new to market
FHA Removes One Percent Origination Cap on the Ks
JUNE 2011
ARIZONA MORTGAGE PROFESSIONAL MAGAZINE
NationalMortgageProfessional.com
52
With the Federal Housing Administration (FHA’s) Mortgagee Letter 2011-18, an originator is no longer limited to the one percent origination cap, and may now charge more than the traditional one percent origination fee on 203k rehabilitation loans (note that the guides for the supplemental origination remain the same). This change now makes the 203k or the “K” a more profitable loan for FHA originators specializing in renovation lending, and is effective for all case numbers assigned on or after April 26, 2011. Regarding the charging of fees, Mortgagee Letter 2011-18 states, “The lender may only collect fair, reasonable, and customary fees and charges from the borrower for all origination services, as described in Handbook 4155.2, 6.A.3.a.” This addendum is clearly FHA’s way of warning mortgage loan originators not to take advantage. As always, lenders need to remain aware of FHA’s Tiered Pricing Rules as outlined in Mortgagee Letter 94-16. This change was likely made in an effort to encourage LOs to offer the product by making it more profitable. Of course, for those with a flat fee compensation plan, this won’t make a difference. However, for those with a niche in rehab lending, it makes a lot of sense to be in the buyer-paid compensation plan. This allows for the flexibility necessary to structure the desired profitability based on the amount of time it will take to process any given transaction. It seems that the FHA realizes the great impact this product can have in purging the housing market of the real estate-owned (REO) inventory, and this change offers good incentive for LOs to offer this product. Given that there are very few LOs who are truly 203k experts (and I am not among them myself!), these rehab lending pros should be able to charge a premium for their expertise. When FHA changed the guidelines on forward loans allowing for borrowers to be charged the normal buyer fees (such as the processing and underwriting), followed by the one percent cap removal, the result was an immediate and significant increase in the FHA originator’s income. We now
have the same scenario with regard to the Ks, which should be pretty exciting to K experts, and presents ample motivation for them to develop and implement plans to increase their referral sources for the Ks.
Time for a new niche? For those of you looking for a new niche, the K may be a good option for you. However, and this is a big however, you must do an honest assessment of yourself and determine if your traits match the required skill set to become a K expert. The MLO who excels at the K is one who has the following traits, or has a team that comprises all of these four traits: It is absolutely critical that you possess a thorough and good working knowledge of the K guides. Excellent communication skills are extremely important in order to manage the myriad aspects of the process and to clearly set accurate and realistic expectations for all parties involved, namely the borrower and real estate agents. One must have a foolproof system of follow up. One of the most common reasons borrowers have negative experiences with the Ks (just read the blogs), is that the follow-up was very poor and they really didn’t know what to expect. One must possess the diligence to brand oneself as “The Local Expert for 203 K Rehabilitation Loans.” You can know the guidelines forwards and backwards, but if people do not know who you are, you won’t get any loans!
Social media The fourth item above is generally the toughest for an LO. However, with a focused social media plan, the right blogging know-how, and the proper implementation and diligence, you can, in time, come to gain the online equity you need to become the branded K continued on page 54
continued from page 51
that its Connexions appraisal management system now offers a new feature for conveniently processing appraisal payments online. Through a secure online link to the Connexions Web-based software platform borrowers can directly enter their credit card or automated clearing house information to pay lenders on the system for appraisals. The new payment processing feature notifies borrowers and lenders that payments have been approved and accepted. Also, lenders will know immediately if there are any payment issues in the appraisal process needing to be addressed and they can make appraiser payment adjustments more easily when additional work is required in an appraisal order. With the Connexions feature, lenders no longer have to manually pay appraisers and worry about possible missing invoices and delayed payments to vendors. After accessing a borrower’s credit card payment, lenders then can pay appraisers directly on Connexions, giving them the opportunity to lower accounting expenses. And there is no need for lenders to incur the expense of setting up a payment storage plan in a separate database when processing payments on Connexions. The new payment option also enables lenders to make refunds and readjust payments for appraisals, and to address vendorspecific refund policies. “The payment processing feature will help lenders improve their margins by giving them better control of their cash flows,” said Jennifer Creech, president of InHouse Inc. “Lenders will know immediately on Connexions what payments are coming in, which appraisers need to be paid and when they need to be paid. InHouse can hold the funds for them and handle the process from beginning to end, or lenders can set up an account in their name and be responsible for the management of the funds.”
LPS Announces Single-Point-of-Contact Requirement Compliance Solution for Servicers Lender Processing Services Inc. (LPS) has announced that it has developed a solution to help mortgage servicers respond to the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board (FRB)-issued consent orders announced on April 15th. A key element of these consent orders is for mortgage loan servicers to provide their borrowers with a dedicated single point(s) of contact for specific mortgage loan servicing functions. LPS has proactively responded to the required consent orders by enhancing its mortgage loan servicing platform, MSP. Clients will be able to assign, view and easily obtain detailed information on the single point of contact assigned to each specific loan throughout the life of the loan.
“Offering mortgage loan servicers the ability to specify a single point of contact for each mortgage loan helps streamline loss mitigation workflows, increases borrower satisfaction with the process and enables mortgage loan servicers to comply with the proposed regulation quickly and easily,” said Greg Whitworth, executive managing director of LPS’ Servicing Solutions division. This enhancement adds a unique tracking field within MSP to record single-point-of-contact information, as designated by the mortgage loan servicer. LPS will also provide fields in ancillary products to support consistency across all communication channels. While the current focus on a single point of contact is specific to loss mitigation, LPS is working to broaden the scope of its single-point-of-contact functionality to all areas of mortgage loan servicing, whether that mortgage loan is current or in any stage of default.
MortgageFlex Collaborates With Xerox Mortgage Services on Enhanced Doc Management
MortgageFlex Systems Inc., a provider of lending and servicing solutions, has announced its integration with Xerox Mortgage Services’ BlitzDocs platform to provide lenders comprehensive and enhanced document management services. The combined offering provides customers with a roadmap to a complete eMortgage solution, including eDisclosures, investor eDelivery, and integrated processes that drive compliance and improve efficiency. BlitzDocs’ one-click integration to the MortgageFlex origination system, the Residential Lending System, enables lenders to seamlessly synchronize documents throughout the loan process and deliver them to consumers, business partners and investors. “MortgageFlex is an industry innovator that has built its business on a strong foundation of industry leadership and technology,” said Nancy Alley, vice president of product management, Xerox Mortgage Services. “The integration of the Xerox Mortgage Services and MortgageFlex platforms will provide comprehensive document management capabilities from the delivery of electronic disclosures to investor delivery to document archiving.” At the core of Xerox Mortgage Services’ offerings is the BlitzDocs Collaborative Electronic Loan Folder (eFolder). The eFolder provides disparate mortgage participants anywhere, anytime, simultaneous access to its contents. Regulated by role-based continued on page 54