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In today’s issue of the Federal Register (76 FR 6149), the FHA published notice that it is extending its temporary waiver of its property flipping regulations (see 24 CFR §203.37a) until December 31, 2011. Pertinent parts of the notice are reprinted below: Waiver This notice announces that FHA is extending the availability of the temporary waiver of its regulation that prohibits the use of FHA financing to purchase single family properties that are being resold within 90 days of the previous acquisition, until December 31, 2011. This waiver, which was issued in January 2010, took effect for all sales contracts executed on or after February 1, 2010, and is set to expire on February 1, 2011. Prior to the waiver, a mortgage was not eligible for FHA insurance if the contract of sale for the purchase of the property that is the subject of the mortgage is executed within 90 days of the prior acquisition by the seller and the seller does not come under any of the exemptions to this 90-day period that are specified in the regulation. … [T]he waiver is applicable to all single family properties being resold within the 90-day period after prior acquisition, … [a]dditionally, the waiver is subject to certain conditions, and eligible mortgages must meet these conditions to take advantage of the waiver. … Although no changes are made to the conditions to which the waiver is subject, this notice also includes guidance on the waiver conditions in response to questions that have arisen from time to time during the first year in which the waiver was made available.

This is to advise all clients that on December 28, 2010, FHA published the above Mortgagee letter (copy attached) that revises its flood zone requirements. Effective for all case numbers assigned on or after March 1, 2011: 1. Mortgagees must obtain life-of-loan flood zone determination services for all properties securing FHA loans. 2. Properties located within a designated Coastal Barrier Resource System unit are not eligible for an FHA-insured loan. Attached to Mortgagee Letter 2010-43 is an Appendix that identifies the flood insurance requirements for the various property types covered by the letter.

Today, the FHA Commissioner issued a Special Edition announcement that, in pertinent part, temporarily extends FHA-approval of currently approved loan correspondents for the purpose of permitting existing loans in the loan correspondents’ pipelines to close in their names, with conditions. According to the announcement, this temporary extension applies only to loans for which, as of December 31, 2010.

In the December 8, 2010 issue of the Federal Register (75 FR 76482), HUD published the following Notice regarding FHA single-family maximum loan limits for 2011: “This notice announces that FHA has posted on its Web site the single-family maximum loan limits for 2011. The loan limit limits can be found at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/.

In today’s Federal Register (75 FR 41217) HUD published notice that in order to enhance FHA risk management practices, FHA is proposing the following changes to its underwriting guidelines: 1. reduce “seller concessions”; 2. introduce a minimum eligibility credit score; 3. reduce the maximum LTV for low credit score borrowers; and 4. tighten underwriting standards for manually underwritten loans.

In the April 20, 2010 issue of the Federal Register (75 FR 20718) the Federal Housing Administration (FHA) published its final rule, effective May 20, 2010, amending part 202 of FHA regulations (24 CFR Part 202) that: (1) increases the net worth requirements for FHA-approved lenders; (2) eliminates the FHA approval process for loan correspondents; and, (3) incorporates criteria specified in the Helping Families Save Their Homes Act of 2009 (HFSH Act). This memorandum attempts to redact what we consider are the more important parts of the final rule and HUD’s preamble published with the final rule in the above-cited issue of the Federal Register and does not address all aspects of the final rule or HUD’s preamble. You are advised to read the complete text of the final rule and HUD’s preamble and not to rely solely on this memorandum. The complete text of the final rule is attached to this memorandum for your information and use.

On January 21, 2010, FHA issued M.L. 2010-02 that announced 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 percent. The full text of M.L. 2010-02, is attached to this memorandum, and is briefly summarized below:

On December 30, 2009, FHA, in accordance with the regulatory changes to 24 CFR §203.27, issued M.L. 2009-53 that, among other matters, removed the one percent origination fee cap for FHA’s standard mortgage insurance programs. The Home Equity Conversion Mortgage (HECM) and the Section 203(k) Rehabilitation Mortgage Insurance programs retain their statutory origination fee caps. As noted in No. 2 below, in order to correct a misstatement, FHA revised M.L. 2009-53. The full text of revised M.L. 2009-53, which is attached to this memorandum, is briefly summarized below:

On September 19, 2008, FHA issued Mortgagee Letter 2008-25 to provide underwriting guidance on FHA insured transactions where a principal residence is being vacated in favor of another principal residence. Due to FHA’s concern that some homebuyers in these transactions may attempt to provide misleading information regarding the rental income of the principal residence being vacated to qualify for the FHA mortgage on the new principal residence, FHA is instituting underwriting guidance designed to assure that the homebuyer can make payments on the full debt service of both mortgages.