2011 Loan Limits Announced

In two separate releases dated November 19, 2010, Fannie Mae (FNMA) and Freddie Mac (FHLMC) published their loan limits for 2011 for all conventional mortgage loans. The general loan limits for 2011 remain unchanged from the 2010 general loan limits. Based on the loan limits established by Federal Housing Finance Agency (FHFA), who estimates median home prices, the "temporary" high cost area loan limits remain unchanged from 2010 for all loans originated on or before September 30, 2011. The maximum limit is $729,750 for a 1-unit property. For loans originated after September 30, 2011, revised "permanent" limits apply with a maximum limit of $625,500 for a 1-unit property in the continental United States.

Reminder About Privacy Notice Changes

As published in the Federal Register Vol. 74, No. 229 Tuesday, December 1, 2009, the OCC, Federal Reserve Board (Board), FDIC, OTS, NCUA, FTC, CFTC, and SEC (the “Agencies”) released their final amendments to the rules which implement the privacy provisions of Subtitle A of Title V of the Gramm-Leach-Bliley Act (GLB Act). In this release, the Agencies adopted a model privacy form which financial institutions may rely on as a safe harbor to provide disclosures under the privacy rules. Furthermore, the Agencies eliminated the safe harbor permitted for notices that were just based on the Sample Clauses contained in 74 FR 40398 if the privacy notice is provided after December 31, 2010.

The safe harbor based upon the old sample clauses is disappearing from previous privacy notice versions.

As a reminder, if you would like to have the protection of the safe harbor, there are four separate model forms you can choose from.  Each form is varied based on (1) whether you provide an opt-out and (2) whether a client includes affiliate marketing.

1. If the client provides an opt-out and wants to include affiliate marketing, Form 1
2. If the client provides an opt-out and does not want to include affiliate marketing, Form 2
3. If the client does not provide an opt-out and wants to include affiliate marketing, Form 3
4. If the client does not provide an opt-out and does not want to include affiliate marketing, Form 4

USDA Funding for 2011

United States Department of Agriculture (USDA) announced November 3, 2010 funding for fiscal year 2011 under the Continuing Resolution. Purchase loans are subject to a 3.5% upfront guarantee fee and refinance loans are subject to a 1% upfront guarantee fee. Investors such as Bank of America and Flagstar Bank are releasing notices supporting the Single Family Housing Guaranteed Loan Program again.

While purchase funds for 2011 are unaffected, on November 30, 2011 USDA released a second notice stating Single Family Housing Guaranteed Loan Program refinance transactions for 2011 are exhausted. Until USDA receives more refinance funds, Rural Development will only issue conditional commitments subject to the availability of Congressionally appropriated funds for refinance transactions. Lenders can still close these loans so Rural Development can obligate the funds for the loan when funds become available; however, lenders must assume all loss default risk for the loan until it is funded by Rural Development and issued the Loan Note Guarantee.

Mortgagee Eligibility Requirements and Clarification of FHA’s Electronic Annual Certification Requirements and Procedures

Recent guidance was given for individuals and entities who originate FHA-insured mortgage loans. HUD listed a number of changes to the eligibility criteria for participation in FHA programs. The guidance provides additional information about FHA’s new requirements and clarifies certain requirements and procedures regarding FHA’s electronic annual certification.

The following aspects are discussed:

• Clarification of the term "unresolved findings"
• Corporate Officer Definition- (person with following titles: Owner, President, VP, COO, CFO, Director, Corporate Secretary, CEO, Member (of a LLP), and Chairman of the Board)
• Properly Notifying HUD of Business Changes which affect a mortgagee’s approval status
• Properly Notifying HUD of Address Changes
• Timeframes Associated with Criminal Activity
• Clarification of Compliance with SAFE Act Requirements - must confirm all employees consistently meet their respective state licensing requirements as well as all federally-mandated licensing or registration requirements including registration with NMLS
• Reminder of HUD’s Annual Recertification Requirements and Definition of “Acceptable” Audited Financial Statements
• New Guidance on Completing the Electronic Annual Certification
• New Information for Mortgagees Unable to Certify

For more detailed information see the mortgagee letter.

FHA Correspondent Approval

There are several notices circulating regarding the May 20, 2010, FHA Final Rule FR 5356-F-02. Under this rule any FHA loan, which disburses on or after January 1, 2011, must be closed in the name of an FHA approved Lender who has unconditional Direct Endorsement (DE) Underwriting Authority. “Sponsored” Loan Correspondents will no longer have access to HUD’s FHA Connection secure system. Numerous Investors such as US Bank and Franklin American are reminding their correspondents to close and disburse any loan sponsored and underwritten through the investor’s correspondent lending program no later than December 31, 2010. Loan Correspondents are only permitted to continue their participation in FHA programs by establishing a third party relationship with an FHA-approved Mortgagee. Per HUD’s guidelines, the deadline applies regardless of the case number assignment or lock expiration date.

Speculation throughout the industry suggests legislation may be passed to allow non-DE lenders to continue to close FHA loans in their own name, though unlikely in time for the December 31, 2010 deadline. In the meantime, Investors are working hard to incorporate loan correspondents into their third party originator programs and close the loans in the investors’ name. Contact your Investor(s) directly to learn more.

Bank Of America

Starting December 11, 2010, Bank of America eliminated their Flex 97 program. On the same date, standard eligibility increased to 97% LTV on 1-unit, primary residences for both purchase and rate-and- term refinance loans on Bank of America’s fully amortizing fixed rate or standard ARM products.

Bank of America FHA ARM disclosure (1FE3075) was updated and is currently in our forms department for revision.

Flagstar Bank, FSB

On November 18, 2010, a 20-year term was added to the following Flagstar Bank programs:

• Fannie Mae DU Refi Plus (5352)
• Freddie Mac Relief Refinance Program (5354)
• Freddie Mac Relief Open Access (5355)

As of December 11, 2010, Flagstar retired their Fannie Mae Flex 97 programs (5321 & 5324) along with their Flexible Fannie Mae Homepath programs (5349 & 5721). December 9, 2010 was the last day to lock loans. All correspondent loans must be delivered on or before February 15, 2011. However, key elements of the now expired flexible Flagstar programs are being incorporated into Fannie Mae’s standard requirements. The LTV is increasing up to 97% on one-unit, principal residence, purchase and refi for the below products:

• Fannie Mae Fixed Rate (5301)
• Agency 3/1, 5/1, 7/1 & 10/1 LIBOR ARMs (5331)
• Fannie Mae HomePath (5349) and Renovation (5721)