And now he has revealed how to get loan mods for investor owned properties, and how to get REAL principal REDUCTIONS and How to use the Home Affordable (Obama program) to get loan mods.

Many people missed the live webinars last weekend because of receiving the notice late. In spite of that, both of them filled up. This video is coming down in a few days so learn from it now.

http://carlpruitt.com/go/loanmod/

In this video, Richard teaches:

• Loan mods and violations, forensic audits and how they fit in.
• How to get principal reductions by pushing the lenders around instead of being pushed around
• Investor owned properties — rental properties NEED loan mods, and here’s how to get them
• Repairing your credit (or your client’s credit) easily and quickly if you have to stop making payments and therefore have a bunch of “lates” on your credit report

http://carlpruitt.com/go/loanmod/

My friend Richard Geller has been helping people get principal reductions on their mortgages and really great loan mod terms.

He has put together a great webinar that he is doing this weekend.

It is for you if you advise homeowners or if you are in the loan mod business or if you are an investor looking for buyers by advertising for loan mods.

In this webinar, Richard teaches:

• Loan mods and violations, forensic audits and how they fit in (this SHOCKED me) — this is so HUGE.
• How to get principal reductions by pushing the lenders around instead of being pushed around
• Investor owned properties — rental properties NEED loan mods, and here’s how to get them
• Repairing your credit (or your client’s credit) easily and quickly if you have to stop making payments and therefore have a bunch of “lates” on your credit report

The webinar is on either Saturday 11AM Eastern, or Sunday at 7PM Eastern.

Click here to register

This webinar had over 700 enrolled and is quickly filling up. Remember, there are two times for you, Saturday at 11AM Eastern or Sunday at 7PM Eastern:

Register here

P.S. I apologize for the lack of FHA updates lately. I took some time off over the summer, and just as I was gearing up to get the updates going again, I came down with the flu and then pneumonia! I’m over it now so you can expect some huge updates over the next few days as I catch you up on the enormous changes going on in the FHA world right now. Literally everything is changing.

On Thursday, August 13, 2009, from 1:00 p.m.- 3:00 p.m. Eastern Time (10:00 a.m. Pacific Time) FHA is Hosting a free industry conference call to discuss FHA’s new Home Affordable Modification Program (FHA-HAMP).

A copy of Mortgagee Letter 2009-23 “Making Home Affordable Program: FHA’s Home Affordable Modification Loss Mitigation Option” and the supplemental guidelines can be found at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/

Participants will have the opportunity to engage in an open question and answer session following the overview.

To join the conference call, please dial: (866) 376-1375 and reference conference ID# 24011959. No pre-registration required.

From their announcement:

OCALA, FLORIDA – TAYLOR, BEAN & WHITAKER MORTGAGE CORP. (“TBW”) RECEIVED NOTIFICATION ON AUGUST 4, 2009 FROM THE U.S DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, FREDDIE MAC AND GINNIE MAE (THE “AGENCIES”) THAT IT WAS BEING TERMINATED AND/OR SUSPENDED AS AN APPROVED SELLER AND/OR SERVICER FOR EACH OF THOSE RESPECTIVE FEDERAL AGENCIES.

TBW HAS UNSUCCESSFULLY SOUGHT TO HAVE THE TERMINATION/SUSPENSION DECISIONS OF EACH OF THOSE AGENCIES REVERSED. AS A RESULT OF THESE ACTIONS, TBW MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATELY.

REGRETTABLY, TBW WILL NOT BE ABLE TO CLOSE OR FUND ANY MORTGAGE LOANS CURRENTLY PENDING IN ITS PIPELINE. TBW IS COOPERATING WITH EACH OF THE AGENCIES WITH RESPECT TO ITS SERVICING OPERATIONS AND EXPECTS TO CONTINUE TO SERVICE MORTGAGE LOANS AS IT RESTRUCTURES ITS BUSINESS IN THE WAKE OF THESE EVENTS.

WE UNDERSTAND THAT THIS COULD HAVE A SIGNIFICANT IMPACT ON OUR VALUED EMPLOYEES, CUSTOMERS AND COUNTERPARTIES, AND ARE VERY DISAPPOINTED THAT A LESS DRASTIC OPTION IS UNAVAILABLE.

The third largest FHA lender in the country Taylor, Bean and Whitaker Mortgage has been suspended from FHA lending effective immediately. In addition, the Government National Mortgage Association (Ginnie Mae) is also defaulting and terminating TBW as an issuer in its Mortgage-Backed Securities (MBS) program and is ending TBW’s ability to continue to service Ginnie Mae securities.

“Today, we suspend one company but there is a very clear message that should be heard throughout the FHA lending world – operate within our standards or we won’t do business with you,” said HUD Secretary Shaun Donovan.

FHA Commissioner David Stevens said, “TBW failed to provide FHA with financial records that help us to protect the integrity of our insurance fund and our ability to continue a 75-year track record of promoting, preserving and protecting the American Dream. We were also troubled that the Company not only failed to disclose it was a target of a multi-state examination and a separate action by the Commonwealth of Kentucky, but then falsely certified that it had not been sanctioned by any state. FHA won’t tolerate irresponsible lending practices.”

TBW may appeal its immediate suspension by submitting a written request for a hearing before an Administrative Law Judge within 30 days. Such a request will not delay the action FHA is announcing today.

In conjunction with TBW’s suspension, HUD sent notices of proposed debarment to TBW’s Chief Executive Officer, Paul R. Allen, and TBW’s President, Ray Bowman. Mr. Allen’s proposed debarment alleges that he submitted false and/or misleading information to Ginnie Mae regarding TBW’s delay in submitting its audited financial reports for fiscal year ending on March 31, 2009. Mr. Bowman’s proposed debarment alleges that he submitted two false certifications to HUD on TBW’s Yearly Verification Report. Mr. Allen and Mr. Bowman have thirty days to contest the proposed debarments.

This action will massively impact small brokers and community banks across the country who rely on TBW to underwrite and close their FHA loans. I have already heard from many loan officers with loans in process, and home purchases on the line. They will now have to find new homes for those loans. We will have to wait and see how this situation impacts the housing recovery.

Here is your chance to get the information straight from the horse’s mouth.

On Thursday June 4, 2009 at 3PM Eastern time HUD is having a conference call for the mortgage industry to provide a brief overview of recently published FHA policy guidance, including the recent tax credit & manufactured housing Mortgagee Letters.

The call-in number is: (866) 207-0413 & the conference ID # is: 13015879.

HUD has re-published Mortgagee Letter 2009-15 entitled “Using First-Time Homebuyer Tax Credits”. This Mortgagee Letter does provide the regulatory framework for monetizing the $8000 first time homebuyer tax credit now in advance. There are two very important points that need to be made about this “monetization”.

First, although the HUD announcement sets out a framework for the policy, HUD does not provide the money. Therefore, we will have to wait and see how the policy becomes a part of the real world and how long we will have to wait to see any delivery of money to the closing table.

I know many people had hoped to see some form of check issued by the Treasury to the buyer, but an Act of Congress would have been required to make that possible. HUD just does not have that option available under current law.

The reality is that the possibility of non-profits or lenders coming up with the money to make these loans when the tax credit proceeds cannot be assigned to a third party is very slim. Neither of these parties has the wherewithal to put out this money and then wait for the home to sell or be refinanced before they are paid. Although the Mortgagee Letter attempts to address these issues, there are no guarantees that some other issue in the borrowers life won’t pop up and prevent the tax credit from being paid to them. With seller paid down payment assistance, the borrower never put their hands on the money. With this plan, the non-profits or lenders who would provide a second lien would have to hope they got repaid when or if the tax credit money arrives.

And don’t hold your breath waiting on state agencies to take up the slack. The states don’t have the money.

Second, the Mortgagee Letter specifically points out that according to “12 U.S.C. 1709(b)(9), the homebuyer’s downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction (or by any third party or entity that is reimbursed, directly or indirectly, by the financially benefiting person or entity).”

In other words, the borrower must still contribute 3.5% of their “own money” into the transaction. Of course, as was always the case, this can be a gift from a relative or similar close relationship.

The proceeds from this monetization can be used for additional down payment or to buy down the interest rate or to pay closing costs. The best use of the money will be dictated by the transaction. For example, many borrowers who are “on the borderline” of approval through the automated underwriting system may be able to change the decision to an approval with a little additional down payment. Other people (i.e. those who definitely plan to stay in the house for a very long time) would be better off paying down the interest rate with the “free money” from the tax credit. Borrowers who know they are going to move in a few years, and who can get the seller to pay all the closing costs may be better off waiting to receive their tax refund the normal way by waiting until they file their next tax return. The tax credit money can simply be put into the bank for a rainy day.

At any rate, this is all speculation until we actually see someone come forward with the actual money and not just a new bureaucratic pronouncement.

Following is the complete text of the Mortgagee Letter:

May 29, 2009

MORTGAGEE  LETTER 2009-15

TO: ALL APPROVED MORTGAGEES

SUBJECT: Using First-Time Homebuyer Tax Credits

The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides for as much as an $8000 tax credit to qualified first-time homebuyers.  FHA supports this important initiative to promote homeownership.  This mortgagee letter provides:

• Basic information on the first-time homebuyer credit obtained from the Internal Revenue Service (IRS) website. Complete information on how the first time homebuyer tax credit works, including the eligibility requirements for the tax credit, the amount of the tax credit that a first-time homebuyer may be eligible to receive, and how a homebuyer may claim the tax credit is available on the IRS website at http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet7.
• Guidance on how FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local government agencies or instrumentalities may assist homebuyers that are eligible for the tax credit.

I. About the First-Time Homebuyer Tax Credit

Please check the IRS website to ensure you have up-to-date information.  A brief overview of the tax credit from the IRS website and a copy of IRS Form 5405 (including instructions) are attached for reference.

Pursuant to 31 U.S.C. 3727 and 26 U.S.C. 6402, a refund of the first-time homebuyer credit will be made by the IRS only to the taxpayer, not to a third party.  In other words, any refund issued in response to a claim for this credit cannot be assigned by a taxpayer to a third party.

II. FHA Tax Credit Guidance

Secondary Financing

Consistent with existing FHA policy, FHA will permit entities covered by Section 528 of the National Housing Act to use the current authority to offer tax credit advances with second liens in a manner consistent with the requirements in 12 U.S.C. 1709(b)(9).  Eligible government agencies and instrumentalities of government are described in handbook HUD-4155.1 5.C3 and 5.C4.

Conditions:

• The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower.
• The second lien may not exceed the total amount needed for the down payment, closing costs, and prepaid expenses.
• Secondary financing may be “soft” (silent) or require a monthly repayment.
• If payments are required, they must be included within the qualifying ratios and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.
• Payments must be deferred for at least 36 months to not be included in the qualifying ratios.
• If the tax credit advance loan has a short term for repayment, it must also provide that if the borrower fails to repay by the designated deadline, principal and interest payments begin automatically or the loan converts to a “soft” second.
• The secondary financing may not require a balloon payment before ten years.

Purchase of Tax Credit

FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local governmental agencies and instrumentalities thereof may purchase the tax credit anticipated by the homebuyer.

Conditions:

• The proceeds of the sale of the tax credit may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405;

• The borrower must submit a signed certification that the tax credit is not subject to offset due to other indebtedness.
• A copy of the borrower’s tax refund and/or the IRS 5405 must be collected and retained in the FHA case binder.
• Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer.  In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive.  (Example:  $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)
• Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer’s downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction (or by any third party or entity that is reimbursed, directly or indirectly, by the financially benefiting person or entity).  Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs.

Due Diligence

FHA expects that entities purchasing tax credit assets will employ appropriate due diligence measures including, but not limited to:

• Require the homebuyer to draft and provide the IRS form 5405 “First-Time Homebuyer Credit.”
• Contact the borrower’s employer and review pay stubs to confirm there are no outstanding garnishments.
• Review the homebuyer’s credit report to ensure there are no unpaid student loans, or other obligations that could be offset against the credit.
• Validate that all of the eligibility requirements for the tax credit are fulfilled
• Review previous tax returns and IRS tax assessment letters, if any, to determine that the borrower does not have unsettled obligations to the IRS

III.  Monitoring

In order to track the tax credit monetization activities, FHA will require FHA-approved mortgagees to input into FHA Connection the following data:

• Name and EIN of the party who purchased the tax credit,
• The amount of the anticipated credit, and
• The amount the homebuyer paid for the monetization services.

The lender must also collect and maintain in the FHA case file the documentation that validates all of the tax credit monetization data submitted via FHA Connection.

FHA will monitor the purchase of tax credit transactions closely.  Charging of excessive fees or costs in the purchase of the tax credit or increasing other fees or charges in the transaction without FHA approval may result in referral to the Mortgagee Review Board, and particularly with respect to entities that are not FHA-approved mortgagees, referral to the Federal Trade Commission, or referral to the appropriate State Attorney General office, as may be applicable.

If you have any questions regarding this mortgagee letter, please call FHA’s Resource Center at 1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

Sincerely,

Brian D. Montgomery

Assistant Secretary for Housing-

Federal Housing Commissioner

Attachments

The most exciting part of the news was that provisions of the “Helping Families Save Their Homes Act” give HUD/FHA more money, manpower and enforcement ability to help put a stop to fraud and general lack of compliance with the regulations.

According to the press release, the Act…

…grants FHA more authority to keep bad actors out of the FHA programs and provided additional enforcement tools to police those lenders who employ false or misleading marketing tactics (see attached). Meanwhile, the Administration’s FY 2010 budget proposal seeks additional investments in FHA to curb fraud and abuse including enhanced investments in technology, staffing and training to enable FHA to cope with the rising volume of mortgage business, detect fraud, and monitor the practices of lenders and appraisers.

“At this time of uncertainty in the mortgage market, FHA needs to be especially vigilant in making sure that its approved lenders meet the highest standards of conduct,” said HUD Secretary Shaun Donovan. “We expect, and more importantly American homebuyers deserve, that when they deal with an FHA-approved lender, they’re dealing with a lender they can trust. “The provisions in the Helping Families Save Their Homes Act will expand our enforcement and help keep bad actors out of our program.”

I have long held that fraud and lack of compliance with the FHA rules were a much, much, much greater contributor to FHA’s default problems than seller paid down payment assistance. Seller paid down payment assistance just happened to get matched with fraud very often because the program made it easier for the criminals to get around having to produce a down payment for their straw buyers. The seller paid down payment assistance was tracked and documented while much of the fraud never was. I personally saw too many of those buyers using seller paid down payment assistance who would move heaven and earth to keep making their house payment on time, even if the value of the home dropped. They simply wanted to be homeowners and were in it for the long haul. If they were late on their payments it would be because they lost their job or had a medical problem which kept them out of work. Not because they had a measly 3% less equity than someone with a conventional loan.

FHA would be in much better shape and would have helped many more people over the past couple of years had some of the money slated for stupid programs like FHASecure and Hope for Homeowners had been put into compliance enforcement.

The honest mortgage originators often didn’t have a chance competing against lenders who would get borrowers approved in spite of the rules. Not because that other loan officer did a better job packaging the loan, but because they weren’t operating by the same guidelines! So I’m glad to see the chance that the field may get leveled.

It appears that this massive action on HUD’s part was an attempt to get out ahead of a news report in the Washington Post which says that a review just completed by the Office of the Inspector General that indicates that FHA’s “Mortgagee Review Board” has been ineffective in policing the large and quickly growing number of FHA approved lenders. All I can say is that I hope they didn’t spend too much money putting together that report. Ginger, my Chocolate Labrador Retriever, could have figured it out without taxing her intellect very much.

At any rate, let’s hope for the best. A lot is going on in the world of FHA lending right now. The jury is still out on how things will work out.

According to a report in Realtor Magazine, HUD spokesman Lemar Wooley has stated that the proposal is still on track. As I suspected from the fact that the original Mortgagee Letter 09-15 was fairly fuzzy on the details, it appears they just got a little ahead of themselves.

According to Realtor Magazine:

The technical details are still being finalized and will soon be published in a mortgagee letter and posted on our Web site,” Lemar Wooley, a HUD spokesperson, told REALTOR magazine Wednesday afternoon.

There are many problems to be worked out – such as how the money can be used as a down payment, how they intend to deal with the fact that some people may have unsurfaced tax problems that interfere with paying the money back, exactly who will loan the money and how they will do it and so forth.

In the meantime, hold your breath. Maybe they’ll get it right the first time, unlike FHASecure and Hope for Homeowners.

Here is the text of the official notice:

This revised notice on the FHA property flipping waiver extension corrects the date in the last line of the notice that was published on 5/15/09:

“Federal Housing Commissioner Brian D. Montgomery has extended the temporary property flipping waiver to May 10, 2010.  Under the waiver, homes that were foreclosed on and are being sold by the mortgagee or on its behalf may be purchased by FHA borrowers without regard to the 90-day seasoning period. The waiver does not apply to entities that purchase foreclosures either singly or in bulk for resale. Subsequent sales of such properties will continue to be subject to the standard regulatory requirements.

The waiver expires for all loans for which the sales agreements were signed by the seller and buyer on or before May 10, 2010. “