receive other payment for the service, unless it is a commission for selling a hazard insurance policy at the borrowers request, and
–fees prohibited by the Real Estate Settlement Procedures Act (RESPA).”
There is also a rule against certain types of advance commission fee payments. “Advancing funds in anticipation of commissions on sales being financed with FHA-insured mortgages is prohibited.”
But there also a set of protections built-in to prevent “gaming the system” with regard to those who may do business with the financial institution:
“A lender may not provide below-market rate or non-interest loans to any parties from whom the lender accepts proposals for FHA-insured mortgages, including but not limited to
–real estate brokers or agents
–mortgage brokers
–packagers, or
–builders”
As you can see, Chapter Six has these provisions in order to protect the integrity of the FHA loan program. Later on in Chapter Six we find some discussion of sales agreements and how they must conform or be modified to conform to FHA loan rules:
“Except for houses sold by FHA under the REO program, FHA is not a party to the sales agreement. When a sales contract contains conditions that, if performed, would violate FHAs requirements, the lender must obtain an addendum or modification to the purchase agreement that allows conformance to those requirements.”
“Nevertheless, failure to perform a condition of the sales contract is not grounds for denying loan endorsement, provided the loan closes in compliance with all regulations and policies. Example: The sales contract may require the seller to pay an amount in excess of present seller contribution limitations.”
Borrowers with questions or concerns about these requirements and how they are met with respect to their specific loan transactions should contact the FHA directly for assistance.
Do you have questions about FHA loans or refinance loans? Ask us in the comments section. All comments are reviewed before being posted to the site.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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