Due to changes in FHA policy under new FHA Single Family Handbook 4000.1, we will be modifying the following ConformX Data Integrity Checks:
Financing of UFMIP
The following warning currently triggers for FHA loans when the Base Loan Amount and Loan Amount are not the same, and Base Loan Amount plus UFMIP minus Loan Amount is greater than $49.99 or Loan Amount minus Base Loan Amount minus UFMIP is greater than $1.00:
Per HUD Lender’s Guide 4155.2 7.2.b FHA UFMIP must either be entirely financed with up to $49.99 paid in cash OR entirely paid in cash. Loan Amount should equal Base Loan Amount plus UFMIP if the UFMIP is being financed. Loan Amount should equal Base Loan Amount if the UFMIP is paid in cash.
The policy which forms the premise for this warning has changed. FHA Single Family Handbook 4000.1 Pt. II.A.2.e.i.(A) states the following:
“The UFMIP must be entirely financed into the Mortgage or paid entirely by cash. Any UFMIP amounts paid in cash are added to the total cash settlement requirements. However, if the UFMIP is financed into the Mortgage, the entire amount is to be financed except for any amount less than $1.00.”
“Base Loan Amount” is still defined substantively the same under the Handbook’s GLOSSARY.
As a result of this policy change, we will be modifying the current warning to only trigger if “FHA Case Number Assignment On or After 09/14/2015” equals “No.” We are creating a new version of this warning that will trigger when “FHA Case Number Assignment On or After 09/14/2015” equals “Yes”, Base Loan Amount and Loan Amount are not the same, and the difference between Base Loan Amount plus UFMIP and the Loan Amount is greater than $0.99. The text for this new warning will state the following:
Per FHA Single Family Handbook 4000.1 Pt. II.A.2.e.i.(A) FHA UFMIP must be entirely financed with no more than $0.99 paid in cash OR paid entirely in cash. Loan Amount should equal Base Loan Amount plus UFMIP if the UFMIP is being financed. Loan Amount should equal Base Loan Amount if the UFMIP is paid in cash.
Per Diem Interest Number of Days
The following warning currently triggers for FHA loans in Initial Disclosure, TILA Redisclosure, and Underwriting packages when the number of days of per diem interest is less than 15:
The days of interest being disclosed on this FHA loan is less than 15. Per HUD 4155.1 5.A.2.b, the lender must use a minimum of 15 days of per diem interest when estimating prepaid items. To increase the number of days of per diem interest, modify the First Payment Date or the Disbursement Date.
This restriction is no longer present in the new Handbook. Rather, it stipulates the following:
“The Mortgagee may collect per diem interest from the Disbursement Date to the date amortization begins. Alternatively, the Mortgagee may begin amortization up to 7 [calendar] Days prior to the Disbursement Date and provide a per diem interest credit. Any per diem interest credit may not be used to meet the Borrower’s MRI. Per diem interest must be computed using a factor of 1/365th of the annual rate.” (FHA Single Family Handbook 4000.1 Pt. II.A.6.a.xii)
“Prepaid items may include flood and hazard insurance premiums, MIPs, real estate taxes, and per diem interest. They must comply with the requirements of the CFPB.” (Ibid. Pt. II.A.4.d.i.[B]..[c] & II.A.i5.c.i.[B]..[c])
Because there is not a similar restriction under the new Handbook, we will be adding the condition “FHA Case Assignment Date On or After 09/14/15” equals “No” to the current FHA per diem days warning.
The following error currently triggers for FHA loans when “Mortgage Insurance Number of Months Cushion” is greater than zero:
Escrow cushion is not allowed on FHA MIP. Please change the MIP cushion months to zero.
This warning was due to the fact that the current FHA Model Mortgage contains the following provision in Uniform Covenant # 1:
“Lender may, at any time, collect and hold amounts for Escrow Items in an aggregate amount not to exceed the maximum amount that may be required for Borrower’s escrow account under the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. Sect. 2601 et seq. and implementing regulations, 24 CFR Part 3500, as they may be amended from time to time (RESPA), except that the cushion or reserve permitted by RESPA for unanticipated disbursements or disbursements before the Borrower’s payments are available in the account may not be based on amounts due for the mortgage insurance premium.” (see FHA Single Family Handbook 4155.2 ch. 12.A.1.a; emphasis added)
Despite the fact that this provision contradicts current FHA administrative law and Handbook policy (see 24 CFR § 203.550[a] and FHA Single Family Handbook 4330.1 REV-5, ch. 2-6[B]), it is included in a legally binding contract and, thus, the MI cushion data integrity check was created in order to ensure that there is no conflict between what a lender/servicer agrees to and what their actions are.
Under the new Model Forward Mortgage (available at http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/model_documents), not only does such a provision cease to exist, but the new Mortgage authorizes the following in Uniform Covenant # 3:
“Lender may, at any time, collect and hold Funds in an amount (a) sufficient to permit Lender to apply the Funds at the time specified under RESPA, and (b) not to exceed the maximum amount a lender can require under RESPA.”
“Funds” is also defined in Uniform Covenant #3 as follows (in relevant part):
“Borrower shall pay to Lender on the day Periodic Payments are due under the Note . . . a sum (the ‘Funds’) to provide for payment of amounts due for: . . . (d) Mortgage Insurance premiums to be paid by Lender to the Secretary or the monthly charge by the Secretary instead of the monthly Mortgage Insurance premiums.”
Because RESPA allows for a Lender to collect a cushion, and because the new Model Mortgage allows for the Lender to collect Funds “not to exceed the maximum amount a lender can require under RESPA,” and because “Funds” includes Mortgage Insurance premiums, Lenders are therefore authorized to collect a cushion for the payment of such premiums.
As a result, we will be adding the condition “FHA Case Assignment Date On or After 09/14/2015” equals “No” to the FHA MIP cushion error.
New GNND Error
As mentioned in a previous announcement (see http://www.docutechcorp.com/document-changes-fha-security-instruments-riders-and-disclosures), we no longer have current “Good Neighbor Next Door” documents, due to a lack of clarity from FHA on how these documents are to be formulated. As a result, the following hard stop error will appear for FHA loans in ConformX if “FHA Good Neighbor Next Door Sales Program Type” is set to “Officer”, “Teacher”, or “Responder”:
The Good Neighbor Next Door program (GNND) is not currently supported in ConformX. Please contact Client Support at 1.800.497.3584 for assistance.
These FHA data integrity check changes will take effect on September 12, 2015. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
September 9, 2015
These changes will be made the evening of Sunday, September 13, 2015. The “FHA Case Number Assignment Date” (Field 42450) will be used directly to trigger the appropriate checks instead of using “FHA Case Assignment Date On or After 09/14/2015”. If the FHA Case Number Assignment Date is empty, it is assumed to be on or after 09/14/2015.
September 9, 2015