HUD Disclosures FHA

HUD offers a model form for this disclosure on its website, but use of the model form is not mandatory.  The Informed Consumer Choice Disclosure is due three business days after a lender receives an application from a consumer for an FHA loan.  This disclosure is not required when a loan applicant is not eligible for a conventional mortgage.  Providing the disclosure is required when a lender determines that a loan applicant may be eligible for a conventional loan or when a lender is not certain that a loan applicant’s options are limited to FHA loan products.

Important Notice to Homebuyers, which is a two-page disclosure that provides loan applicants with:

• A reminder that HUD does not regulate interest rates for FHA loans and that rates and other loan terms are negotiated between the lender and the loan applicant
• Warnings about participating in loan fraud
• A statement of the importance of reporting loan fraud
• The number to use to contact HUD if the loan applicant believes that he/she has been subject to discrimination
• A notice that the loan may be prepaid at any time without incurring a prepayment penalty
• An explanation of the circumstances (such as refinances) in which a borrower may be entitled to a refund of a portion of an upfront mortgage insurance premium
• An explanation of the length of time that monthly mortgage insurance premiums are due
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• a Lead Disclosure in transactions involving homes built prior to 1978

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TILA Disclosures

Closing Disclosure

Underwriting for an FHA loan usually begins with the use of an automated underwriting system (AUS), known as Technology Open to Approved Lenders (TOTAL). Lenders submit data to TOTAL, which produces a Mortgage Scorecard that evaluates the overall credit risk posed by the borrower 

A downgrade to manual underwriting automatically occurs when the following and other conditions exist:

• Within the past 12 months, had:
  • Three or more mortgage payments that were 30 or more days late
  • One or more mortgage payments that were 60 or more days late, or
  • One mortgage payment that was more than 90 days late
• $1,000 or more in disputed derogatory credit accounts
• Received a bankruptcy discharge within two years of the assignment of an FHA case number
• Transferred title to his/her property though a foreclosure sale, short sale, or the exchange of a deed-in-lieu of foreclosure within three years of the assignment of an FHA case number, or
• Undisclosed mortgage debt
• Non traditional credit ( has 3 other written references 12 months)
• FHA underwriting may exceed 31/ 43 and go as high as 36/50 if there are compensation factors
• Obtain funds required to make a down payment
• Obtain funds for closing costs
• Lower the DTI ratio by paying off existing debts with a loan
• Down payment funds may also come from a gift that is fully documented.  Acceptable gift funds are those that come from family members, a close friend who has a clearly defined and documented interest in the borrower, a charitable organization, or a government agency that promotes home ownership for first-time home buyers or low- to moderate-income families.

Documentation for a gift is essential, and it must include:

The donor’s name and contact information
The donor’s relationship to the borrower
The amount of the gift
A statement that repayment is not expected, and
A copy of the donor’s bank statement, showing withdrawal of the funds and a statement showing the deposit of them into the borrower’s account

The ability to show the transfer of funds from the gift donor to the recipient is essential because the HUD Handbook states that “Cash on Hand is not an acceptable source of donor gift funds

role of the FHA to endorse them.  Direct endorsement programs allow approved lenders to underwrite and close loans without prior approval from the FHA.  Within 60 days after the closing of a loan under a direct endorsement program, the lender must submit the closing package to HUD, where the agency will either endorse the case and issue a Mortgage Insurance Certificate (MIC) or issue a Notice of Return (NOR).  Lenders may attempt to resolve a Notice of Return by submitting additional information and requesting reconsideration for endorsement 

FHA loans 2017 Test Answers

FHA loan limits establish a maximum amount that consumers can borrow, and loan limits differ by area to reflect regional variations in housing prices.
Loan limits are established in the National Housing Act as the lesser of:

• 115% of the median home price for an area, or
• 150% of the conforming loan limit of $424,100

Loan limits are divided into:

• The ceiling: 150% of the conforming loan limit = $636,150
• The floor: 65% of the conforming loan limit = $275,665

For areas between the ceiling and floor, loan limits are computed by multiplying an area’s median home price by 115%.
The source of funds for FHA insurance is not taxpayer dollars, but insurance payments made by FHA borrowers.
UFMIP is due at closing and must be paid in full with cash or by financing the entire premium.
In all transactions, regardless of the borrower’s credit score or DTI ratio, the cost of UFMIP is 1.75% of the loan amount.
Reference to HUD’s MIP chart is required to calculate the cost of Annual MIP, which is based on:

• Initial LTV of the loan
• Loan term 
• Base amount of the loan, which does not include the cost of financing UFMIP

FHA loans are qualified mortgages.  FHA will not insure loans with points and fees that exceed the 3% limit.  HUD does not limit the DTI ratio for FHA qualified mortgages to 43%.
HUD extends a conclusive presumption of compliance to loans with APRs that do not exceed the average prime offer rate by more than (Annual MIP + 1.15 percentage points).
HUD extends a rebuttable presumption of compliance to loans with APRs that exceed the average prime offer rate by more than (Annual MIP + 1.15 percentage points).

 Funds collected from the payment of UFMIPs and Annual MIPs are deposited into the Mutual Mortgage Insurance Fund (MMIF).

FHA will not insure loans with points and fees that exceed:

1. 2% of the total loan amount
2. 1.5% of the total loan amount
3. X 3% of the total loan amount
4. 1% of the total loan amount  

What is the UFMIP required for FHA borrowers?

1. 5% of the median home value in the area
2. 1.75% of the base loan amount
3. 2% of the value of the property
4. 3.5% of the purchase price

Correct. The UFMIP required for FHA borrowers is 1.75% of the base loan amount.

origination of FHA loans begins with the completion of the Uniform Residential Loan Application (URLA) and the HUD/VA Addendum to Uniform Residential Loan Application, which is available through the HUD website.  addendum includes a Lender’s Certification, which requires lenders to verify certain information provided and steps taken during the application process. The addendum also includes a Borrower’s Certification, which requires borrowers to attest that information provided to the lender is accurate and complete

One of the advantages of FHA loans is that loan applicants can qualify for them with lower credit scores than those required for conventional mortgages.  In the conventional mortgage market, a consumer must have a credit score of at least 620 to be eligible for mortgage credit. FHA loans are available to consumers with credit scores in the 500s; loan applicants with credit scores of less than 500 are not eligible for an FHA loan.

HUD refers to the credit score used in the evaluation of an application for an FHA loan as a “minimum decision credit score” (MDCS). The MDCS refers to the credit score when only one score is reported, or if multiple reports provide the same score. When reported scores are different, the MDCS is:

• The middle score if three scores are reported
• The lowest score if two scores are reported
• The lowest score if there are multiple applicants and they have different scores
• With a credit score of 580 or above, a loan applicant is eligible for maximum financing, which is 96.5% of the Adjusted Value of the home that will secure the loan. For loan applicants with credit scores that are between 500 and 579, the loan-to-value ratio is limited to 90%.
• HUD limits contributions by sellers and other parties with a financial interest in a transaction to 6% of the sales price of a home. When contributions exceed 6%, they are regarded as inducements to purchase, which will “…result in a dollar-for-dollar reduction to the purchase price when computing the Adjusted Value of the Property before applying the appropriate Loan-to-Value (LTV) percentage”

 

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Our goal is simply to ensure that you have the best mortgage for your current situation and future goals. It may be time to review your current mortgage if: You are experiencing ever-increasing payments on your home equity line of credit (HELOC) You currently have a HELOC that will be adjusting in the coming months You have changing needs that requires you to sell your current home and find a new one That’s where a mortgage review comes in. It can help you uncover more options and opportunities. It’s complimentary, and you’ll never be pressured into making a change. By reviewing your current situation you may find out if now is a good time to refinance or sell and buy a new home. We are committed to providing options for your individual situation!

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MIP Plus 1.15 Percentage Points

The CFPB’s threshold for qualified mortgages that are subject to a rebuttable presumption of compliance is an APR that exceeds the APOR for a comparable transaction by 1.5 percentage points or more (for first-lien transactions).  FHA qualified mortgages are subject to a rebuttable presumption of compliance if the loan has an APR that exceeds the APOR by more than the sum of the Annual MIP plus 1.15 percentage points.   Therefore, the threshold that defines the difference between FHA loans that are subject to a conclusive or rebuttable presumption of compliance is higher than the threshold that the CFPB established.  As a result of this higher threshold, HUD’s qualified mortgage rule extends safe harbor qualified mortgage status to more loans.

FHA qualified mortgages are subject to a rebuttable presumption of compliance if the loan has an APR that exceeds the APOR by more than the sum of:

1. The UFMIP plus 2.25 percentage points
2. X The Annual MIP plus 1.15 percentage points
3. The Annual MIP plus 3 percentage points
4. The UFMIP plus 2 percentage points

EXEMPT

The HUD rule exempts FHA reverse mortgages, which are known as home equity conversion mortgages (HECMs), from requirements to meet qualified mortgage standards. HUD’s rule also exempts transactions exempted by the CFPB. These exempt transactions include:

• Bridge loans with terms of 12 months or less, including loans used to finance the purchase of a new dwelling while the borrower is trying to sell his/her current home
• Bridge loans for the initial construction of a new dwelling
• Construction phases of 12 months or less of a construction-to-permanent loan
• Loans made by a housing finance agency (agencies that have authority to make loans pursuant to the Housing and Community Development Act of 1992)
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