FHA Single Family Housing Policy Handbook TABLE OF CONTENTS ... - NAFHAC

[Pages:865]FHA Single Family Housing Policy Handbook Table of Contents

FHA Single Family Housing Policy Handbook TABLE OF CONTENTS

I. DOING BUSINESS WITH FHA .................................................................1

A. FHA LENDERS AND MORTGAGEES .............................................................................. 1

1. Types of Program Approvals .................................................................................................... 2 a. Title I................................................................................................................................... 2 b. Title II ................................................................................................................................. 2

2. Types of Approved Mortgagees................................................................................................ 2 a. Supervised Mortgagee ........................................................................................................ 3 b. Nonsupervised Mortgagee .................................................................................................. 3 c. Government Mortgagee ...................................................................................................... 4 d. Investing Mortgagee ........................................................................................................... 4

3. Application and Eligibility Requirements for Approval........................................................... 5 a. Title I and Title II Program Applications ........................................................................... 5 b. Online Application.............................................................................................................. 5 c. Eligibility Requirements ..................................................................................................... 8 d. Processing of Applications ............................................................................................... 24 e. Application Approval........................................................................................................ 24 f. Application Denial ............................................................................................................ 25

4. Branch Offices ........................................................................................................................ 25 a. Registration ....................................................................................................................... 25 b. Single Family Lending Area ............................................................................................. 25 c. Managers........................................................................................................................... 26 d. Net Branching Prohibition ................................................................................................ 26

5. Supplemental Mortgagee Authorities ..................................................................................... 27 a. Title II Direct Endorsement Authority.............................................................................. 27 b. Title II Single Family Lender Insurance Authority .......................................................... 34 c. Title I Manufactured Housing Loan Direct Endorsement Authority................................ 37 d. Title II Multifamily Accelerated Processing Authority .................................................... 37

6. Post-Approval Operations....................................................................................................... 37 a. Operating Requirements and Restrictions ........................................................................ 37 b. Providing Information to FHA.......................................................................................... 37 c. Compliance with Law ....................................................................................................... 38 d. Servicing of FHA-Insured Mortgages .............................................................................. 39 e. Employee Compensation .................................................................................................. 39 f. Conflicts of Interest........................................................................................................... 39 g. Payment of Operating Expenses ....................................................................................... 39 h. Prohibited Payments ......................................................................................................... 39 i. Staffing.............................................................................................................................. 40 j. Use of Contractors ............................................................................................................ 40 k. Affiliates ........................................................................................................................... 41 l. Branch Office Requirements............................................................................................. 41 m. Fair Housing Notice .......................................................................................................... 41 n. Advertising........................................................................................................................ 42

Handbook 4000.1

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Effective Date: 09/14/2015 | Last Revised: 09/30/2015

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

7. Post-Approval Changes .......................................................................................................... 44 a. Requirements for All Post-Approval Changes ................................................................. 44 b. Information Updates ......................................................................................................... 45 c. Change in Partnership or Principal Owners ...................................................................... 45 d. "Doing Business As" Names ............................................................................................ 45 e. Relocation to a Different State.......................................................................................... 45 f. Liquid Assets or Net Worth Deficiency............................................................................ 46 g. Operating Loss .................................................................................................................. 46 h. Fidelity Bond .................................................................................................................... 46 i. Errors and Omissions Insurance ....................................................................................... 46 j. Principal Activity Change of Nonsupervised Mortgagee ................................................. 47 k. Servicing for Investing Mortgagees .................................................................................. 47 l. Fiscal Year End Date ........................................................................................................ 47 m. Supervision Change .......................................................................................................... 47 n. Business Form................................................................................................................... 47 o. Bankruptcy........................................................................................................................ 48 p. Lending License(s)............................................................................................................ 49 q. Mergers, Acquisitions, and Reorganizations .................................................................... 49 r. Conservatorship, Receivership, or Transfer of Control .................................................... 55 s. Cease Operations .............................................................................................................. 55 t. Unresolved Findings or Sanctions .................................................................................... 55

8. Annual Recertification ............................................................................................................ 56 a. General Requirements....................................................................................................... 56 b. Online Certification .......................................................................................................... 57 c. Annual Recertification Fee ............................................................................................... 57 d. Financial Data Submission ............................................................................................... 58 e. Rejection of a Mortgagee's Recertification Package ........................................................ 59 f. Recertification Extension Requests .................................................................................. 59 g. Failure to Recertify ........................................................................................................... 59

9. Voluntary Withdrawal of FHA Mortgagee Approval............................................................. 59 a. Standard ............................................................................................................................ 59 b. Required Documentation .................................................................................................. 60 c. Reapplication .................................................................................................................... 60

B. OTHER PARTICIPANTS ................................................................................................... 60

1. Appraisers ............................................................................................................................... 60 a. FHA Appraiser Roster ...................................................................................................... 60 b. Application and Approval Process.................................................................................... 60 c. Renewal............................................................................................................................. 62 d. Post-Approval Requirements ............................................................................................ 62

2. 203(k) Consultants .................................................................................................................. 65 a. 203(k) Consultant Roster .................................................................................................. 65 b. Application and Approval Process.................................................................................... 65

3. Direct Endorsement Underwriters .......................................................................................... 68 a. Program Overview ............................................................................................................ 68 b. DE Underwriter Eligibility ............................................................................................... 69 c. Mortgagee's Approval Process ......................................................................................... 70

Handbook 4000.1

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Effective Date: 09/14/2015 | Last Revised: 09/30/2015

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

d. Post-Approval Requirements ............................................................................................ 70 4. Nonprofits and Governmental Entities ................................................................................... 70

a. Program Overview ............................................................................................................ 70 b. Application and Approval Process.................................................................................... 73 c. Post-Approval Requirements ............................................................................................ 95 5. Additional Other Participants ............................................................................................... 101

II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT ...102

A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES ............. 102

1. Origination/Processing.......................................................................................................... 103 a. Applications and Disclosures.......................................................................................... 103 b. General Mortgage Insurance Eligibility.......................................................................... 125

2. Allowable Mortgage Parameters........................................................................................... 149 a. Maximum Mortgage Amounts........................................................................................ 149 b. Loan-to-Value Limits...................................................................................................... 152 c. Required Investment ....................................................................................................... 155 d. Maximum Mortgage Term.............................................................................................. 155 e. Mortgage Insurance Premiums ....................................................................................... 155

3. Underwriting the Property .................................................................................................... 157 a. Property Acceptability Criteria ....................................................................................... 157 b. Required Documentation for Underwriting the Property ............................................... 166 c. Conditional Commitment Direct Endorsement Statement of Appraised Value ............. 166

4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) .................. 167 a. Underwriting with an Automated Underwriting System ................................................ 167 b. Credit Requirements (TOTAL)....................................................................................... 171 c. Income Requirements (TOTAL)..................................................................................... 186 d. Asset Requirements (TOTAL)........................................................................................ 210 e. Final Underwriting Decision (TOTAL).......................................................................... 236

5. Manual Underwriting of the Borrower ................................................................................. 238 a. Credit Requirements (Manual) ....................................................................................... 238 b. Income Requirements (Manual) ..................................................................................... 259 c. Asset Requirements (Manual)......................................................................................... 283 d. Final Underwriting Decision (Manual)........................................................................... 309

6. Closing .................................................................................................................................. 327 a. Mortgagee Closing Requirements................................................................................... 327 b. Mortgage and Note ......................................................................................................... 333 c. Disbursement of Mortgage Proceeds .............................................................................. 333

7. Post-Closing and Endorsement ............................................................................................. 335 a. Pre-Endorsement Review................................................................................................ 335 b. Mortgagee Pre-Endorsement Review Requirements ...................................................... 335 c. Inspection and Repair Escrow Requirements for Mortgages Pending Closing or Endorsement in Presidentially-Declared Major Disaster Areas ..................................... 338 d. Procedures for Endorsement ........................................................................................... 340 e. Endorsement and Post-Endorsement .............................................................................. 347

8. Programs and Products ......................................................................................................... 350 a. 203(k) Rehabilitation Mortgage Insurance Program ...................................................... 350

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Effective Date: 09/14/2015 | Last Revised: 09/30/2015

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

b. Disasters and 203(h) Mortgage Insurance for Disaster Victims ..................................... 385 c. Energy Efficient Mortgages ............................................................................................ 388 d. Refinances....................................................................................................................... 394 e. Refinance of Borrowers in Negative Equity Positions Program (Short Refi) ................ 412 f. Section 251 Adjustable Rate Mortgages......................................................................... 415 g. Section 248 Mortgages on Indian Land .......................................................................... 418 h. Section 247 Single Family Mortgage Insurance on Hawaiian Home Lands .................. 421 i. New Construction ........................................................................................................... 425 j. Construction to Permanent.............................................................................................. 432 k. Building on Own Land.................................................................................................... 435 l. Weatherization ................................................................................................................ 437 m. Solar and Wind Technologies ......................................................................................... 440 n. Assumptions (Effective for Applications Taken on or after September 14, 2015) ........ 443 o. HUD Real Estate Owned Purchasing ............................................................................. 446 9. 203(k) Consultant Requirements .......................................................................................... 453 a. Overview......................................................................................................................... 453 b. Consultant Duties............................................................................................................ 453 c. Consultant Fee Schedule................................................................................................. 454 d. Improvements Standards................................................................................................. 455 e. Consultant 35 Point Checklist......................................................................................... 456 f. Architectural Exhibit Review ......................................................................................... 461 g. Preparing the Work Write-Up and Cost Estimate........................................................... 462 h. Feasibility Study ............................................................................................................. 462 i. Draw Request Inspection ................................................................................................ 462 j. Change Order .................................................................................................................. 462 k. Additional Required Documentation .............................................................................. 463

B. APPRAISER AND PROPERTY REQUIREMENTS FOR TITLE II FORWARD AND REVERSE MORTGAGES ................................................................................................ 465

1. Commencement of the Appraisal.......................................................................................... 465 a. Information Required before Commencement of Appraisal .......................................... 465 b. Additional Information Required Before Commencement of an Appraisal on New Construction .................................................................................................................... 465

2. General Appraiser Requirements .......................................................................................... 466 3. Acceptable Appraisal Reporting Forms and Protocols......................................................... 466

a. Additional Documentation Required for Appraisals of New Construction.................... 467 b. Application of Minimum Property Requirements and Minimum Property Standards by

Construction Status ......................................................................................................... 468 c. Minimum Property Requirements and Minimum Property Standards ........................... 469 d. Gross Living Area........................................................................................................... 484 e. Appliances....................................................................................................................... 486 f. Swimming Pools ............................................................................................................. 486 g. Mechanical Components and Utilities ............................................................................ 487 h. Roof Covering................................................................................................................. 488 i. Structural Conditions ...................................................................................................... 489 j. Defective Paint................................................................................................................ 489 k. Attic Observation Requirements..................................................................................... 489

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Effective Date: 09/14/2015 | Last Revised: 09/30/2015

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

l. Foundation ...................................................................................................................... 490 m. Crawl Space Observation Requirements ........................................................................ 490 n. Environmental and Safety Hazards................................................................................. 491 o. Repair Requirements....................................................................................................... 492 p. Utility Services................................................................................................................ 493 q. Onsite Sewage Disposal Systems ................................................................................... 496 4. Valuation and Reporting Protocols....................................................................................... 497 a. Photograph, Exhibits and Map Requirements ................................................................ 497 b. Intended Use and Intended Users of Appraisal............................................................... 498 c. Development of the Market Value.................................................................................. 498 5. Property Acceptability Criteria for Manufactured Housing for Title II Insured Mortgages 511 a. Definitions....................................................................................................................... 511 b. Standard .......................................................................................................................... 511 c. Foundation Systems ........................................................................................................ 512 d. Running Gear .................................................................................................................. 513 e. Perimeter Enclosure ........................................................................................................ 513 f. HUD Certification Label................................................................................................. 513 g. Data Plate ........................................................................................................................ 514 h. Flood Zone ...................................................................................................................... 514 i. Additions to Manufactured Housing............................................................................... 514 j. Measurement Protocols................................................................................................... 515 k. Sales Comparison Approach for Manufactured Housing ............................................... 515 l. Estimate of Cost New for Manufactured Housing.......................................................... 515 6. Condominium Projects.......................................................................................................... 515 a. Definition ........................................................................................................................ 515 b. Standard .......................................................................................................................... 515 c. Required Analysis and Reporting ................................................................................... 515 d. Site Condominium .......................................................................................................... 516 e. Manufactured Housing Condominium Projects.............................................................. 516 7. Valuation of Leasehold Interests .......................................................................................... 516 a. Definition ........................................................................................................................ 516 b. Standard .......................................................................................................................... 516 c. Required Analysis and Reporting ................................................................................... 517 d. Mixed Use One- to Four-Unit Single Family Properties ................................................ 517 8. Additional Appraisal Requirements for 223(e) Mortgages .................................................. 518 9. Unimproved Property Appraisal ........................................................................................... 518 a. Definition ........................................................................................................................ 518 b. Standard .......................................................................................................................... 518 c. Required Analysis and Reporting ................................................................................... 518 10. Update of Appraisal .............................................................................................................. 519 11. Market Conditions Addendum, Fannie Mae Form 1004MC/Freddie Mac Form 71, Instructions Applicable to FHA Appraisals .......................................................................... 519 a. Standard .......................................................................................................................... 519 b. Required Analysis and Reporting ................................................................................... 520 12. Programs and Products ......................................................................................................... 520 a. Section 248 Indian Land Program .................................................................................. 520

Handbook 4000.1

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Effective Date: 09/14/2015 | Last Revised: 09/30/2015

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

b. Section 247 Hawaiian Homelands Program ................................................................... 523 c. Standard 203(k) and Limited 203(k) Rehabilitation Mortgages ..................................... 524 d. Special Energy-Related Building Components .............................................................. 525 e. HUD Real Estate Owned Properties ............................................................................... 527

C. CONDOMINIUM PROJECT APPROVALS .................................................................. 533

III. SERVICING AND LOSS MITIGATION...............................................534

A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES ............. 534

1. Servicing of FHA-Insured Mortgages .................................................................................. 534

a. Servicing in Compliance with Law................................................................................. 534

b. Responsibility for Servicing Actions .............................................................................. 535 c. Providing Information to HUD ....................................................................................... 537

d. Communication with Borrowers and Authorized Third Parties ..................................... 537

e. Payment Administration ................................................................................................. 537 f. Servicing Fees and Charges ............................................................................................ 542 g. Escrow............................................................................................................................. 543

h. Insurance Coverage Administration ............................................................................... 547

i. Mortgage Insurance Premium Remittance...................................................................... 549 j. Post-Endorsement Mortgage Amendments .................................................................... 550

k. Mortgage Insurance Premium Cancellation and Termination ........................................ 556

l. Mortgage Insurance Termination.................................................................................... 558 m. Disclosures ...................................................................................................................... 560

n. Record Retention ? Servicing File .................................................................................. 562

2. Default Servicing .................................................................................................................. 563

a. Mortgages in Delinquency or Default............................................................................. 563 b. HUD Default Servicing Contact ..................................................................................... 563

c. Reporting to Consumer Reporting Agencies and the IRS .............................................. 563

d. Late Charges ................................................................................................................... 564 e. Partial Payments for Mortgages in Default..................................................................... 565 f. Lien Status ...................................................................................................................... 566

g. Imminent Default ............................................................................................................ 566

h. Early Default Intervention .............................................................................................. 567 i. Loss Mitigation Review Process..................................................................................... 579

j. HUD's Loss Mitigation Program.................................................................................... 585

k. Home Retention Options................................................................................................. 591 l. Home Disposition Options.............................................................................................. 615

m. Loss Mitigation Incentives.............................................................................................. 644

n. Non-Monetary Default.................................................................................................... 644

o. Distressed Asset Stabilization Program .......................................................................... 646 p. Claims Without Conveyance of Title ............................................................................. 646

q. Reinstatement.................................................................................................................. 649 r. Foreclosure...................................................................................................................... 651 s. Acquiring Possession ...................................................................................................... 662

t. Conveyance of Acquired Properties ............................................................................... 665

u. Deficiency Judgments ..................................................................................................... 684 3. Programs and Products ......................................................................................................... 686

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Effective Date: 09/14/2015 | Last Revised: 09/30/2015

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

a. Adjustable Rate Mortgages............................................................................................. 686 b. Assumptions.................................................................................................................... 691 c. Presidentially-Declared Major Disaster Areas................................................................ 694 d. Hawaiian Home Land Mortgages (Section 247 Mortgages) .......................................... 699 e. Insured Mortgages on Indian Land (Section 248 Mortgages) ........................................ 703 f. Section 222 Mortgages ................................................................................................... 704 g. Good Neighbor Next Door.............................................................................................. 707 h. HOPE for Homeowners .................................................................................................. 710 i. Nehemiah Housing Opportunity Grants Program........................................................... 711 j. Servicing FHA-Insured Mortgages for Servicemember-Borrowers............................... 712 k. Section 235 Mortgages ................................................................................................... 715

IV. CLAIMS AND DISPOSITION ................................................................783

V. QUALITY CONTROL, OVERSIGHT AND COMPLIANCE ............784

A. QUALITY CONTROL OF LENDERS AND MORTGAGEES .................................... 785

1. Quality Control Program Overview...................................................................................... 785 a. Purpose of Quality Control Program .............................................................................. 785 b. Definitions....................................................................................................................... 785 c. Standard .......................................................................................................................... 786 d. Required Documentation ................................................................................................ 786

2. Institutional Quality Control Program Requirements ........................................................... 786 a. Who May Perform Quality Control ................................................................................ 786 b. Operational Compliance ................................................................................................. 787 c. Identifying Patterns ......................................................................................................... 792 d. Fraud, Misrepresentation, and Other Findings ............................................................... 792

3. Loan Level Quality Control Program Requirements ............................................................ 794 a. Loan File Selection ......................................................................................................... 794 b. Loan Sample Risk Assessment ....................................................................................... 797 c. Origination and Underwriting Loan File Compliance Review ....................................... 798 d. Quality Control Reviews of Specialized Mortgage Programs ........................................ 801 e. Servicing Loan File Compliance Review ....................................................................... 802 f. Ineligible Participants ..................................................................................................... 803

4. Data Integrity ........................................................................................................................ 804 a. Standard .......................................................................................................................... 804 b. Required Documentation ................................................................................................ 804

B. QUALITY CONTROL OF OTHER PARTICIPANTS.................................................. 805

1. Direct Endorsement Underwriter .......................................................................................... 805 2. Nonprofits and Governmental Entities ................................................................................. 805

a. Quality Control Plan Overview ...................................................................................... 805 b. Quality Control Plan Findings and Corrective Action.................................................... 805 c. Fraud, Misrepresentation, and Other Findings ............................................................... 806 3. Additional Other Participants ............................................................................................... 806

C. MORTGAGEE MONITORING ....................................................................................... 807

1. Cooperation with HUD Investigations and Reviews ............................................................ 807

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Effective Date: 09/14/2015 | Last Revised: 09/30/2015

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

2. Institutional Mortgagee Monitoring...................................................................................... 807 a. Title I Lender Monitoring Reviews ................................................................................ 807 b. Title II Mortgagee Monitoring Reviews ......................................................................... 807 c. Servicer Tier Ranking System II..................................................................................... 808

3. Loan Level Monitoring ......................................................................................................... 812 a. Title I Loan Reviews....................................................................................................... 812 b. Title II Loan Reviews ..................................................................................................... 812

D. MONITORING OF OTHER PARTICIPANTS .............................................................. 812

1. Appraisers ............................................................................................................................. 812 2. 203(k) Consultants ................................................................................................................ 813 3. Nonprofits and Governmental Entities ................................................................................. 813

a. Monitoring of Governmental Entities and HUD-approved Nonprofits .......................... 813 b. Monitoring of HUD Homes Participants ........................................................................ 813 c. Monitoring FHA Mortgagor Participants ....................................................................... 814 d. Monitoring of Secondary Financing Program Participants ............................................ 814 4. Additional Other Participants ............................................................................................... 814

E. ENFORCEMENT ............................................................................................................... 815

1. Referrals for Non-Compliance.............................................................................................. 815 2. Employee Improprieties Attributed to the Mortgagee .......................................................... 815 3. Program Office Actions and Sanctions................................................................................. 815

a. Actions and Sanctions Against Mortgagees ................................................................... 815 b. Loan Level Actions and Sanctions ................................................................................. 822 4. Mortgagee Review Board Actions and Sanctions ................................................................ 822 a. Actions and Sanctions..................................................................................................... 822 b. Procedures....................................................................................................................... 826 5. Actions and Sanctions Against Individuals and Other Program Participants....................... 828 a. Limited Denial of Participation ...................................................................................... 828 b. Suspension ...................................................................................................................... 829 c. Debarment....................................................................................................................... 830 d. Civil Money Penalties..................................................................................................... 831 e. Specific Program Participants......................................................................................... 831

APPENDIX 1.0 ? MORTGAGE INSURANCE PREMIUMS ........................838

APPENDIX 2.0 ? ANALYZING IRS FORMS .................................................840

APPENDIX 3.0 ? POST-ENDORSEMENT FEES AND CHARGES BY HOC (APPLIES TO SERVICING ONLY).......................................................843

APPENDIX 4.0 ? HUD SCHEDULE OF STANDARD ATTORNEY FEES (APPLIES TO SERVICING ONLY).......................................................850

APPENDIX 5.0 - FIRST LEGAL ACTIONS TO INITIATE FORECLOSURE AND REASONABLE DILIGENCE TIMEFRAMES (APPLIES TO SERVICING ONLY).................................................................................852

Handbook 4000.1

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Effective Date: 09/14/2015 | Last Revised: 09/30/2015

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

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