Lenders and Real
Estate Professionals
• Downloads
• Training
• Seminar Set-Up
• References
• Lender Online
Information for Single-Family
Lending and
Real Estate Professionals
Program
Announcement
March 24, 2010
Message from Bank of America
To All Correspondent Clients
Topics in this Product announcement
include:
Increase in Upfront Mortgage Insurance Premiums
FHA Property Flipping Requirements
Increase in Upfront Mortgage Insurance Premiums
As announced in HUD Mortgagee Letter 2010-02, effective for FHA loans with case numbers assigned on or after April 5, 2010, FHA will collect an upfront mortgage insurance premium (UFMIP) of 2.25%. This policy change will increase premiums for purchase money and refinance transactions, including streamline refinance transactions.
Applications that do not have an FHA case number assignment date prior to April 5, 2010 will be subject to the new up front mortgage insurance premium (UFMIP) factors.
Applications that are disclosed with the lower
UFMIP factors and do not have a case number assignment date prior to
April 5, 2010 will be required to re-disclose to increase the UFMIP
to the borrower within 3 days of the change circumstance event, or
no later than April 8, 2010 to comply with Regulation X.
FHA programs NOT impacted by the new UFMIP
factors at this time are:
• 248 Indian Reservations
• 247 Hawaiian Homelands
Section 12.01 of the Client Guide will be updated with this change on April 5, 2010.
FHA Property Flipping Requirements
With certain exceptions, FHA has prohibited insuring a mortgage on a home owned by the seller for less than 90 days. This restriction was imposed in 2003 to prevent property flipping (reselling for profit with an artificially inflated value). On January 15, 2010, HUD announced a temporary (1 year) waiver of the prohibition with strict conditions to ensure against predatory practices.
Effective April 1, 2010, Correspondent Lending will allow the 90-day waiver for all property sellers, including private sale transactions, but prohibits FHA financing for properties owned less than 90 days if the sales price is greater than or equal to a 20% increase over the seller's acquisition cost. The 90 days is calculated from the seller’s acquisition date to the purchase contract date of the new transaction.
Regardless of who the property seller is, if the resale occurs within 0 to 90 days, the following requirements must be met: All transactions must be arms-length; no identity of interest between buyer, property seller or third parties.
Specific ways to ensure an arms-length transaction include:
Property seller currently holds title to the
property.
LLCs, corporations or trusts serving as
property sellers must meet all applicable state and federal law.
No pattern or previous flipping activity
exists on the property (as evidenced by multiple title transfers
within 12 months.
The property was marketed openly and
fairly (Any sales contracts with “assignment of contract of
sale” may be a red flag).
Transactions with sales price greater than or
equal to a 20% increase over seller's acquisition cost are not
allowed.
Section 12.01 of the Client Guide will be updated with this change on April 5, 2010.
If you have any questions, contact Laura Khurscheed-Uschok at laura.uschok@bankofamerica.com or 818-874-8161.