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This Week in Washington

FHA issues RFI on rehabilitation mortgage insurance program

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This Week in Washington
Friday, February 17, 2023

The Federal Housing Administration (FHA) issued a request for information (RFI) on how it can enhance its Single Family 203(k) rehabilitation mortgage insurance program. Specifically, it is looking for comments related to reducing barriers to the program’s use and feedback on ways to expand the preservation and renovation of aging housing stock as well as housing opportunities through updates to its policies and programs.

This program is used to finance the rehabilitation of an existing one-to-four-unit structures primarily used for residential purposes. Mortgages insured through the 203(k) program are used to rehabilitate an eligible structure and refinance outstanding indebtedness on the structure and real property on which it is located.

These funds also can be used to purchase and rehabilitate a structure and purchase the real property on which it is located or rehabilitate the interior space of an eligible condominium unit excluding areas under the responsibility of a condo association.

“FHA would like to offer improved options to finance the purchase or refinance of a home that needs significant rehabilitation,” Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon said. “Feedback from today’s RFI will help us advance our goals to increase housing supply, reduce vacancy and blight, and expand homeownership opportunities in all communities.”

Interested parties have until April 17 to submit their comments, though the FHA did state late-filed comments will be considered to the extent practicable.

Gordon provided specific questions for consideration, including:

  • What information can you provide regarding ways in which the FHA 203(k) program does or does not meet the needs of borrowers seeking to renovate or rehabilitate their homes?
  • What policies or processes governing the 203(k) program could be streamlined, modified, or eliminated to enhance your experience with the 203(k) program?
  • How could FHA increase participation in the 203(k) program?
  • What methods would you recommend HUD use to increase stakeholders’ awareness about FHA’s 203(k) program?
  • What state or local regulations impact the use of FHA’s 203(k) program?
  • The 203(k) program is currently underutilized by nonprofits and governmental entities. What type of changes would encourage more nonprofits and governmental entities to increase their participation in the program?
  • What technology solutions could improve the availability of, or facilitate, the 203(k) program?
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12 USC Section 2605 or Section 6 is titled Servicing of mortgage loans and administration of escrow accounts. It pertains to qualified written requests, notices of transfer of servicing and the administration of escrow accounts.
An arrangement that involves a person who is in a position to refer business as part of a real estate settlement service and who has an interest in a settlement services provider.

In the arrangement, the person, who has either an affiliate relationship with or a direct or beneficial ownership interest of more than one percent in a settlement services provider, directly or indirectly refers business to that provider or influences a consumer to select that provider.
An arrangement that involves a person who is in a position to refer business as part of a real estate settlement service and who has an interest in a settlement services provider.

In the arrangement, the person, who has either an affiliate relationship with or a direct or beneficial ownership interest of more than one percent in a settlement services provider, directly or indirectly refers business to that provider or influences a consumer to select that provider.
A mortgage disclosure that lists all estimated charges and fees associated with your loan. In addition to fees and charges, it will list your loan amount, mortgage rate, loan term and estimated monthly payment. Your escrows due at closing for insurance and taxes will also be outlined. Mortgage lenders are legally required to provide a GFE within three days of receiving your application.
A mortgage disclosure that lists all estimated charges and fees associated with your loan. In addition to fees and charges, it will list your loan amount, mortgage rate, loan term and estimated monthly payment. Your escrows due at closing for insurance and taxes will also be outlined. Mortgage lenders are legally required to provide a GFE within three days of receiving your application.
Under RESPA Section 2605(e)(1)(B), a qualified written request is a written correspondence that includes: 1) the name and account of the borrower, or has enough information to allow the servicer identify that information; and 2) a statement of the reasons for the belief of the borrower that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

A QWR cannot be written on a payment coupon or other payment medium supplied by the servicer.
Under RESPA Section 2605(e)(1)(B), a qualified written request is a written correspondence that includes: 1) the name and account of the borrower, or has enough information to allow the servicer identify that information; and 2) a statement of the reasons for the belief of the borrower that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

A QWR cannot be written on a payment coupon or other payment medium supplied by the servicer.
12 USC Section 2609 or Section 10 is titled Limitation on requirement of advance deposits in escrow accounts. It governs escrow accounts including notifications and statements to borrowers. Section 10 also sets out penalties for those who violate the section.
RESPA Section 3 provides that a thing of value includes any payment, advance, funds, loan, service or other consideration

Regulation X says thing of value includes: monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person’s expenses or reduction in credit against an existing obligation.
A form used by a settlement or closing agent itemizing all charges imposed on a borrower and seller in a real estate transaction. This form represents the closing transaction and provides each party with a complete list of incoming and outgoing funds. RESPA requires the HUD-1 to be used as the standard real estate settlement form in all transactions in the U.S. involving federally related mortgage loans.
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