U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ...

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER

Special Attention of: All FHA-approved Mortgagees All Direct Endorsement Underwriters All FHA Roster Appraisers All FHA Roster Inspectors All FHA-approved 203(k) Consultants All HUD-approved Housing Counselors All HUD-approved Nonprofit Organizations All Governmental Entity Participants All Real Estate Brokers All Closing Agents

Transmittal: Handbook 4000.1 Issued: September 30, 2016 Effective Date: Multiple; See Below

1. This Transmits: Handbook 4000.1, FHA Single Family Housing Policy Handbook. 2. Explanation of Materials Transmitted: This revision to the FHA Single Family Housing Policy Handbook, or Handbook 4000.1 (Handbook), is being published to update existing sections. Below is a list of content updates being made to the Handbook:

Handbook Section

Handbook Changes

Page Number(s)

Asterisks (*) in document identify items with effective dates that differ from the September 30,

2016 effective date. Refer to Section 3 below for more information.

Section I ? Doing Business with FHA

I.B.2.b.iii 203(k) Consultants ? Provided additional guidance for

67, 92, 94

Application and Approval

prospective 203(k) Consultants and

Process ? Incomplete

nonprofit and Governmental Entities

Application;

who submit incomplete applications.

I.B.4.b.vi Nonprofits and

Governmental Entities ?

Application and Approval

Process ? Incomplete

Application;

I.B.4.b.ix(C) Nonprofits and

Governmental Entities ?

Recertification ? Incomplete

Recertification Application

Handbook Section I.B.4.a.i(A) HUD Homes

Handbook Changes

Updated guidance for nonprofit programs purchasing HUD Homes.

Page Number(s) 70

Section II ? Origination through Post-Closing/Endorsement

II.A.1.a.i(A)(4)(c)(vi) Single Use Incorporated change as announced in

111

of Signature

E-SIGN waiver, dated May 19, 2016.

II.A.1.a.i(E)(1)(a)(iii) Property Incorporated PACE guidance to

117, 125-126, 146-

Assessed Clean Energy;

reflect ML 2016-11.

147, 177, 231, 306,

II.A.1.a.iii(B)(6)(e) Additional

323, 341, 542-543

Requirements When Ordering an

Appraisal;

II.A.1.b.iv(A)(6) Property

Assessed Clean Energy

II.A.4.a.iii(A)(1) Automated

Underwriting System Data Entry

Requirements ? Mortgagees;

II.A.4.d.iii(G)(2) Interested Party

Contributions (TOTAL) ?

Standard;

II.A.5.c.iii(G)(2) Interested Party

Contributions (Manual) -

Standard;

II.A.5.d.vii(B) Calculating Total

Mortgage Payment;

II.A.6.a.viii(A) Monthly Escrow

Obligations;

II.D.12.d.iv Property Assessed

Clean Energy

II.A.1.a.iii(B)(6) Ordering

Removed redundant language in

123

Appraisals

Ordering Appraisals section.

II.A.1.a.iii(B)(7) Appraisal

Clarified that the effective date of the

126, 480

Effective Date;

appraisal cannot be a date before

II.D.1.a Information Required FHA case number assignment and

before Commencement of the provided additional guidance on the

Appraisal

use of conventional or other

government-guaranteed appraisals.

II.A.1.b.ii(B)(2)(a) Other Parties Added Closing Agent and title

138

to the Transaction - Standard

company to list to make consistent

with Section V.A.3.f.i(A) Ineligible

Participants ? Origination and

Underwriting Reviews ? Standard.

II.A.1.b.iv(A)(1)(e) Required

Removed and revised language to

143

Flood Insurance Amount

make consistent with 24 CFR

203.16a.

2

Handbook Section

II.A.1.b.iv(A)(7) Dwelling Unit Limitation; II.A.5.d.xii(C) Dwelling Unit Limitations; II.A.8.a.iii(A) Dwelling Unit Limitation

II.A.3.a.ii(F) Requirements for Living Unit; II.D.3.e Appliances II.A.3.a.ii(P) Individual Residential Water Purification Systems; II.A.6.a.viii(A) Monthly Escrow Obligations; II.D.3.p.vi Individual Residential Water Purification Systems II.A.4.a.v Accept Risk Classifications Requiring a Downgrade to Manual Underwriting (TOTAL); II.A.4.b.iv(C) Undisclosed Mortgage Debt (TOTAL) II.A.5.d.ix(F)(1) Calculating Residual Income

II.A.6.b.i Mortgage and Note Definitions II.A.7.d.ii(C) Uniform Case Binder Stacking Order

II.A.8.a.x(B) Maximum Mortgage Amount for Refinance ? Required Documentation

Handbook Changes

Moved section from II.A.5.d.xii(C) to II.A.1.b.iv(A)(7), and revised to clarify that guidance applies to Governmental Entities or nonprofit Borrowers. Subsequent heading numbers were renumbered. Updated heading in II.A.8.a.iii(A) for consistency. Clarified definition, standard, and reporting requirements for appliances. Added guidance for individual residential water purification systems.

Clarified guidance for when mortgage debt requires a downgrade to manual underwriting.

Clarified that total fixed payment should be part of residual income calculations. Updated definition of Mortgage.

Clarified requirement that, when applicable, Mortgagees must include Affiliated Business Arrangement disclosures in case binders. Removed unnecessary language in 203(k) Maximum Mortgage Amount for Refinance section.

Page Number(s) 147-148, 335, 364

164, 500-501 170-173, 341, 511

179, 188

327 345 355 379

II.A.8.a.xv(A)(2)(a) Initial Draw Amended origination fees and

384

at Closing ? Standard 203(k);

discount points as allowable

II.A.8.a.xv(A)(2)(b) Initial Draw disbursements at closing.

at Closing ? Limited 203(k)

3

Handbook Section

Handbook Changes

II.A.8.a.xvi Data Delivery/203(k) Calculator

Removed unnecessary lowest acquisition cost information and added credit for lead-based paint stabilization.

Page Number(s) 386

II.A.8.d.vi(A)(2)(b)(i) Calculating Maximum Mortgage Amount ? Standard; II.A.8.d.vi(B)(3)(a) Calculating Maximum Mortgage Amount for Simple Refinance Transactions Standard II.A.8.d.vi(A)(1)(b)(i) Rate and Term ? Payment History Requirements (Manually Underwritten) - Standard II.A.8.d.vi(B)(1)(b)(i) Simple Refinance ? Payment History Requirements (Manually Underwritten) ? Standard; II.A.8.d.vi(C)(2)(b)(i) Streamline Refinances ? Payment History Requirements - Standard II.A.8.i.i New Construction Definitions

Removed language regarding UFMIP refund applying only when the Mortgage included financed UFMIP.

Updated payment history requirements for No Cash-Out Refinances.

Clarified that Properties less than one-year old subject to a second sale are treated like existing properties.

411, 414 410, 413, 417-418

437

II.A.8.n.iv(A) Processing of an Assumption ? Initiating Processing

II.A.8.o.i(C)(2) Section 203(b) With Repair Escrow; II.A.8.o.vi(B) Section 203(b) With Repair Escrow; II.A.8.o.vi(C)(3) Section 203(b) With Repair Escrow; II.A.8.o.vi(D)(2) Section 203(b) With Repair Escrow

Replaced reference to outdated HUD-92210, and updated with instructions to notify HUD of assumptions via FHA Connection. Revised repair escrow amount to $10,000, in response to Final Rule "Disposition of HUD-Acquired Single Family Properties; Updating HUD's Single Family Property Disposition Regulations," published August 11, 2016.

456 459, 463, 464

4

Handbook Section

Handbook Changes

II.A.8.o.v(B)(2) Investment Property ? Investor Buyer; II.A.8.o.vi(A)(3) Section 203(b) ? Investor Buyer II.A.9.c.iii Draw Inspection Fee

II.D.3.c.iii(C)(7) Stationary Storage Tanks II.D.3.g Mechanical Components and Utilities II.D.3.g.iii Plumbing System

Updated headings to clarify that the section is relevant for an "Investor Buyer" rather than general investors.

Updated draw inspection fee guidance to reflect ML 2016-12. Revised language about stationary storage tanks and MPR/MPS. Updated language for appraisal of mechanical components and utilities. Clarified language for appraisal of plumbing systems.

Section III ? Servicing and Loss Mitigation

III.A.1.l.ii(A) Termination of

Clarified language on termination of

Mortgage Insurance

mortgage insurance.

III.A.2.a.i Mortgages in

Updated definition for consistency

Delinquency or Default ?

with the regulation.

Definitions

III.A.2.h.xii(A)(2) Reasonable Clarified that the Mortgagee must

Effort in Arranging a Face-to- send the request for an interview by

Face Interview

certificate of mailing or certified

mail.

III.A.2.i.iii(A) Borrower's

Added language regarding

Financial Information

Borrower's financial information,

including new sub-sections on

Living Expenses, Borrower Income,

and Hardship.

III.A.2.i.viii Notice to Borrower Added language regarding

after Loss Mitigation Review

Mortgagee's Notice to the Borrower.

III.A.2.j.i HUD's Loss Mitigation Removed Informal and Formal

Program ? Definitions

Forbearances from definition of Loss

Mitigation Options, since they are

workout tools.

III.A.2.j.iii HUD's Loss

Updated the Loss Mitigation Option

Mitigation Option Priority

Priority Waterfall table.

Waterfall

III.A.2.k.iv(D)(2) Special

Updated language on the date the

Forbearance ? Unemployment SFB ? Unemployment Agreement

Agreement ? Standard

expires.

III.A.2.k.v Loan Modification Added effective date language.

Page Number(s) 462, 463

469 490 501 503

575 579 594

598-598

601-602 604

608-610 614 617

5

Handbook Section

Handbook Changes

III.A.2.k.v(E)(7) Trial Payment Plans during Foreclosure; III.A.2.r.ii(C)(2) Terminating Foreclosure Proceedings for Loss Mitigation III.A.2.k.v(G) FHA-HAMP Loan Modification Provisions; III.A.2.k.v(H) FHA Mortgage Insurance Coverage and MIP III.A.2.k.vi(D)(2) FHA-HAMP Standalone Partial Claim III.A.2.k.vi(F) FHA-HAMP Trial Payment Plans III.A.2.l.ii(C)(2) Disclosure Requirements for PFS Transactions III.A.2.p.iv Independent ThirdParty Providers III.A.2.r.i(D)(1)(c) Prohibition of Foreclosure due to Federal Law or Regulations III.A.2.r.i(G) Manufactured Housing Review; III.A.2.t.v(C)(1) Title Evidence for Manufactured Housing ? Standard III.A.2.r.ii(E)(2)(d)(ii) Delay Due to Bankruptcy ? Chapter 11, 12, or 13 Bankruptcy III.A.2.t.ii(C) Mortgagee Property Preservation and Protection Action

III.A.2.t.ii(C)(4)(c)(ii) Requests for Exceeding Property Preservation Allowances ? Required Documentation III.A.3.c.iv(E) Deeds-in-Lieu of Foreclosure

III.A.3.d.i(C) HUD's Loss Mitigation Program

Clarified language to indicate Mortgagee must suspend and/or terminate foreclosure action, depending on state law requirement, during Trial Payment Plan. Clarified language for FHA-HAMP and FHA mortgage insurance coverage.

Updated language for FHA-HAMP Standalone Partial Claim. Added sections about FHA-HAMP Trial Payment Plans. Removed bullet to reflect that PFS transactions are not reported to CAIVRS. Updated language for Independent Third-Party Providers. Added language on how to report the status of the Defaulted Mortgage in SFDMS. Updated language regarding property classification and requirements for proper purging of title to align with Section II.

Clarified mortgagee guidance for foreclosure actions during Chapter 11, 12, or 13 Bankruptcy. Clarified when Mortgagee is responsible for preserving and protecting Property and updated documentation requirements. Renamed column for clarity.

Renamed heading to "Home Disposition Options," and added clarifying language. Removed items that were inaccurately listed as loss mitigation options.

Page Number(s) 622, 681

622-623

628 630-633

646 671 676 678, 715-716

683 691

693

731 733

6

Handbook Section

III.A.3.j.i(B)(1)(a) Interest Rate Cap ? Standard

Handbook Changes

Updated language to reflect amendments to Servicemembers Civil Relief Act, signed on March 31, 2016.

Section IV ? Claims and Disposition

IV.A.1.a.vii(B)(2) FHAC

Updated content to reflect that

Connection ? Standard;

Claims Without Conveyance of Title

IV.A.2.d.i(A) CWCOT

(CWCOT) may now be filed via

Processing Fee Exemption for FHA Connection (FHAC).

Small Servicers ? Standard;

IV.A.2.d.iv Submission of Claim

Form Parts to HUD for CWCOT

IV.A.1.a.vii(B)(6) Mortgagee

Re-labeled section from paragraph

Contact Information

(7) to paragraph (6) after deleting the

previous paragraph (6) (Advice of

Payment Letter) to reflect ML 2016-

09.

IV.A.1.b Title II Claims ? Claim Clarified language about timeframe

Status

after which Mortgagee can view

claim status, and about claims

submitted via EDI.

IV.A.2.a.iv(B) Submission of

Updated claim-filing guidance to

Parts B, C, D, and E

reflect ML 2016-09.

IV.A.2.e.iv Submission of Claim Corrected claim requirements

Form Parts to HUD for PFS;

relative to PFS claims and removed

IV.A.2.e.v Extension of Time to guidance for extension of time to

Submit PFS Claim

submit PFS claims.

IV.A.2.f Claim Type 31 ? Special Clarified SFB-Unemployment

Forbearance

incentive procedures.

IV.A.2.g Claim Type 32 ? Loan Separated Claim Type 32 - Loan

Modification;

Modification into two sections; the

IV.A.2.h Claim Type 32 ** -

first addresses regular Loan

FHA-HAMP Loan Modification Modifications and the second

addresses FHA-HAMP Loan

Modifications. Clarified incentive

procedures in both sections.

IV.A.2.i Claim Type 33 ** -

Clarified FHA-HAMP Partial Claim

FHA-HAMP Partial Claim

incentive and insurance benefits

procedures.

IV.A.3.e Advice of Payment and Updated Advice of Payment and

Title Approval

Title Approval guidance to reflect

ML 2016-09.

Page Number(s) 748

823, 862, 864

824 826 850 868 868 868

869 870-871

7

Handbook Section

Handbook Changes

IV.A.4.b.ii(B)(2) Reacquisition Package ? Required Documentation IV.A.4.b.ii(C) Resubmission of Claim IV.A.5.b Post-Claim Reviews ? Standard

IV.B.2.i.iii(D)(2)(a) Return of Entire Earnest Money Deposit IV.B.2.k.iii(A)(1)(c) Hard-to-Sell Properties

Updated to include inspection reports.

Updated instructions for resubmitting a claim. Corrected language to align with existing requirements of Handbook 4330.4. Added bullet to address VA Amendatory Clause. Corrected hard-to-sell total commission from $1,000 to $2,000.

Page Number(s) 874-875

875 875-876

902 907

Section V ? Quality Control, Oversight and Compliance

V.A.1.c.i Exception for

Clarified Standard to list QC

Multifamily Mortgagees

Program requirements not applicable

to the QC Program of a Multifamily

Mortgagee.

916-917

Appendices

Appendix 4.0 ? HUD Schedule Corrected inaccurate attorney fee for

984

of Standard Attorney Fees

South Carolina and clarified

(Applies to Servicing Only)

language in second footnote.

Appendix 5.0 ? First Legal

Corrected inaccurate data for

986

Actions to Initiate Foreclosure California and DC.

and Reasonable Diligence

Timeframes (Applies to

Servicing Only)

8

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