FHA Condo Changes Delayed
Another extension had been issued in regards to the implementation of the new condominium project approval procedures outlined in HUD's Mortgagee Letter 2009-19.
HRAP- Hud Review and Approval Process
DELRAP - Direct Endorsement Lender Review and Approval Process
The new guidelines will partially take the burden off of HUD to approve projects and place that burden on the lenders themselves if they so wish. This is a lot of risk that lenders may or may not want to take on. The new "lender approval" process is called DELRAP/HRAP and is now visible on the HUD condo site. I'm still trying to figure out exactly how the mechanics work but this is what I can tell so far.
1. DELRAP is only available to lenders with full DE designation.
2. A lender can use DELRAP to approve condo projects or it can have HUD do it (HRAP) but apparently not both.
3. Lenders who choose the DELRAP option must certify compliance with certain HUD regulations.
4. The lender are still completely responsible for certifying that the project meets all HUD requirements.
5. Lenders must certify that no greater than 30% of the project is encumbered by FHA-insured mortgages.
6. Once a DELRAP lender reviews and approved a project, they are responsible for inputting the correct project approval information.
7. DELRAP lenders are responsible for maintaining all of the condominium project document exhibits
8. DELRAP lenders must certify that the project maintains acceptable insurance.
A great idea but there is still much ambiguity in the new system and this is probably the cause of the delayed execution. The intentions are good: Get the banks to more efficiently and quickly review condo's for approvals, but the new process is so ambiguious that it is deemed perilous for banks that don't get it right.
Gils Enews: Credit Scores
This weeks topic:
- Credit Scores -
(thank you to the agents that emailed topic suggestions last week)
Please email me your topic suggestions. Driving around dropping off fliers wastes gas, time and paper. Help me keep it Green, Clean and Current.
Update on current purchase transaction turn times:
FHA: 5 days to underwrite. (still time to close for the $8,000)
Conventional: 4 days to underwrite
FHA rehab: 15 days to underwrite
Gil's current loan closing performance stats:
100% ytd pre-approval letter to closing record
100% ytd rate quote to rate delivery accuracy record
97% ytd on-time closing record
89% ytd purchase to refinance loan ratio
Years of reliable and trusted service for purchase money financing.
What are some current loan process concerns right now?
1. Funds to close verification from buyers (no unsourced deposits allowed)
2. Debt to income ratios
3. Horrible loan pre-approvals on down-leg transactions
4. Low credit scores
Below is a list of my top 9 programs that should be in every agents resource folder:
Fast closing flyer: www.realestateloans.com/fhadonewell.pdf
100% Rural Development: www.realestateloans.com/usda.pdf
$100 down for HUD owned homes: www.realestateloans.com/100hudhome.pdf
Deferred maintenance homes: www.realestateloans.com/uglyhomes.pdf
Pre-approvals that close: www.realestateloans.com/concierge.pdf
VA 100% financing: www.realestateloans.com/va.pdf
My personal email for questions: gilkerk@yahoo.com
Ahead of the Curve
For Active Real Estate Marketing Professionals...
New Credit Score Requirements: Credit score requirements are now lender to lender specific. Due to default rates with certain lenders and secondary market requirements some lenders have been pushed to increase credit score requirements for their mortgages. You may want to proactively monitor your buyers to make sure they are matched with lenders that have an appetite for their credit score.
Recently, I've started seeing the introduction of three to four Tiers for FHA loans: 620, 640 and 660. You will see 660 minimums with a few lenders that have been hardest hit with mtg defaults and low FHA score card results. Some lenders are also overlaying the higher scores to protect their future FHA score card.
As most of you know, conventional lenders have already instituted risk based pricing on conventional loan programs. Risk based pricing is tiered towards both down payment and credit score. Prime rates are offered at scores starting at 720. You will see rate/fee increases when the score goes down in 20 point increments. 700-719 pricing, 680-699 pricing, 660-679 pricing, 640-659 pricing and so on down to the 620-639 floor.
Please take a look at the above flier on credit scoring. I'm supporting my Tier one agents and their buyers with credit score inhancement and rescoring.
Is the lending process burning you out? Is your loan officer slower than you'd like? Cut yourself free from bad service, poor communication and start enjoying incredible support today. Call if I can assist.
Could your team use an updated presentation to get agents up-to-speed on loan program changes? Lending is a huge part of transactional business, consider scheduling my lunch and learn for your team.
Win over your listing presentations and let your listings professionally present themselves with a year of free TALKING HOME TOUR TECHNOLOGY. Call to sign up today. See the above flier for details.
Gil Kerbashian
Mortgage Lending Since 1997
Gil's Loan Answer Hotline: (847) 873-7295
FHA Credit Score Changes Coming
In February we were still funding loans down to a 580 credit score, now its 620 with most lenders. Some lenders are taking score requirements up to 640 and 660. The lending process is moving back to its technical book procedures. The changes are good because those that are buying now shouldn't experience defaults, and bad because many buyers aren't prepared for the rapid changes.
Regarding verifying down payment - Important: Any underwriting unit can ask for bank statements and official verification of deposits in tandem for the last 60 days up and through closing. NOTE: Any large deposits going into the account will need to be fully sourced, even if its a large deposit going into a giftors account. Cash deposits are not allowed. WHY?...
Recently there has been a slew of sellers kicking back the down payment to buyers in order to off-load properties. This has caused a tightening of down payment verification. Please take a moment to read the link at
Flood Insurance Certs, Get Them Up-Front
Early flood certs, a Must for all Mortgage Brokers and Bankers
HUD’s letter Mortgagee Letter 2009-37 brings up the point for consideration by all mortgage brokers and bankers. It’s not smart to wait for the appraiser or end lender to make the flood determination for the subject property and ultimately the loan requirements for your borrowers. Waiting is a major disservice to your customers by not working proactively to determine the flood status of the property as soon as possible in the loan process.
There’s few things more distruptive to a borrower than learning at the last minute that the property is in a flood zone because of some small body of water that overflowed years ago and now they need to pay hundreds of dollars for a flood insurance premium and additional escrow reserves in order to close. It could blow your deal if you borrower is low on reserves (like most).
Pull your flood certs early if you live in a state that has lots of bodies of water near residential properties.
