19W-059

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19W-059

Attention: Business Development Managers & Mortgage Brokers

July 18, 2019

Please take a moment to read the important information contained in this bulletin.

Included in this Bulletin: FHA 4000.1 Handbook Updates

The Federal Housing Administration (FHA) published the quarterly update to its Single Family Housing Policy Handbook 4000.1 (SF Handbook). Revisions include updated policy guidance, clarifications, corrections, and additions to SF Handbook Section I (Doing Business with FHA), Section II (Origination through Post-Closing/Endorsement), and Section V (Quality Control, Oversight and Compliance).

Change in Timing of Inspections in Presidentially Declared Major Disaster Areas (PDMDAs) FHA has changed its policy to accelerate the timing of inspections in PDMDAs. FHA now permits the inspection to be dated 14 days from the Incident Period start date (in addition to "after the Incident Period"). In the past, HUD policy required inspections to be signed after the Incident Period or a waiver was issued. This change may be implemented immediately.

HUD added that "if the effective date of the appraisal is on or after the date required above for an inspection, a separate inspection report is not necessary." The new guidance also confirms what was in an FAQ that the FEMA trigger is "individual assistance" in a PDMDA.

"All Properties with pending Mortgages or endorsements in areas under a Presidentially Declared Major Disaster Areas (PDMDA) designated for individual assistance must have a damage inspection report that identifies and quantifies any dwelling damage. The damage inspection report must be completed by an FHA Roster Appraiser even if the inspection shows no damage to the Property, and the report must be dated after the Incident Period (as defined by FEMA) or 14 Days from the Incident Period start date, whichever is earlier. If the effective date of the appraisal is on or after the date required above for an inspection, a separate damage inspection report is not necessary."

Other Handbook Changes In addition to the disaster inspection change outlined above, below is a list of the other most significant changes/clarifications in the revised Handbook.

? Page 34 - Makes clear that the FHA approved lender is responsible for the actions of its sponsored third party originators (TPOs).

? Page 132 - Clarifies that the Minimum Decision Credit score is the median score when there are three scores.

? Pages 166, 517 - Clarifies requirements that pertain to public water supply systems and individual water supply systems (wells). Specifies conditions when water tests are required for each.

? Page 178 - Clarifies that TOTAL is not used for non-profit or government entity borrowers.

? Page 202 - Simplifies the calculation of overtime, bonus and tip income.

? Page 205 - Simplifies the calculation of commission income and revises the documentation requirements for such income.

? Page 213 - Simplifies the calculation of auto allowance income.

? Pages 226, 233-234 - Expands the definition of Interested Parties to include lenders and TPOs; provides a clearer definition of Premium Pricing; clarifies that Premium Pricing credits from the lender or TPO are excluded from the 6% limit on Interested Party contributions provided the lender or TPO is not the seller, real estate agent, builder or developer.

? Page 236 - Clarifies when rent below fair market is considered a sales inducement.

? Page 424 - Changes the requirements for meeting the net tangible benefit test when doing a streamline refinance with a reduction in term.

? Page 488 - Requires that the appraiser provide an explanation in the appraisal report if the seller is not the owner of record.

? Page 498 - Clarifies the appraisal requirements applicable to stationary storage tanks.

? Page 509 - Appraiser must ask to have utilities turned on if they are off.

? Page 521 - Requires appraisal photographs for any negative or positive view influences that affect the value or marketability of the property.

? Pages 977-986 - Deletes most guidance related to analysis of Form 1040 tax returns.

Effective Date of Changes

?

HUD notes that these changes/clarifications may be implemented immediately but must be

implemented for mortgages with case numbers assigned on or after September 9th.

?

To the extent that changes are incorporating previously published Mortgagee Letters, you should

follow the guidance in the applicable mortgagee letter.

For complete details, please see the FHA 4000.1.

Author: Underwriting

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