HUD's New Proposals For Mortgagees

HUD.Gov and Their Proposals

It has been posted in hud.gov that FHA plans to strengthen their ability to keep making loans by forcing lenders to take more responsibility for their actions. That this actually means is that HUD is setting stricter rules and regulations to help lenders stay within accountability to make loans which perform better and stay focus on quality rather than quantity.

Will this eliminate some lenders being excluded from HUD/FHA's approved mortgage lenders; probably not. But, it is being geared to help lenders realize that to keep making FHA mortgages insured by them; they must comply with all rules and regulations in all aspects.

This is good news for the consumer; not derogatory and it will eliminate as many people losing their home at a later date.

Please note, that while you may not agree with this post and think it negative; it is still the honest truth at what is going on in mortgage lending. I do not print articles that are not based upon facts. While some things may be my opinion; mortgage news is always based upon facts from the rules and regulations; be it negative or positive.

AND you thought No One Noticed What Lenders Do

With the above news from HUD, you are not just now seeing new rules; as there has been rules and regulations from day one, when any lender became approved to partnership with HUD. It isn't something new? Nope, it has been there all the time but now HUD is going to tighten up and has already discharged some lenders who have fallen short of the basic restrictions and guidelines that needed to followed and were not.

With that said; What this means is that HUD plains on making the lenders responsible for their actions and they will set out explicit guidelines for lender to go by and the level of loan performance that lenders must maintain to continue making FHA Loans. What this means to prospective mortgage applicants:

This means that a lender must gather all documentation to include but not limited to:

  • Verifying and analyzing credit worthiness, income and employment of the applicants.
  • They must verify the source of assets that the borrower is using for downpayment and fund for closing.
  • Ensure that all property guidelines are met to include; safety of the property being purchased
  • Ensure that there is no structual problem with the property (sometimes a structural engineer must inspect the property) and,
  • Ensure that the property appraisal satisfies FHA's appraisal requirements.

They have said that if these things are lacking; the lender may be held responsible when and if the loan goes into default; regardless of what the reason.

Fraud and Misrepresentation

HUD will also make it tough on the lender who allows someone to commit fraud or a misrepresentation of something in the loan file. Meaning, if they don't have a job; you don't make one up. If they have no money for closing, you don't get them to make a loan that is not disclosed. Meaning that you do not send the VOE (verification of employment) to someone other than the employer of the applicant and the person who completes this VOE should actually be someone in human resources; or a manager who tells the truth.

Fraud has never been allowed nor misrepresentation; although it did occur but now someone is going to be responsible when HUD does their quality control. Each mortgage company should have QC before the loan leaves the office.

Is this new? Nope, it has always been in force but will be implemented in a stronger and more prudent way.

 

Summary

 HUD has never been slack with rules and regulations; it just seems that auditors possibly overlooked or were given the "good files."  There has always been some of the same standards but to a little different degree and somehow lenders were able to walk away without paying the price of whoever decided to make a loan that would not perform.

That is what lending is all about anyway; performance, and HUD has always been concerned with performance.  If an applicant has a history of delinquency; there is not reason to believe they will improve.  That is how you have to look at it.  If there are a few minor delinquencies, which can be explained; the borrower has a history of employment and income, and the property which is collateral for the loan is sufficient; the performance of the loan is more than likely to be satisfactory also.

Having underwritten thousands of FHA loans, these new implementations which will be enforced to a greater level than before; is a good thing. This is eliminate the lender's loan officers, managers or whomever from trying to force an underwriter to approve a loan that will not perform AND usually the underwriter can tell immediately after reviewing the file; whether or not it is a go.

So, this is why getting a mortgage loan is becoming harder and harder by the day.  More and more guidelines and rules to be followed.  One thing for sure, it will eliminate excessive foreclosures.

Resources

HUD.Gov

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