April 28, 2020
The FHA and HUD have issued guidelines for mortgage loan closing procedures that may be affected by coronavirus lockdown measures, quarantine, and other issues related to the COVID-19 pandemic.
Many home buyers were caught by surprise by coronavirus issues and there are many home loans that are affected.
The Department of Housing and Urban Development issued initial policies in March, 2020, but updated them in mid-April to include provisions in several areas designed to help facilitate FHA home loans during the outbreak.
FHA Loan Rules On Title insurance
The FHA and HUD issued guidance on loan servicing issues designed to address situations in counties where recording offices are not operational during the national emergency. The FHA/HUD official site answers the following question related to such scenarios:
“Will FHA accept title policies with gap insurance?”
The HUD official site reminds readers that FHA loan rules do not require title insurance.
“However, the mortgagee must ensure that all objections to title have been cleared and any discrepancies have been resolved, to ensure that the FHA-insured mortgage is in first lien position” according to the updated COVID-19 instructions to FHA lenders.
“FHA does not object to mortgagees obtaining gap insurance to protect against the potential of not obtaining first lien position.”
FHA Loan Rules For Home Loans Closed Remotely
HUD’s updated policies for closing loans during COVID-19 includes mention of the fact that the FHA and HUD do not regulate formatting or usage of notarized documents.
State law will dictate those procedures, but in any case, your participating FHA lender “must ensure that the mortgage and Note comply with all applicable state and local requirements for creating a recordable and enforceable mortgage, and an enforceable Note, including the requirements for notarization of these documents.”
As you can see, HUD guidelines aren’t the only ones at work here, so it’s a very good idea to ask your lender if you aren’t sure what the proper steps are in your state for notarized documents.
Using A Power Of Attorney To Close The FHA Home Loan
Updated HUD guidance for closing loans with a power-of-attorney include the following:
“FHA permits a borrower to designate an attorney-in-fact to use a POA to sign documents on their behalf at closing, including page 4 of the final Form HUD-92900-A, HUD/VA Addendum to Uniform Residential Loan Application (URLA), and the final Fannie Mae Form 1003/Freddie Mac Form 65, URLA.”
Ask your loan officer if you are not sure how these coronavirus guidelines affect your mortgage transaction.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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