SCORE 2 FOR THE BROKERS!
Disparity between (sponsored) FHA Originators and Originators
Working directly for mortgagees continues at HUD
Mortgage Letter 2011-34, the subject of which is titled Revised Lender Approval Requirements, issued September 23, 2011, does a couple of things which I will outline momentarily. But it does not grant parity between third party originators (mortgage brokers) that are sponsored to originate FHA loans and originators that work directly for lenders that are HUD approved mortgagees. By most interpretations, the former can engage in selling real estate and the latter cannot. HUD does not come right out and sanction this but through their omission of mentioning it in ML 2010-20; it is generally accepted and allowed by most lenders. Many had hoped that this Mortgagee Letter would address this inequity. It did not. While this ML rescinded many sections of the current Mortgage Approval Handbook, also known as the 4060.1, it did not rescind the section that restricts originators working for mortgagees, namely Section 2-9 F&G, from engaging in any other real estate related activities outside of originating mortgages for the mortgagee that employs them.
Secondly, there was no lifting of the requirement for employees of mortgagees to be W-2'd employees vs. 1099. Mortgage brokers being sponsored for FHA can opt for 1099 reporting. So, for now, score two for the independent mortgage brokers!
Now let's discuss what this ML did address that pertains to all. Jurisdiction restrictions have been removed. Effective immediately, HUD will follow state licensing guidelines when it comes to originations. Mortgagees and their branches or sponsored brokers may originate FHA loans in any state where they hold the appropriate license.
In most cases, this means three levels of licensing. For mortgagees the levels will likely be the company, the branch and the originator. For third party originators, or mortgage brokers, the levels will be the wholesale lender (mortgagee), the broker and the originator. You will want to have your appropriate licensing in place prior to advertising, taking an application, or representing yourself as an originator in any fashion. It is now a felony in several states to engage in origination activities without proper licensing.
Additionally, unless you expect to have business in the next couple of weeks, if you submit your new application at the end of October and its approved after November 1st, most states will approve your license through December 31st of 2012.
Read all the changes ML 2011-34 makes here.
KNOW YOUR LIMIT!
Loan Limits, of course
|Is it Friday yet?|
The much anticipated, late September extension of temporary loan limits did not materialize. Just not enough sympathy on the hill for those of us in high cost areas like California. The standard conforming limit remains at $417,000. The maximum high cost (HB) limit of $729,750 dropped to HERA limits, effective 10/1/2011 to $625,500. Do not assume the county you are doing your loans in is at $625,500. Many counties in California are below this amount. In fact, the counties that are now at $625,500 is a relatively short list; eleven in all. If the county you intend to lend in is not in one of these counties, you will want to use the loan limit look up tools listed below.
Eleven California Counties at New Maximum HB Limit of $625,500:
- Contra Costa
- Los Angeles
- San Benito
- San Francisco
- San Mateo
- Sana Barbara
- Santa Clara
- Santa Cruz
New FNMA (HERA) limits for California Printable for easy reference
FHA Loan Limit Look up