FHA LENDING CAN BENEFIT YOUR INSTITUTION AND YOUR COMMUNITY
The decline in the subprime mortgage lending market coupled with revamped regulations and processes has made Federal Housing Administration (FHA) lending more popular. Government–backed loans benefit a wider population and provide lenders extra product offerings, improved credit risk management, and additional opportunities to help struggling borrowers refinance.
However, there are risks to consider. Carefully investigate your options and plan accordingly. There are specific steps to becoming an FHA licensed lender, and ongoing requirements to maintain lender status.
You should first determine what you want your FHA lending program to look like. Which types of loans do you want to offer? Does your institution want to service FHA loans? Does your institution want to offer FHA loan servicing to other FHA lenders? What type of FHA lender do you want to be? What are some opportunities and risks of the various options? What are the underwriting standards for each type of loan? What do you need to do to ensure that your program meets FHA’s quality control requirements?
The requirements for creating and maintaining an FHA lending program have been streamlined, but there are significant licensing and compliance hurdles. Failure to properly follow regulations and underwriting requirements may result in uninsured loans or might require lenders to indemnify FHA on certain loans. Repeated violations may result in the assessment of civil money penalties and even license forfeiture.
If your institution is new to FHA lending, you’ll need to secure licensing from U.S. Department of Housing and Urban Development (HUD). Our experienced HUD consultants will walk you through the process; saving you time and helping you manage risk.
While your application is pending, you should work on internal policies and processes, in addition to training and ongoing maintenance. You’ll need to determine the necessary documents for your proposed FHA program, including disclosures, notes, security instruments, and FHA–specific documents (such as transmittal forms).
The approval period is also a great opportunity to work with your marketing and sales staffs to train them on FHA lending and to ensure that they develop compliant marketing materials and sales processes.
FHA has very specific requirements on representations and logos. It is crucial to ensure your marketing campaigns and collateral materials comply with their requirements. Likewise, it is important that your customer–facing lenders understand your FHA programs and how to explain them to customers in the context of your overall product portfolio.
Once you have become a licensed, FHA–approved lender, your institution will still need to maintain lender status. FHA requires annual re–approval and re–verification of licensure, and it is important that each institution comply with these detailed requirements.
Our Government Lending Services provides consulting in the areas of HUD licensing, loan origination training, integration and assessment services, and industry standard FHA and VA loan documentation that complies with federal and state mortgage regulations.
Click here to register for our free FHA Lending webinar and download one of our use cases to see practical applications of our solution.
DON'T WAVE THE WHITE FLAG ABOUT RED FLAGS!
Though indications of potential mortgage fraud have often been dubbed red flags, the term takes on a whole new meaning on November 1, 2008. Recent updates to the Fair and Accurate Credit Transactions Act (FACT Act), commonly known as “Red Flag Rules,” require every financial institution and creditor to implement a written Red Flags program to detect, prevent, and mitigate identity theft in connection with the opening of certain accounts or the activity of certain existing accounts.
While this may feel like just another in a long line of regulations, Red Flags compliance will actually help your business by preventing ID theft and potential fraud. A fully developed and implemented Red Flags program will not only prevent costly fines for non–compliance, but will help detect and deter future fraud losses in your lending programs. Properly training your staff to understand, identify, and address relevant Red Flags will arm your company with additional loss prevention detection.
The implementation of these new FACT Act rules and guidelines will require dedicated resources and proper planning in order to successfully comply by the November 1, 2008 deadline. It’s crucial to understand that these new rules can’t be fully implemented overnight and will include many preparatory steps in order to fully and successfully implement the program.
To help you streamline the development of your Red Flags program, our team of legal and professional compliance experts have created a dedicated Red Flags Resource Center. This web site is filled with helpful articles, webinars, and overviews of our automated solutions and consulting programs, ranging from assistance in the various phases to complete program development. To learn more, please visit our Red Flag Resource Center today!
SIMPLIFY YOUR MORTGAGE CLOSING DOCUMENTATION
Click here to view the Wolters Kluwer Financial Services Simplified Mortgage™ Compliance Extra video on ComplianceHeadquarters.com.
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REMINDERS
- Missed an issue of the VMP® Information Newsletter? Access previous issues in the archive.
- We welcome any comments or suggestions for this newsletter. Please forward any to Angela Coenen at angela.coenen@wolterskluwer.com.
