Written By: Stacey Sprain
HUD’s recently issued Mortgagee Letter 2011-10 finally communicated some important information I have long been waiting for. One should never request an FHA case assignment without a complete and active loan application at hand from the borrower(s) and property for which the case assignment is being requested.
As obvious as this statement may seem to some of us, this has been an ongoing debate with originators and it’s been difficult to explain and argue to this point. Though I’ve always directed originators to HUD’s natural transaction order athttp://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?address=4155-2.1...which clearly points out that step 2 refers to completion of the loan application prior to step 3 which is where the lender requests the FHA case assignment,
originators of course have had difficulty understanding why they can’t order a case assignment in order to get an FHA appraisal so they can check value for borrowers who “may” want to refinance if enough property value is there to allow them to qualify. The problem with that is that common sense says if you know enough about the borrower to know that you’d need an FHA appraisal to qualify them and you have enough information at hand to request the case assignment (borrower name, property address, SSN, date of birth) you obviously have enough information in your hands to meet the regulatory requirements of having a loan application.
In addition, here is what HUD confirms for us in regards to FHA case assignments inMortgagee Letter 2011-10:
FHA Case Assignment Request Requirements
Current Policy:Under no circumstances should an FHA case be requested or assigned without a complete active loan application in hand for the borrower(s) and property for which the FHA case is being requested.
New Policy 04/18/11: Effective starting April 18, 2011, case requestors will berequired to certify in FHA Connection data screens that an active loan application is in hand.
FHA Case Cancellations
Lenders must fax a case cancellation request to the appropriate HUD Homeownership Center holding jurisdiction for the subject property under any of the following circumstances:
• Borrower withdraws or cancels application and an FHA appraisal was not completed
• Borrower is rejected and an FHA appraisal was not completed
• Case includes an expired FHA appraisal (appraisal expires after 120 days).
Note: HUD will not cancel an existing FHA case if appraisal logging reflects an un-expired appraisal connected with the case.
Case cancellation requests must be faxed to the appropriate HOC listed by jurisdiction below:
• Atlanta HOC Fax: 813-228-2478 (AL, FL, GA, KY, IL, IN, MS, NC, SC, TN)
• Denver HOC Fax: 303-672-5211 or 303-672-5210 (AR, CO, IA, KS, LA, MO, MN, MT, NE, NM, ND, OK, SD, TX, WI, WY, UT)
• Philadelphia HOC Fax: 215-656-3434 (DE, DC, MD, MI, PA, VA, WV) or 215-656-3438 (CT, ME, MA, NH, NJ, NY, OH, RI, VT).
• Santa Ana HOC Fax: 714-796-5521 (AK, AZ, CA, HI, ID, NV, OR, WA)
Automatic Case Number Cancellations
FHA systems automatically cancel any uninsured case number where there has been no activity for 6 months since the last action except for
• loans where an appraisal update has been entered, and/or
• loans where the Upfront Mortgage Insurance Premium (UFMIP) has been received.
Last action includes case number assigned, appraisal information entered, firm commitment issued by FHA,
insurance application received and subsequent updates, and Notice of Return and resubmissions
Last action does not include updates to borrower names and/or property addresses.
For example, making changes to the number of borrowers on the loan will not reset the 6 month timeframe for automatic cancellation.
To prevent automatic cancellation of case numbers for which mortgage insurance will be sought, mortgagees must enter appraisal information, successfully transmit insurance application, etc.
Reinstatement of FHA Case Assignments
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.
Case numbers that were automatically cancelled, including case numbers for condominium units, will not be re-instated unless the mortgagee provides evidence that the subject loan closed prior to cancellation of the case number, such as a HUD-1 Settlement Statement, or the mortgagee provides evidence that not reinstating the case number causes an undue hardship to the borrower that is unrelated to recent changes to premiums and underwriting requirements.
About The Author
Stacey Sprain - As an NAMP® staff writer, Ms. Stacey Sprain is currently a NAMP® member in good standing, and is 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. If you would like to become a volunteer writer for us, please email us at: firstname.lastname@example.org.