Written By: Stacey Sprain, Op-Ed Writer
I don’t know about anyone else out there but FHA case transfers have been a thorn in our side this year- big time. And it’s gotten more complicated now that the life of the appraisal has gone from 180 days to 120. Where it gets confusing is when there is an existing FHA appraisal with the initial lender who then must transfer the case and appraisal to a new lender. The whole process is clunky at best and gets further complicated by nearly all lenders having their own appraiser exclusionary list in some form.
Then there comes the question of when a lender should cancel a case assignment and when they should leave it open. I have seen inconsistencies all over the place on that answer- some say cancel the case whenever the loan ends up not closing as an FHA loan, some say just leave it open in case another buyer or another transaction comes to fruition on the same property, etc. However, I just learned something new that I haven’t seen or heard before but found listed right within HUD Handbook 4155.1. (I swore HUD snuck these details in there, even though there are May 2009 dates listed!)
According to the Handbook, Lenders must fax a cancellation request, specifying the reason for cancellation, to the appropriate HOC to close outstanding files and cancel an FHA case number if any of the following circumstances occur:
• an appraisal has not been completed and the borrower will not close the loan as an FHA loan
• the FHA mortgage insurance will not be sought, or
• the appraisal has already expired.
So if the case is requested but then you end up switching from an FHA to a different loan type before you receive the FHA appraisal, you should request the case cancellation. Not sure what they mean by the second option because to me, it seems to read as if it would be the same situation as the first. But the third option is one I don’t recall ever seeing clarified before- If you request an FHA case and receive the FHA appraisal but then for whatever reason, the appraisal reaches over 120 days old without having closed the loan, you need to request the existing case be cancelled so you can request a new case assignment and a new appraisal. The only exception would be in the case you are able to obtain an appraisal update using FNMA Form 1004D to extend the appraisal validity in accordance with the direction given inMortgagee Letter 2009-51. This direction is different than any direction I have seen or heard of previously so I’m still pretty perplexed as to why I have never seen it in the Handbook if it’s been there for over a year? Regardless, this is a change to everything I have ever heard of and a change to what we’ve been practicing to date in our organization so I felt it important to point out in case it may be helpful to others.
In addition, I am often asked about the shelf life of a single FHA case number- How long will it “sit out there” on FHA Connection? According to HUD, the system will automatically cancel an uninsured case number 13 months after the last action taken on the loan/case. At that point, the case assignment is said to automatically “purge off” the system.
I have heard of cases recently within our own organization that were present when the loan was originated and processed but that had been cancelled by the HOC at some point before insuring. If you should ever run into one of these situations, don’t panic! According The Handbook, if a case number has been canceled, and FHA insurance will be sought, the lender must fax a request to the appropriate HOC, requesting that the case number be reinstated to an active status.
And now on to the contact information for the Homeownership Centers:
• Atlanta Homeownership Center jurisdiction
o Fax to (813) 228-2478
• Denver Homeownership Center jurisdiction:
o Fax to (303) 672-5211 or, if busy, (303) 672-5210
• Philadelphia Homeownership Center jurisdiction fax based on location of property:
o Fax to (215) 656-3434: DE, DC, MD, MI, PA, VA, WV
o Fax to (215) 656-3438: CT, ME, MA, NH, NJ, NY, OH, RI, VT
• Santa Ana Homeownership Center jurisdiction:
o Fax to (714) 796-5521
You would also want to request a case cancellation on an existing case when initiating a request for case transfer with no response from the initial lender. You will always want to document the tracking and courses of action taken in those situations so that you can provide the details to HUD when you fax in your request. Under some circumstances, if HUDF cannot rectify the situation with the initial lender, they may cancel the existing case which will allow you to order a new one and the ability to proceed with the deal.
About The Author
Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution.