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Now that TRID ("Truth­in­Lending Integrated Disclosure") has been implemented, all of us who are in the real estate/lending business are working to comply with the rules relating to TRID, the rules established by CFPB ("Consumer Finance Protection Bureau," the federal agency policing compliance, Bulletin 2013­2), and, for closing attorneys, the rules, policies, and procedures required in order to be compliant with ALTA Best Practices, which are the standards set for attorneys who wish to undertake the best methods, policies, andprocedures to protect the Borrowers’ (the "Consumers") privacy and to best represent their clients’ ("Lenders/Creditors") best interests. As all of you who are in the real estate business have been told at the many seminars you have attended, the closing attorney ("settlement agent") is a representative ("third party vendor") of the lender, and the lender is now responsible for all of the actions of the closing attorney/settlement agent. Because each lender has their own compliance officer(s) who interpret the new law and set their own company policies and procedures, there continues to be much confusion and inconsistencies in many areas of the closing ("consummation") process.

On August 15, 2013, the Federal Housing Administration (FHA) relaxed its three (3) year waiting period on foreclosures and other “economic events” which would have heretofore prevented a borrower from qualifying for a loan for the purchase of a primary residence.   For FHA case numbers assigned on or after August 15, 2013, a homebuyer with prior credit problems can apply for an FHA insured mortgage loan. 

 

Mortgage insurance, which is required on all FHA loans, is provided by homebuyers in order to insure the lender against  a loss resulting from  a foreclosure.  For more information regarding FHA mortgage insurance and other requirements relating to FHA loans, please see my prior blog articles.  FHA mortgage insurance is generally available for any loan which is made by an approved FHA lender  and meets minimum standards of the FHA Mortgage Guidelines. 

In 2000, Andrew Cuomo, the then serving Secretary of Housing and Urban Development, announced that Borrowers with FHA loans would be able to cancel their mortgage insurance “just like conventional markets” once reaching a 22% equity (a 78% loan to value at the time of the origination ratio). Prior to 2000, mortgage insurance on FHA loans was paid during the entire term of the loan. Unfortunately, on June 3, 2013, most FHA loans will once again require that mortgage insurance be paid for the life of the loan. The automatic cancellation of the mortgage insurance premium will be rescinded and any mortgage with a loan to value ratio of greater that 90% at the time of the origination (a HUGE MAJORITY of FHA loans), will now require that the mortgage insurance be paid for the life of the loan. FHA loans with a loan to value ratio of 90% or less (10% equity or more) will require the payment of mortgage insurance for 11 years, irrespective of the equity the homeowner builds through prepayments to principal. These new rules apply to all applications received on April 1, 2013; therefore, a Buyer seeking an FHA loan must have his or her application in place on March 31, 2013, in order to avoid the new rules.


From our offices in Decatur, Alabama, we represent clients in Morgan, Madison, Cullman, Lawrence, and Limestone Counties, including the communities of Decatur, Huntsville, Madison, Hartselle, Cullman, and Athens.

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