TopMortgage Compliance Update (1)
September 22, 2010
FHA: Issues FHA Connection Update
for Sponsored TPOs


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Greetings!
In my article, entitled FHA Issues Guidance for Lender Approvals (July 2010, National Mortgage Professional Magazine), I discussed the many changes that would be required pursuant to Mortgagee Letter 2010-20.

This ML, issued on June 11, 2010, outlines some of the most important revisions that HUD-FHA has made to its single family loan origination program and contained the long-awaited guidance regarding the implementation of its Final Rule. That Final Rule adopted changes pertaining to the approval of mortgage lenders by the Federal Housing Administration (FHA) that are designed to strengthen FHA by improving its management of risk.


If your organization has not drafted and begun implementing policies and procedures to comply with Mortgage Letter 2010-20, I highly urge you to do so immediately.


After December 31, 2010, loan correspondents (i.e., Third-Party Originators, so-called "TPO"s) will only be permitted to continue participation in FHA programs by establishing a sponsorship relationship with an FHA-approved mortgagee. Indeed, loan correspondents will no longer have access to non-public FHA systems, beginning January 1, 2011 (i.e., FHA Connection). Only FHA-approved mortgagees will be permitted to order FHA case numbers from the FHA Connection. HUD will provide future guidance, with respect to the processing of case numbers ordered prior to the January 1, 2011.


Mortgagee Letter 2010-33 has been expected. It describes the system enhancements to FHA Connection, providing notice to mortgagees who are sponsors ("Sponsoring Mortgagees') of sponsored third party originators ("Sponsored Originators") of new FHA Connection data submission requirements as was announced in Mortgagee Letter 2010-20.


For transactions originated by an FHA-approved loan correspondent, mortgagees should follow the current process through December 31, 2010.


FHA Connection enhancements will be implemented on October 4, 2010, and sponsoring mortgagees must begin complying with the new data entry requirements on that date.


Best regards,
Jonathan

___________________________________

Highlights
EFFECTIVE DATES

On or After October 4, 2010
  • All required sponsored origination data fields must be completed on assigned case numbers assigned.
  • Sponsoring mortgagees will no longer enter their 10 digit FHA ID in the FHA Connection as the loan originator for loans involving a sponsored originator, as previously advised in Mortgagee Letter 2010-20, as a temporary workaround pending this system enhancement release.
  • For mortgagees using B2G (FHA Connection Business to Government) that are unable to modify their systems to accommodate the transmission of the Employer Identification Number (EIN) by October 4, 2010, the FHA Connection Case Number Assignment screen must be used to order a case number for sponsored originator transactions.
  • The modified HUD/VA Addendum to the Uniform Residential Loan Application (92900-A) is required for all applications.
Until January 1, 2011
  • For loan originations not involving a sponsored originator, FHA mortgagees may use the prior version of the 92900-A (dated 5/2008) until January 1, 2011.
As of January 1, 2011
  • The FHA-approved loan correspondent program will no longer be available, and B2G mortgagees must comply with new systems requirements to support collection of sponsored originator data. Only FHA-approved entities will have direct access to FHA Connection.
SYSTEM AND SCREEN CHANGES
  • New Sponsored Originator Maintenance Screen Modified Case Number Assignment Screen
  • Modified Case Transfer Screen
  • Modified Insurance Application and HECM Insurance Application Screens
  • Modified Case Query Screen
  • Viewing Sponsored Originator Performance in Neighborhood Watch
  • FHA TOTAL Scorecard Changes
FORM CHANGE AND NEW SIGNATURE COMPLIANCE

HUD/VA Addendum to Uniform Residential Loan Application (92900-A)
  • Modified on page 3 to capture necessary information for sponsored originators, as follows:
    • Loan Origination Company - Entity's Legal Name of the originating mortgagee
    • Loan Origination Company Tax ID -- Employer Identification Number issued by the Internal Revenue Service (IRS)
    • NMLS ID of the Loan Origination Company - The unique identifier of the company, if licensed with NMLS
  • For those loans originated by a sponsored originator, the sponsoring mortgagee must enter its name and address in block 15 on pages 1 and 3. Directly below block 15 on page 3 are the new fields the mortgagee must enter for capturing the sponsored origination information described above.
  • The revised form 92900-A (dated 9/2010) must be used for all loan applications taken by a sponsored originator on or after October 4, 2010.
  • For loan originations not involving a sponsored originator, FHA mortgagees may use the prior version of the 92900-A (dated 5/2008) until January 1, 2011.
Uniform Residential Loan Application
  • On the Universal Residential Loan Application (URLA), the actual interviewer's name, signature and telephone number must appear on page 4, regardless of who employs the interviewer (e.g., a sponsored originator).
  • While common practice in the industry is for the interviewer to also sign page 1 of the 92900-A, if a sponsored originator is involved, it is now required that the sponsoring mortgagee must sign and date page 1 of the URLA.
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FHA Connection Enhancements to Support Sponsored Third Party Originations (Sponsored Originations), Mortgagee Letter 2010-33,

September 21, 2010


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