September 3, 2015
The FHA will launch the new FHA Single Family Home Loan Handbook, HUD 4000.1, on September 14th. There will be certain updates, changes, alterations and revisions of some FHA loan policy in the handbook, and the FHA/HUD have anticipated some frequently asked questions about existing or new policies contained in that handbook.
In the days leading up to the launch, we’re covering some of those FAQ topics here. Some may apply to borrowers, some apply to lenders, and there are a variety of topics that may be relevant to both.
One frequently asked question topic of concern to lenders is the question of how much, if any, work associated with an FHA loan can be contracted out to third parties. FHA loan rules that take effect on September 14, 2015 will include the following guidance:
“Provided the lender ensures that the contracting out of certain functions does not and will not materially affect underwriting or servicing decisions or otherwise increase financial risk to FHA, the lender may use contract support for administrative and clerical functions that include:
–clerical assistance;
–mortgage processing (typing of mortgage documents, mailing and collecting verification forms, ordering credit reports, and/or preparing for endorsement and shipping mortgages to the purchasing mortgagee);
–ministerial tasks in mortgage servicing (processing of a foreclosure action, preservation and protection, and/or tax services);
–legal functions; and
–quality control (must have a valid contractual agreement in place that specifies the roles and responsibilities of each party).”
FHA loan rules add some prohibitions to the above, stating that the lender must not:
–contract out any of the above functions to sponsored third party originators (TPO), real estate brokers, or other similar entities.
–contract with any Entity or person that is suspended, debarred, under a Limited Denial of Participation (LDP), or who is otherwise excluded from participation in FHA transactions.
–contract out management or underwriter functions.”
The FAQ section on this topic also mentions that the lender, “may own or have an ownership interest in a separate business entity that offers such contract services.”
Another area that directly affects the lender is the FHA requirement to have a “home office”. The rules that take effect when HUD 4000.1 launches on September 14th, 2015, include the following:
“A lender must designate a headquarters or home office for its FHA business. The home office does not have to be the lender’s corporate office. The home office must have a staff of at least two full-time employees. The lender may not rely on a shared receptionist to satisfy the full-time employee requirement. A lenders home office facility must:
–be located in a commercial space that is separate from any other entity (except for reception-type entrances or lobbies);
–be clearly identified, including having a permanently affixed business sign and other means of identification commonly used by businesses, so that the general public and other businesses will know, at all times, exactly which entity is being represented and is conducting business; and
–display a fair housing poster if the lender deals with borrowers and the general public”.
As you can see, a lot of attention to detail went into many of these revisions. We’ll write more about them and how some of these directly affect the borrower in future blog posts.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It’s designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It is easy to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
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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