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LOC Stay Lifted

ebroker2 — Tue, 05 Apr 2011 23:56:04 +0000

April 5, 2011:

The Appellate Court has lifted the stay issued Friday, April 1, 2011 regarding the Federal Reserve Board Rule on loan officer compensation. Previously slated to start on April 1, the stay has now been lifted and goes into effect immediately. It appears that most lenders will accept loans submitted tomorrow, April 6, under the old rule as long as the application is dated April 5, 2011.

Both NAMB and NAIHP have vowed to continue the fight for the sake of the consumer, we will continue to update as things move forward. So for now, the Loan Originator Compensation Rules are now in effect.

Broker2Banker – experts in assisting Mortgage Brokers and Loan Originators become affiliated with Mortgage Banking companies. Please contact us immediately. We can help.

Loan Officer Compensation Regulations stayed by the U.S. Court of Appeals.

ebroker2 — Fri, 01 Apr 2011 17:38:20 +0000

The U.S. Court of Appeals in Washington, D.C. has granted a temporary stay of the implementation of the Federal Reserve Board’s Loan Originator Compensation rules. The court has directed the defendant Federal Reserve Board to file a reply brief by Monday April 4th. The plaintiffs, the National Association of Mortgage Brokers (NAMB) and the National Association of Independent Housing Professionals (NAIHP), have until Tuesday morning April 5th to file their reply briefs. After that filing takes place the Appeals court can order a hearing or make a decision on the basis of the filed briefs. The stay the court has ordered is a temporary measure freezing things in place while the appeal is considered. If the court decides in favor of the NAMB and NAIHP then the most likely course of action would be that the case would move back to the District Court. The stay would probably be extended to cover the period of time the case is in the District Court and could be extended further if there is another appeal. If the Appeals Court decided in favor of the Federal Reserve the stay will be dissolved upon the issuance of the decision. Pasted below is the notice from the Appeals Court.

Case Number: 11-507
Document: 1301118

In an ongoing attempt to keep mortgage professionals up to date Broker2Banker will continue to post information on this highly volatile subject. Broker2Banker is a mortgage banking fulfillment Services Company with an emphasis on Branch Affiliated Mortgage Banking Companies. Let us help you find a mortgage banking home. To reach us go to the contact section of this site.

Broker compensation will soon take on a new look

ebroker2 — Fri, 12 Nov 2010 18:15:09 +0000

by Amy Avitable, director of compliance services, Sheshunoff Consulting and Solutions

As published in Scotsman Guide’s Residential Edition, November 2010.

The landscape for mortgage-broker compensation is changing. Are you ready? Here’s a look at what’s coming and how brokers — and their lenders — can evolve their payment models and prepare for the future.

* * *

The Federal Reserve Board’s final rule on loan-originator compensation takes effect April 1. That date marks the end of an era in how mortgage brokers, mortgage-company employees and even loan officers within banks are paid.

The final rule, announced this past Aug. 16, prohibits paying mortgage brokers and other loan originators based on the interest rate paid by borrowers or on any other term or condition of the loan other than the amount of credit extended. As a result, the rule prohibits yield-spread premium (YSP) that is based on the interest rate and interest-rate overages paid to loan originators. For many brokers and other loan originators, YSP has become a common means of getting paid.

Because the new rule applies to loan originators — defined as people who arrange consumer credit for compensation — it will cover mortgage brokers, certain employees of mortgage companies and financial institutions, and lenders themselves if they are extending a loan that is funded by another creditor.

The rule, however, only applies to closed-end consumer credit secured by a dwelling. Consequently, commercial loans aren’t covered even if they’re secured by someone’s home.

Home-equity lines of credit and consumer loans not secured by a dwelling also aren’t covered by the rule, although the Federal Reserve plans to consider whether they should be as it issues more regulatory requirements in the future.

Compensation limits

The final rule contains two primary provisions:

Limits on how compensation is calculated and paid; and
A prohibition on steering.

The compensation limit states that a loan originator, such as a mortgage broker, cannot be paid based on the terms and conditions of the loan. As a result, mortgage-broker compensation can’t be calculated based on interest rate, annual percentage rate, loan-to-value ratio or the existence of prepayment penalties on the loan.

To prevent evasion, the Federal Reserve also prohibits compensation based on a proxy for the loan’s terms and conditions — such as borrower credit scores, debt-to-income ratios or credit risk. A mortgage broker may, however, be compensated based on factors that don’t represent terms or conditions of a loan, such as:

The total number of loans from the broker that were originated;
The total amount of credit that was extended from the broker’s loans;
The performance of the broker’s loans in the long run;
The number of actual hours of work performed by the broker, paid at an hourly rate;
Legitimate business expenses, such as overhead;
Whether the borrower is a new or existing customer;
The percentage of applications submitted by the broker that result in closed loans; and
The quality of the broker’s loan files, such as their accuracy and completeness.

Brokers also can receive a payment fixed in advance, such as a per-loan fee. This can be a flat fee for all loans arranged, or it can differ for specific loan tranches. For example, brokers could be paid $1,000 for each of the first 1,000 loans they arrange and a different amount for each loan after that.

Another compensation option includes paying brokers a percentage of each loan amount. Specific requirements apply if this option is used, however. First, the percentage must be fixed and can’t vary with different loan amounts. Second, the compensation arrangement can include minimum and maximum amounts of compensation, but these limits must not vary for different transactions.

For example, brokers can be paid 1 percent of the loan amount for all loans originated and can have a minimum and maximum fee in their agreement with the lender. The broker cannot, however, be paid different percentages for different loan scenarios, such as 2 percent for loans to $300,000 and 3 percent for loans of more than $300,000

Exception to the rule

The rule includes one major exception: Mortgage brokers can be paid based on the terms and conditions of a loan if they are paid by the consumer only. In other words, when a consumer pays a mortgage broker’s or other loan originator’s compensation, no one else can compensate the broker or originator regardless of how the compensation is determined.

Consumers are considered to have paid broker compensation when they pay a broker directly or from loan proceeds. Consumers aren’t, however, considered to have compensated brokers simply because they paid points to the lender — whether in cash or from the loan proceeds — or because they paid the broker for third-party fees incurred, such as an appraisal fee.

Note that if a broker adds an up-charge to a third-party fee, it will be treated as broker compensation.

Steering prohibition

The new compensation limits under the Fed’s final rule meet requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as provisions proposed by the Fed in its ongoing efforts to overhaul mortgage-lending rules. The final rule, however, added another provision — the steering prohibition — that goes beyond the requirements of the Dodd-Frank Act.

Under the rule, mortgage brokers and loan originators are prohibited from steering consumers to loans based on the fact that they will receive higher compensation — unless the loan also is in the consumers’ best interest. Mortgage brokers may offer loans that will deliver them less than or the same amount of compensation as what they would earn on other loan options for which a consumer would likely qualify. When brokers offer loans that would allow them to receive more compensation, they must establish that the loan offered is in the consumers’ best interest.

The final rule includes a safe harbor for meeting these requirements. For each fixed-rate loan, variable-rate loan and reverse mortgage in which a consumer expresses interest, brokers must provide three loan options for which the consumer would likely qualify.

One option must be the loan that has the lowest dollar amount of discount points and origination points or fees. Another must be the loan with the lowest interest rate for which the consumer would likely qualify. The third must be an option that doesn’t have negative amortization, a prepayment penalty, interest-only payments or a balloon payment in the first seven years. In the case of reverse mortgages, this option must be a loan without a prepayment penalty, shared equity or shared appreciation.

In determining what loan option has the lowest interest rate for a variable-rate loan, the broker must determine if the initial rate will be fixed for at least five years. If it will be, then the broker will use the initial interest rate that will be in effect at closing. If the rate isn’t fixed for at least five years and the rate varies based on an index, then the broker must look to the fully indexed rate at closing without regard for any premium or discount on the rate.

If the loan is instead a stepped-rate loan, then the broker must use the highest rate that would apply in the loan’s first five years.

If there are not three loan options that meet the criteria in the safe harbor, then the broker can offer fewer options. Brokers can offer more than three options only if they highlight which of the loan options meet the safe-harbor criteria. Further, brokers must consider loan options from a significant number of lenders with which they do business regularly.

This means brokers who regularly do business with three or more lenders must look at loan options from at least three of those lenders. If brokers only regularly do business with one or two lenders, then they may get loan options from only those lenders and won’t be required to start business relationships with others.

The loans that brokers eventually offer to consumers don’t have to be from all the lenders considered, however. Rather, brokers simply must look at their loan options to identify loans that would meet the safe-harbor criteria.

* * *

The Federal Reserve’s final rule on lending compensation and steering marks a major shift in how mortgage brokers and originators will be paid, as well as how they will document their decisions about which loan products are offered to consumers. Brokers also should know that this rule won’t be the last new requirement regarding compensation practices they will face in the coming months and years.

Although it’s hard to say when other new requirements and legislation will be implemented or take effect, brokers who evolve quickly will put themselves in the best position to succeed moving forward.

Amy Avitable is director of compliance services at Sheshunoff Consulting and Solutions. She is an attorney and certified public accountant. As a nationally known compliance expert, she speaks frequently for state bankers and mortgage associations and the American Bankers Association. Avitable was formerly director of FIS Regulatory Advisory Services, where she served financial institutions, the Federal Deposit Insurance Corp., the Federal Reserve Board and the Office of the Comptroller of the Currency. Contact her at aavitable@smslp.com.

Final ruling means YSP Gone April 1, 2011

ebroker2 — Mon, 16 Aug 2010 17:26:27 +0000

The Federal Reserve Board on Monday announced final rules to protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices. The new rules apply to mortgage brokers and the companies that employ them, as well as mortgage loan officers employed by depository institutions and other lenders.

Today, lenders commonly pay loan originators more compensation if the borrower accepts an interest rate higher than the rate required by the lender (commonly referred to as a “yield spread premium”). Under the final rule, however, a loan originator may not receive compensation that is based on the interest rate or other loan terms. This will prevent loan originators from increasing their own compensation by raising the consumers’ loan costs, such as by increasing the interest rate or points. Loan originators can continue to receive compensation that is based on a percentage of the loan amount, which is a common practice.

The final rule also prohibits a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party. In consumer testing, the Board found that consumers generally are not aware of the payments lenders make to loan originators and how those payments can affect the consumer’s total loan cost. The new rule seeks to ensure that consumers who agree to pay the originator directly do not also pay the originator indirectly through a higher interest rate, thereby paying more in total compensation than they realize.

Additionally, the final rule prohibits loan originators from directing or “steering” a consumer to accept a mortgage loan that is not in the consumer’s interest in order to increase the originator’s compensation. The rule will preserve consumer choice by ensuring that consumers can choose from loan options that include the loan with the lowest rate and the loan with the least amount of points and origination fees, rather than the loans that maximize the originator’s compensation.

The Federal Register notice containing the final rules is attached. The final rules are effective April 1, 2011.

Consumer Finance Law Passes

ebroker2 — Thu, 22 Jul 2010 18:40:31 +0000

Bureau of Financial Protection created:

Loan Originators lose Yield Spread Premium: Brokers better off working with a Bank Affiliate Company if they want to stay in the business.

Mortgage Originator Requirements and Prohibitions as outlined in the new law:

The Law creates a new definition of “mortgage originator”:

Under the Law, a mortgage originator includes persons taking applications, assisting consumers in obtaining a mortgage, or negotiating the terms of a mortgage, but does not include administrative employees, certain employees of manufactured home retailers, real estate brokers unless they are compensated by a lender, broker or other mortgage originator, and servicers or their employees, including those involved in loan modification/loss mitigation. A person “assists a consumer in obtaining or applying to obtain a residential mortgage loan” by, among other things, advising on residential mortgage loan terms, preparing residential mortgage loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.

Compensation:

The Law also imposes new restrictions on mortgage originator compensation. Mortgage originators may no longer be compensated, directly or indirectly, based on the terms of the loan other than the amount of the principal. Thus, yield spread premiums are banned. A mortgage originator may not receive origination fees from both the borrower and the lender, although this does not apply to third party fees paid to non-affiliates. The Law requires that regulations implementing further restrictions on mortgage originators, including preventing:
• steering a consumer into a loan for which they lack a reasonable ability to repay, or a loan that has predatory characteristics, such as equity stripping, excessive fees, or abusive terms;
• steering a consumer from a qualified mortgage to a mortgage that does not meet that definition;
• engaging in abusive or unfair lending practices that promote disparities; and
• mischaracterizing consumer credit history, the products available to a consumer, the appraised value of a property, or discouraging a consumer from seeking a loan from another mortgage originator if unable to suggest a loan not more expensive than the one for which the consumer qualifies.
The Law also clarifies that the statutory language does not (i) permit a yield spread premium where total compensation from all sources varies based on the terms of the loan; (ii) limit compensation to the creditor based on a sale of a consummated loan to a subsequent purchaser; (iii) restrict a consumer’s ability to finance fees or costs through the rate or principal (so long as they don’t vary based on the terms of the loan); or (iv) prohibit incentive payments based on the number of loans a mortgage originator makes within a certain time period.

For violations of these compensation provisions, mortgage originators are subject to TILA and HOEPA penalties, with liability capped at the greater of actual damages or 3 times the amount of compensation or gain in connection with the loan, plus the costs to the consumer of bringing the action, which includes reasonable attorneys’ fees.

Mortgage Underwriting Standards:

The Law sets forth new duties for underwriting loans for origination. Notably, reverse mortgages and bridge loans of up to a year are exempt from the new underwriting standards.

Under the Law, prior to originating a loan, a creditor is required to make a reasonable and good faith determination that, at the time the loan is consummated, the consumer has a reasonable ability to repay the obligation, including all taxes, insurance (including mortgage insurance), assessments, and any second loans extended simultaneously. The determination must be based on verified and documented information, and the creditor must look at a number of factors, including credit history, current income, “expected income the consumer is reasonably assured of receiving,” current obligations, DTI or residual income after non-mortgage debt and mortgage-related obligations, employment status, and assets other than equity in the dwelling or real estate securing repayment of the loan. In addition, the determination must be made using a payment schedule that fully amortizes the loan over its full term, even if the loan being originated is a “nonstandard loan” (which include, among other things, interest-only, deferred-principal or interest loans, and negative amortization loans).

The Law also requires the creditor to verify income and documentation to make its determination. However, a creditor refinancing a loan made or guaranteed by the federal government under a “streamlined refinancing” is exempt from income verification requirements under certain circumstances. In addition, creditors may take into account seasonal or irregularities of income when underwriting and scheduling payments.

The Law does include a “safe harbor presumption” for meeting the requirement to determine ability to repay, although it does not appear that the presumption is irrebuttable. A creditor or assignee may presume a loan meets “ability to repay” requirements if it is a “Qualified Mortgage.” A “Qualified Mortgage” means a loan where:
• regular payments cannot result in an increase of principal;
• there are no balloon payments (defined as a scheduled payment more than twice as large as the average of earlier scheduled payments);
• income and financial resources are verified and documented;
• for a fixed rate mortgage, the loan is underwritten as fully amortized or, for an ARM, where the mortgage is underwritten based on the maximum rate permitted for the first 5 years and fully amortizing payment schedule;
• DTI or other measures of DTI meet (to-be-promulgated) BCFP regulations;
• total points and fees payable in connection with the loan do not exceed 3% of the total loan amount;
• the loan term does not exceed 30 years except for in high-cost areas and pursuant to other rules;
• for reverse mortgages, the loan meets to-be-established rules; and
• where there is a balloon payment, the mortgage meets the above criteria and the creditor operates predominantly in rural or underserved areas, makes fewer mortgages than a to-be-established cap, portfolios the loans, and meets any asset size threshold or other criteria set by rule.
Relating to the points and fees trigger, when calculating points and fees, the creditor is to exclude either (i) up to 2 bona fide discount points payable by the consumer, but only if the interest rate discount does not exceed more than 100 basis points of the prime offer rate; or (ii) up to and including 1 bona fide discount point payable by the consumer if the interest rate discount does not exceed the average prime offer rate by more than 200 basis points. The law uses the definition of “points and fees” set forth in TILA, which generally will include, among other things, all items in the finance charge other than interest or time-price differential, fees charged for title examination, title insurance, document preparation, escrows, notarization, appraisals, credit reports (unless such charges are bona fide third party expense not retained by the creditor) and compensation paid to mortgage originators. Mortgage insurance should be excluded from the calculation of “points and fees” on this basis.

The BCFP will have power to revise by rule the Qualified Mortgage criteria set forth above. In addition, HUD, the Veterans Administration, the Department of Agriculture, and the Rural Housing Service must all implement rules to define what constitutes a Qualified Mortgage for the lending within their respective jurisdictions.

Limits on Loan Attributes and Other Practices

The Law sets forth a number of restrictions on certain practices. Specifically:
• Prepayment penalties will be allowed only for certain fixed-rate mortgages and even then there are a number of restrictions on the terms of a prepayment penalty;
• Financing single premium credit insurance is generally prohibited, as are mandatory arbitration clauses, waving statutory causes of action.
• Negative-amortization loans may be originated, but the consumer must first receive certain disclosures and, if the borrower is a first-time buyer, the borrower must get counseling.
In addition to the new underwriting requirements, the BCFP will be required to issue regulations pertaining to all residential mortgages that prohibit abusive, unfair, deceptive and predatory practices and ensure that mortgage credit is extended in accordance with the stated purposes of this title.

New Disclosure Requirements

The Law also imposes new disclosure requirements for mortgages, unless the BCFP issues rules to exempt or modify disclosure requirements for any class of mortgages. The requirements include new disclosures relating to, among other things:
• policies regarding partial payments prior to settlement;
• rate resets for loans that reset from fixed rates to adjustable rates;
• the aggregate amount of settlement charges, the fees paid to the originator, and the amount of interest paid over the life of a loan;
• variable rate loans for which an escrow account is established relating to the initial and fully-indexed amount of payment; and
• periodic statements for mortgage loans (including, among other things, the amount of principal, the interest rate, any applicable reset date).
High Cost Mortgages

The Law also adds new restrictions on “high cost mortgages.” A credit transaction is considered a “high cost mortgage” if one of the following is true:
• The loan is a first mortgage where the APR exceeds the average prime offer rate by 6.5% or 8.5% if the dwelling is personal property and the loan amount is less than $50,000;
• The loan is a subordinate lien where the APR exceeds the average prime offer rate by 8.5%;
• The mortgage has total points and fees, other than third-party charges, that exceed 5% of the total transaction if greater than $20,000; or
• Prepayment fees or penalties more than 36 months after closing or the fees or penalties when aggregated exceed more than 2% of the amount prepaid.
The definition of total points and fees has been revised and for these purposes, it specifically excludes mortgage insurance premiums charged under federal or state programs, mortgage insurance premiums not exceeding the amounts payable under policies in effect at the time of origination under FHA, as well as private mortgage insurance premiums paid by the consumer after closing. Therefore, PMI premiums paid at closing would be included within points and fees for purposes of determining a high-cost mortgage.
Specifically, creditors are prohibited from loan flipping, offering balloon payments, recommending defaults, charging late fees of over 4%, including acceleration clauses, financing points and fees, modification or deferral fees. In addition, payoff statement fees are limited and a creditor must obtain a certification from an approved housing counselor that the borrower received pre-loan counseling.

House Passes Resolution to Dictate Mortgage Loan Officer Pay

ebroker2 — Wed, 16 Jun 2010 20:47:55 +0000

House Passes Resolution to Dictate Mortgage Loan Officer Pay, ComplianceA House Resolution (HR), passed on Capitol Hill, added a series of provisions to the Senate’s Wall Street Reform and Consumer Protection Act, including guidelines that dictate origination fees policy and holds individual loan officers accountable for compliance with the new law. The legislation is also creating concern in the industry about potential negative, unintended consequences its passage may bring.

According to a release from the House Financial Services Committee, HR 4173 dictates that mortgage compensation can only be financed if all originator compensation is paid by the borrower and not third parties.

The borrower also has to pay the entire fee by financing it. The resolution also permits “compensation through rate” for all mortgages as long as they meet the borrower fee financing provision. Previously, the House version of the legislation only allowed this for so-called “qualified mortgages,” those loans that conform to guidelines for purchase by federal agencies and the government-sponsored enterprises (GSEs), while the Senate version applied to all mortgages.

The passage of HR 4173 comes as the House and Senate continue the reconciliation process of each body’s financial reform legislation before it is sent to President Obama for signature. The compensation rules brings both versions in-line with each other, ensuring it will be included in the final version of the legislation.

Another component of the resolution makes mortgage originators, including individual mortgage brokers and loan officers, subject to damages for violations of the legislation. If the broker or loan officer violates the compensation restrictions, isn’t properly registered, or violates regulations prohibiting conflicts of interest (so-called “anti-steering” guidelines), individuals can be fined up to three times their originator compensation.

These new rules, if signed into law, would open the door for originators to expend capital and time re-training employees, as loan officers continue to navigate new policies implemented by changes to the Real Estate Settlement Procedures Act (RESPA). The resolution’s passage comes as the House passes separate legislation to reform the Federal Housing Administration (FHA).

California Aids DRE licensees moving to DC license

ebroker2 — Thu, 20 May 2010 20:14:50 +0000

STATE OF CALIFORNIA

DEPARTMENT OF CORPORATIONS

May 4, 2010

FROM: California Department of Corporations

SACRAMENTO 95814-4052 SAN FRANCISCO 94102-5303 LOS ANGELES 90013-2344 SAN DIEGO 92101-3697 1515 K STREET, SUITE 200 71 STEVENSON STREET, SUITE 2100 320 WEST 4

Currently be licensed or have held in the past an active California Real Estate License;

Do not have an MLO endorsement application pending with DRE;

File an MLO license application (Form MU4) to DOC through NMLS no later than June 15, 2010;

Submit a Request for Certification of Pre-License Education no later than June 15, 2010. The request is available on the NMLS website at http://mortgage.nationwidelicensingsystem.org/slr/PublishedStateDocuments/CA-DOC-MLO-New-Application-Checklist.pdf;

Pay a system processing fee of $15.00 to NMLS on or before November 30, 2010.

Mortgage loan originators who fail to file an MLO license application with the DOC or fail to submit the Request for Certification of Pre-License Education by June 15, 2010 will not have their pre-license education certified by DOC.

Upon receipt of the Request for Certification of Pre-License Education and verification of the license with DRE, DOC will submit a list of the real estate licensees who meet the pre-license education certification requirements to NMLS on a continuing basis. NMLS will then send the MLO applicant an e-mail requesting that they log into the system and pay a system processing fee of $15.00. Shortly after payment of the system processing fee to NMLS, the applicant’s record will be updated to reflect compliance with the pre-license education requirements.

The pre-license education certification will not be made until the certification processing fee of $15.00 is paid to NMLS. Please note that the MLO license will not be issued unless the pre-license education requirements are completed or certified in NMLS. Also, MLOs employed by DOC licensees must be licensed by July 31, 2010. If the certification processing fee is not paid on or before November 30, 2010, the state education courses will not be certified and the NMLS record will not be updated. In that case, the applicant will need to complete 20 hours of NMLS approved education in order to satisfy the SAFE requirements. Mortgage loan originators who have their pre-license education certified by DOC will be required to complete 8 hours of continuing education in order to renew their MLO license during the November 1, 2010 to December 31, 2010 renewal period.

TH STREET, SUITE 750 1350 FRONT STREET, ROOM 2034 (916) 445-7205 (415) 972-8559 (415) 972-8559 (213) 576-7500 (213) 576-7500 (619) 525-4233 (619) 525-4233

1-866-ASK-CORP 1-866-ASK-CORP www.corp.ca.gov 1-866-275-2677 1-866-275-2677

If you have any questions, please contact the Consumer Services Representatives at 1-866-ASK-CORP 1-866-ASK-CORP .

FHA Raises Net Worth Requirements to $2.5 million Over Next 3 Years

ebroker2 — Tue, 13 Apr 2010 18:39:50 +0000

April 5th, 2010

The Federal Housing Administration (FHA) announced it will issue a final rule in the next few days to reduce and manage counterparty risks to its insurance funds as it continues to play a critical role in today’s housing market. The new regulations will increase net worth requirements of FHA-approved lenders (including reverse mortgage lenders), strengthen lender approval criteria, and make lenders liable for the oversight of mortgage brokers.

“These changes support quality mortgage lenders while excluding organizations that are ill-equipped to handle the risk associated with market variations,” said FHA Commissioner David H. Stevens. “That is particularly important now when a robust, competitive mortgage finance market is a crucial element in rebuilding the American economy. Lenders bear the overall risk of FHA-endorsed loans, therefore it makes sense for them to approve their counterparties and have sufficient capital to operate.”

The final rule permits FHA to more effectively focus its resources on lenders that pose the greatest potential threat to its insurance funds and to ensure that lenders possess the resources appropriate for the financial services they deliver. FHA solicited public comments and on this new regulation and considered those comments in the development of the final rule said the agency.

According to FHA, the final rule will raise net worth requirements of FHA approved lenders from $250,000 to a minimum of $ 1 million. FHA said it will provide current lenders one year following the enactment to increase net worth. Effective three years after the enactment of the provision:

Timing	Net Worth Requirement
Effective immediately	New lender applicants must possess a net worth of $1 million
1 year after effective date of final rule	·Current FHA-approved lenders (except small businesses) must possess a net worth of $1 million ·Current FHA-approved small business lenders must possess a net worth of $500,000
3 years after effective date of final rule	·Single-Family - Approved lenders and applicants must have a net worth of $1 million plus 1% of total loan volume in excess of $25 million ·Multi-Family – Approved lenders and applicants must have a net worth of $1 million §If performing mortgage servicing — must have an additional 1% of total volume in excess of $25 million §If not performing mortgage servicing — must have an additional 0.5% of total loan volume in excess of $25 million

The proposed rule would have increased the minimum net worth requirement for all FHA-approved mortgagees from $250,000 to $2.5 million over a 3-year period.

According to FHA, “these changes align FHA with Fannie Mae and Freddie Mac and have potential to increase the number of mortgage brokers eligible to originate FHA-insured loans while providing for more effective oversight of brokers by FHA-approved lenders. “

Mortgage brokers or other third-party originators, already approved by FHA, will be authorized to continue to originate FHA-insured loans through the end of the calendar year without sponsorship of an FHA-approved lender.

Another attempt by Washington to eliminate YSP.

ebroker2 — Sat, 16 Jan 2010 00:40:57 +0000

A number of Senate Democrats, led by Sen. Jeff Merkley (D-OR), sent a letter to the Federal Reserve Board calling for a ban on YSP, labeling it as an unfair and deceptive practice used to steer consumers into riskier mortgage loans and gain a larger profit.

The letter was clearly used to protect Wall Street and big banks, so that they can increase their market share at the expense of small business men and women and their employees, thus deflecting their involvement in the mortgage and housing crisis. Click HERE to read the Senate Letter signed by the following Senators.

Sen. Christopher Dodd (D-CT)                Sen. Robert Menendez (D-NJ)
Sen. Carl Levin (D-MI)                            Sen. Mark Warner (D-VA)
Sen. Barbara Mikulski (D-MD)                Sen. Ron Wyden (D-OR)
Sen. Jack Reed (D-RI)                           Sen. Daniel Akaka (D-HI)
Sen. Claire McCaskill (D-MO)                 Sen. Russ Feingold (D-WI)
Sen. Benjamin Cardin (D-MD)                 Sen. Frank Lautenberg (D-NJ)
Sen. Charles Schumer (D-NY)                Sen. Sherrod Brown (D-OH)
Sen. Bob Casey (D-PA)                         Sen. Jeanne Shaheen (D-NH)
Sen. Sheldon Whitehouse (D-RI)

The Senate and House of Representatives are going to continue to attack the YSP and eventually eliminate it completely. If and when this happens Brokers will have very few options.   If you want to continue in the Mortgage Business and are a small business owner, be prepared to change. Start looking at all your options, Affilated Mortgage Bank Branch, Loan Officer for Bank of America, Chase, CitiBank or some other Bank.

FHA Loan Origination Fee Amended

ebroker2 — Mon, 11 Jan 2010 23:48:53 +0000

HUD Repeals FHA Origination Fee Cap; Announces New FHA-Related Fee Disclosures. On December 30, HUD issued Mortgagee Letter 2009-53 that eliminates the 1% loan origination fee limit on FHA loans but provides that the FHA will monitor lenders to ensure they are charging “fair and reasonable” fees for all origination services and that it intends to issue future guidance containing fee limits. The letter also clarifies the manner in which fees and charges for Federal Housing Administration (FHA) insured loans must be disclosed on the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement. In particular, the mortgagee letter instructs mortgagees on the proper method for disclosing origination charges (which are no longer capped at one percent of the mortgage amount for standard mortgages) and seller credits. Additionally, with respect to GFEs, the letter provides that mortgagees must file any GFE provided to the borrower on the right hand side of the insurance endorsement case binder. The new requirements go into January 1, 2010. For a copy of the letter, please see http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-53ml.pdf.