PNP SPECIFICATIONS - American Financial Network,...

PROCESSING, UNDERWRITING, DOCS, FUNDING FHA – HANDLING FHA LOANS

AFN-R-Ops_HandlingFHALoans • Rev. 02/02/2017

PNP SPECIFICATIONS PNP Name/ History

Procedure: FHA - Handling FHA Loans Date Issued: 12/07/2016 Date Effective: 12/07/2016 Date Revised: 02/02/2017

Production Channels

Retail Wholesale

Correspondent

Accountable Personnel/ Department

Loan Processors Underwriters Doc Drawers Funders

Issuing Personnel/ Department

EVP, Operations

Subject Matter Expert (SME)

Director of Processing Branch Account Managers Director of Underwriting Underwriting Managers Director of Credit Risk Director of Closing/Funding

Purpose The purpose of this procedure is to provide guidance when handling a loan insured by the U.S. Department of Housing and Urban Development (HUD) and to ensure compliance with agency regulations and AFN policy.



RELATED DOCUMENTATION Guide Branch Loan Processing Manual

Procedure Ordering Appraisals

Form Submission to Underwriting Minimum Requirements

URLs FHA Mortgage Limits

HUD Mortgagee Letters

Single Family Housing Policy Handbook (4000.1)

RELATED DEFINITIONS FHA Home Loan

The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), insures loans, so lenders can offer affordable mortgages with features such as low down payments, low closing costs and easy credit qualifying.

FHA Connection

Provides FHA-approved lenders and business partners with direct, secure, online access to computer systems of the U.S. Department of Housing and Urban Development (HUD).

TABLE OF CONTENTS A. LOAN PROCESSORS ................................................................... 1

Meeting Requirements for FHA Loans ................................................... 1 Obtaining Case Assignments, CAIVRS, and Refinance Authorizations in FHA Connection........................................................................................ 2 Additional Requirements for FHA Purchases .......................................... 6 Additional Requirements for FHA Streamlines ........................................ 6 Additional Requirements for Simple Refinances and Refinances with FHA Payoffs ........................................................................................... 14 Requesting an FHA Appraisal ............................................................. 16 Documentation Requirements in Encompass for FHA Loans ................... 17 Case Transfers and Case Cancellation Requests ................................... 19 Requesting PTD Review and Clear to Close on FHA Loans ...................... 21

http://files.afncorp.com/WebTrac/Ratesheet/PNPs/AFN-P-Pro_BranchProcManual.pdf

http://files.afncorp.com/WebTrac/Ratesheet/PNPs/AFN-R-Pro_OrderAppraisals.pdf

http://files.afncorp.com/WebTrac/Ratesheet/PNPs/AFN-X-UND_MinSubRequ.pdf

https://entp.hud.gov/idapp/html/hicostlook.cfm

http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee

http://www.allregs.com/tpl/public/fha_freesite.aspx



Special Closing Considerations for FHA Purchases ................................ 22 Special Closing Considerations for FHA Payoffs .................................... 23 Special Closing Considerations for FHA Streamlines .............................. 25

B. UNDERWRITERS ..................................................................... 27

Meeting Requirements for FHA Loans ................................................. 27 Adding FHA Conditions in Encompass ................................................. 29 Reviewing FHA Appraisals ................................................................. 30 Reviewing the HUD 1003 Addendum (92900A) .................................... 35 Completing the HUD-92900LT FHA Loan Transmittal ............................ 36 Additional Requirements for FHA Purchases ........................................ 41 Additional Requirements for FHA Refinances ....................................... 43 Additional Requirements for FHA Streamlines ...................................... 44 Additional Requirements for Refinances with FHA Payoffs ...................... 51 Clearing the PTD Review Milestone ..................................................... 53

C. DOC DRAWERS ........................................................................ 55

Meeting Requirements for FHA Loans ................................................. 55 Validating Lender Credits .................................................................. 56 Validating Upfront Mortgage Insurance Premiums ................................ 57 Additional Requirements for FHA Purchase .......................................... 57 Additional Requirements for FHA Streamlines ...................................... 58 Additional Requirements for Refinances with FHA Payoffs ...................... 59

D. FUNDERS ................................................................................ 60

Meeting Requirements for FHA Loans ................................................. 60 Required Forms for FHA Loans ........................................................... 61 Validating Lender Credits .................................................................. 62 Additional Requirements for FHA Purchases ........................................ 63 Additional Requirements for FHA Streamlines ...................................... 64 Additional Requirements for Refinances with FHA Payoffs ...................... 65


REVISED 02/02/2017; PAGE 1 OF 65


A. LOAN PROCESSORS

MEETING REQUIREMENTS FOR FHA LOANS

Loan Processor

Note Complete the steps in this procedure marked "Loan Processor" in addition to the customary steps for all loans.

Note All initial signed disclosures must be returned by the borrower and in the file (eFolder) before a new FHA case number can be ordered, including the initial 1003, initial 92900A, and all other required disclosures.

• Login credentials are required to use FHA Connection • Each individual must use their own login • Login credentials can be obtained from the AFN Help

Desk ([email protected]) Note: Refer to the FHA Connection Login Agreement included with new hire paperwork and available on the AFN intranet: FHA Connection/VA WebLGY Acknowledgement

1. Prior to requesting an FHA case number: a. Confirm that disclosures are:

• In the eFolder • Filed in the proper placeholders, and • The loan is in the App Received milestone or later

b. For all borrowers on the loan confirm accuracy of: • Borrower name • Social security number • Date of birth

c. Verify accuracy of the subject property address prior to completing the FHA case assignment.

Note: Typos or incorrect information may result in a failed validation by HUD that will require corrections in FHA Connection.

mailto:[email protected]

http://files.afncorp.com/WebTrac/Ratesheet/PNPs/AFN-F-Adm_FHAConnection.pdf




OBTAINING CASE ASSIGNMENTS, CAIVRS, AND REFINANCE AUTHORIZATIONS IN FHA CONNECTION

Loan Processor

2. FHA Connection is accessed from the web browser via: https://entp.hud.gov/clas/login_fhac.fcc Standard hours of operation for case processing: Monday – Friday, 8am – 10pm EST (5am – 7pm PST). Log in and proceed with ordering a case assignment by following the procedure in Using FHA Connection.

3. When completing the case assignment information: a. Include all borrowers on the loan (including those on a

separate application). b. Ensure borrower names are entered to match the way

they will be vesting on the loan; FHA case assignment must match the names as they will be listed on the closing documents.

The correct format in FHA Connection is to enter LAST NAME & SUFFIX (if any), FIRST NAME & MIDDLE INITIAL/NAME (if any).

Examples Borrower name as it will appear on closing documents: John A. Wayne, Jr.

• Correct entry in FHA Connection: Wayne Jr, John A

• Incorrect entry in FHA Connection (1): Jr Wayne, John A

• Incorrect entry in FHA Connection (2): John A Jr, Wayne

4. Upon completion of the case assignment in FHA

Connection: a. Print the case assignment. b. Upload to the eFolder under Gen – FHA/VA Case

Number & CAIVRS.

https://entp.hud.gov/clas/login_fhac.fcc

http://files.afncorp.com/WebTrac/Ratesheet/PNPs/AFN-R-Proc_UsingFHAConnection.pdf




OBTAINING CASE ASSIGNMENTS, CAIVRS, AND REFINANCE AUTHORIZATIONS IN FHA CONNECTION, CONTINUED

Loan Processor

5. FHA will issue a warning on the case assignment that states "pending borrower validation": a. Validations typically take 24-48 hours to be completed. b. Generate and re-print an updated case assignment to

be uploaded into the eFolder in Encompass once all borrower information has been validated in FHA Connection and shows successful.

c. Once obtained, move the old case assignment printout with the warning to the TRASH folder in Encompass.

6. In the event that borrower or address information was input incorrectly, corrections will need to be made in Encompass and in FHA Connection. a. To update the case assignment for borrower

information or subject property address information, log in to FHA Connection, select Single Family FHA Single Family Origination Case Processing Borrower/Address Change.

b. Updates will require re-validation in FHA Connection; an updated case assignment must be pulled to replace the old printout in Encompass when validation is complete and showing successful. • Do not upload the borrower/address change

confirmation or a case query; print an updated case assignment with the corrections upon validation

7. Confirm the FHA originator ID matches the ID shown:

• In Encompass on the HUD 1003 Addendum form (screen)

• On the initial signed 92900A, and • On the FHA case assignment

Note: In the event that the case assignment is reflecting the incorrect FHA Originator ID, request a correction by completing the steps in #38 (below) for case transfers.





Loan Processor

8. a. Obtain a CAIVRS number for all borrowers on the loan (except for FHA Streamlines).

b. Upload the CAIVRS number confirmation to the eFolder under Gen – FHA/VA Case Number & CAIVRS.

For assistance with ordering CAIVRS, refer to the procedure Using FHA Connection.

9. Prior to completing the Submittal milestone, complete the FHA Management Form (screen) Tracking in Encompass with the following information:

• FHA Case Number Date (must match the date of case assignment on the printout from FHA Connection)

• Case Number with the ADP code included (for example, on a fixed rate loan for a single family residence, the ADP code would be 703, so the case number would be in the following format: XXX-XXXXXXX-703)

• CAIVRS Number (date of search and the CAIVRS Number for each borrower)

http://files.afncorp.com/WebTrac/Ratesheet/PNPs/AFN-R-Proc_UsingFHAConnection.pdf





Loan Processor

10. For all refinances: Prior to completing the Submittal milestone, complete the FHA Payoff dropdown on the AFN – Borrower Summary Origination Form (screen) to indicate if the existing loan to be refinanced is an FHA loan.

• If the current loan being refinanced is an FHA loan, indicate “Yes” to document in Encompass that an FHA payoff exists on the loan.

11. Prior to completing the Submittal milestone and after all updates are made in Encompass, click the Get MI button to refresh the FHA MIP information.

This can be updated on the AFN – Borrower Summary Origination form (screen) or 1003 page 2 under proposed payments by clicking the Edit field and then Get MI.




ADDITIONAL REQUIREMENTS FOR FHA PURCHASES

Loan Processor

12. Prior to completing the Submittal milestone, access the FHA Management Form (screen) Basic Info tab, and complete the “Purchase Date” under Property Information as the date of the purchase contract (not to be confused with the funding or closing date).

ADDITIONAL REQUIREMENTS FOR FHA STREAMLINES

Loan Processor

Note In addition to the above requirements concerning FHA Case Assignments, FHA Streamline Refinances will require additional items to be obtained prior to submission.

13. AFN distributes a monthly bulletin indicating particular cutoff dates for the given month that affect FHA Streamline refinances. Review the cutoff dates for submission and adjust accordingly based on deadlines prior to structuring the loan for submission to Underwriting.

14. Complete the FHA Streamline Checklist in Encompass to ensure compliance with all Streamline requirements, and to verify that required documentation is provided for Underwriting.

Note: While this screen is not required in Encompass, it is a useful tool to verify items that will be needed for a particular loan, and can help the Processor request items upfront in order to minimize conditions in Underwriting.




ADDITIONAL REQUIREMENTS FOR FHA STREAMLINES, CONTINUED

Loan Processor

15. Obtain a Refinance Authorization printout from FHA Connection: • To obtain, log in to FHA Connection, select Single

Family FHA Single Family Origination Case Processing Refinance Authorization

• The new case number will need to be entered with the projected closing date and Loan Processor’s contact name and phone

• Once entered, a screen will appear with the results, which must be printed and uploaded to the eFolder in Encompass with the Case Assignment under Gen – FHA/VA Case Number & CAIVRS

Note: The Refinance Authorization will give results for the projected month of closing as well as the following month. Confirm the correct figures are being used based on the month of closing. A new Refinance Authorization does not need to be obtained unless the closing is delayed past the months listed on the form.





Loan Processor

16. Prior to completing the Submittal milestone, confirm the AFN – Borrower Summary Origination Form (screen) correctly reflects the loan as a Streamline Refinance:

a. Under transaction details, confirm loan program code reflects FHA with loan term and includes “STRML” in the program code to indicate it is a Streamline.

b. Loan Documentation Type Code dropdown should indicate “(B) Streamline Refinance.”

c. Documentation Type dropdown box should indicate “Streamline (without appraisal).”

d. Update the appraised value in Encompass to match the Original Property Value from the Refinance Authorization (this must be the value used for LTV purposes and MIP rate calculations).





Loan Processor

17. Prior to completing the Submittal milestone, access the FHA Management Form (screen) Basic Info tab, and:

• Complete the Loan Information section to indicate that the loan is a Streamline refinance w/o appraisal, and

• Complete the dropdown indicating the FHA Streamline Type (credit qualifying or non-credit qualifying)

18. Prior to completing the Submittal milestone, complete the FHA Management Form (screen) Tracking in Encompass with the following information from the Refinance Authorization (see the above screenshot on where to find the information on the Refinance Authorization):

• Refinance Authorization date (date pulled in FHA Connection)

• Old FHA case number (case number being refinanced)

• MIP Refund (found on the Refinance Authorization as “Unearned UFMIP;” Upfront Mortgage Insurance Premium, if none, enter zero)

Continued

PROCESSING, UNDERWRITING, DOCS, FUNDING FHA – HANDLING FHA LOANS REVISED 02/02/2017; PAGE 10 OF 65



Loan Processor

18. Cont.

• Prior endorsement date (found on the Refinance Authorization as “Original Endorsement Date”)

Note: Failure to complete this information accurately on the FHA Management screen may result in incorrect MIP factors. It is imperative that this information be completed with accurate data from FHA Connection prior to submission.

19. Obtain a payoff demand good through the projected closing date for the original loan to be refinanced.

Some FHA payoffs will not list a daily per diem but rather have a monthly amount. If this applies to the subject loan to be paid, make sure the payoff is good through the month of closing. For FHA payoffs with a daily per diem amount, ensure the payoff is good through the estimated closing date plus a maximum of 5 calendar days. Note: Netting escrows on an FHA Streamline is only permissible if the payoff demand on the existing loan reflects the netted amount with the escrow account deducted, or if written instruction from the settlement agent is provided confirming the lender will accept netted escrows on the payoff.

20. Upon receipt of the payoff, update the payoff balance on page 2 of the 1003 (Liabilities section) and then complete the FHA Max Mtg Streamline Form (screen) in Encompass with the following information:

• FHA Case # (should auto-complete based on previous entry of case number on FHA Management screen)

Continued




Loan Processor

20. Cont.

• Case # Assigned Date (should auto-complete based on previous entry of case number on FHA Management screen)

• SOA (Section of Act; verify from case assignment) • Total Loan Amount of Current FHA Loan (obtain

from copy of note showing original loan amount or Refinance Authorization showing original mortgage amount)

• Existing indebtedness: Enter the current principal balance from the payoff demand (this should not be the payoff balance, only the principal balance)

• Unpaid principal balance − MIP: Enter the MIP breakdown on the payoff if listed, up to a maximum of 2 months (if not itemized, cannot credit any MIP from the payoff here)

• Unpaid principal balance − Interest: Enter the interest breakdown listed on the payoff, up to 60 days maximum (for FHA loans with a daily per diem interest on the payoff, the maximum that may be included in the loan amount calculation is through the estimated closing date plus 5 calendar days of interest, not to exceed the maximum 60 days allowed)

• Days: Enter the number of days of interest being included in the calculation

• Minus lesser of Unearned UFMIP: Enter the UFMIP refund (if any) from the Refinance Authorization (if none, enter zero)

Final computation: Once the above is completed, the screen will provide the maximum base loan amount that can be used; update the base loan amount on the AFN – Borrower Summary Origination screen with this amount.

Continued




Loan Processor

20. Cont.

Return to the FHA Max Mtg Streamline screen, and confirm Total New Mortgage Amount matches gross loan amount after adjusting the base loan amount above. Note: May be less by $1 due to rounding down for the base loan amount calculation. Click on the Print Form button at the top right-hand corner of the screen to print the worksheet and upload to the eFolder in Encompass under Gen – Maximum Loan Amount Worksheet. Note: For investment properties, only the principal balance from the payoff may be included in the loan amount calculation (less any MIP, Mortgage Insurance Premium, refund); interest and MIP breakdown from the payoff may not be included and must be entered as zero on the FHA Max Mtg Streamline form.




Loan Processor

21. Prior to completing the Submittal milestone, complete the FHA Streamline NTB Form (screen) in Encompass.

Make sure the loan amount is calculated prior to completing this step, otherwise the information will be inaccurate as the proposed loan information will auto-complete based on the information in Encompass.

Confirm the PI and MI payments are broken down on page 2 of the 1003 for the existing loan information before completing the form. Both the current and proposed loan information must be completed in full with the following:

• Amortization type • Amortization term • Breakdown of the monthly PI payment (do not

include escrows) • Monthly MI dollar amount • Interest rate • MIP Rate (for the current loan, this information is

listed as Annual MIP Factor on the Refinance Authorization or case query for the original case number obtained above)

• For loans that no longer have MIP being collected, the NTB must be determined by comparing the current interest rate to the combined proposed interest rate; the MIP rate should not be entered if the borrower is no longer paying monthly MIP

Note: If the subject property is an investment property, the FHA Streamline NTB form (screen) will have the current PI and MI payment fields unlocked in order to edit from the screen itself rather than carrying over from page 2 of the 1003. (This is because page 2 of the 1003 requires the primary residence existing payment information to be entered under the existing payment breakdown.) Second homes on FHA Streamlines are generally not eligible as they must be prior-approved directly by HUD.




Loan Processor

22. Upon completion, confirm a PASS result for the applicable test, print the NTB form, and upload to the eFolder in Encompass under Gen – Net Tangible Benefit Worksheet.

ADDITIONAL REQUIREMENTS FOR SIMPLE REFINANCES AND REFINANCES WITH FHA PAYOFFS

Loan Processor

23. For any FHA refinances (Streamline or not Streamline) with an existing FHA loan being paid off at closing, a Refinance Authorization will still be required. An MIP refund may still apply to the new loan even if it is not a Streamline Refinance.

24. Prior to completing the Submittal milestone, confirm receipt of the Refinance Authorization for any applicable refinances with an FHA payoff, and complete the FHA Management screen with the Refinance Authorization information per the instructions in step 18 above.



ADDITIONAL REQUIREMENTS FOR SIMPLE REFINANCES AND REFINANCES WITH FHA PAYOFFS, CONTINUED

Loan Processor

25. If the loan is an FHA Simple Refinance (an FHA rate/term refinance with an FHA payoff, where the funds are being used solely to extinguish the existing FHA loan and associated closing costs), the case assignment from FHA Connection must reflect Simple Refinance in the FHA to FHA Refinance Type. Please refer to Bulletin 16-061 for more information on FHA Simple Refinances. Processors should review the FHA Simple Refi Checklist screen (form) in Encompass and answer the questions accordingly to ensure compliance with all Simple Refinance requirements, and to confirm that all required documentation is provided for Underwriting. While this screen is not required in Encompass, it is a useful tool to verify what items will be needed for a particular loan, and can help the Processor request items upfront in order to minimize conditions in Underwriting.

26. For FHA Simple Refinances, confirm the program code is entered in Encompass as an FHA rate/term refinance, not a Streamline. (Simple Refinances require full income/asset documentation and an appraisal.)

27. Prior to completing the Submittal milestone, access the FHA Management Form (screen) Basic Info tab, and complete the Loan Information section to indicate that the loan is a Simple Refinance, if applicable. Note: Not all FHA payoffs are going to be a Simple Refinance; only select this loan purpose if the loan is in fact a Simple Refinance.

http://files.afncorp.com/WebTrac/Ratesheet/PNPs/Bulletin_Ops16-061-FHASimpleRefi-20160729.pdf



REQUESTING AN FHA APPRAISAL

Loan Processor

28. Generate and input case number. A case number will need to be generated and input in Encompass prior to ordering an appraisal through Encompass to ensure that the case assignment defaults on the order form when accessing services. For more information, refer to Ordering Appraisals.

29. Confirm the correct appraisal type is ordered (FHA-specific) when placing the appraisal order with the AMC.

30. If the property type is a condo, the project must be FHA approved to be eligible for financing. Please review project eligibility at the following site prior to ordering an FHA appraisal: https://entp.hud.gov/idapp/html/condlook.cfm Please note: The FHA Case must reflect the property type as a condo and the project ID must be on the case assignment. (There is also a lookup within the case assignment when selecting the property type indicator as a condo). Enter the project ID for the condo on the FHA Management Form (screen) Tracking in Encompass. Note: AFN only accepts HRAP approved condos at this time. If the project is DELRAP approved, the property cannot be approved in Underwriting. Please pay attention to the project approval type before ordering an appraisal and submitting the loan to Underwriting.


https://entp.hud.gov/idapp/html/condlook.cfm



REQUESTING AN FHA APPRAISAL, CONTINUED

Loan Processor

31. If the property type is a PUD, the PUD indicator should be selected on the FHA case assignment when printed and uploaded to Encompass. (Verify upon receipt of the appraisal and update the case assignment accordingly if it indicates the property type is a PUD.) *Unlike a condo, a PUD project ID does not need to be entered in Encompass or on the case assignment.

32. If a case was transferred to AFN from another lender, obtain a case query in FHA Connection prior to ordering a new appraisal in order to confirm an appraisal was logged by the previous lender. If an appraisal has been logged, request the appraisal from the previous lender instead of ordering a new appraisal.

33. For FHA case numbers assigned on 6/27/16 or after, the AMC must provide the FHA Appraisal and a submission summary report, both of which will need to be uploaded to Encompass in the appropriate placeholders. For information on proper uploading procedures for appraisals, refer to Ordering Appraisals.

DOCUMENTATION REQUIREMENTS IN ENCOMPASS FOR FHA LOANS

Loan Processor

34. Prior to completing the Submittal milestone, confirm that all required documentation specific to the FHA product are included in the eFolder (in addition to regular loan requirements for submission). Documentation may include the following: • Disclosures – FHA/VA Disclosures: Fully-executed

government disclosures specific to FHA loan programs • Gen – 92900A (initial): Initial 92900A addendum to

loan application fully executed by borrowers and loan officer (pages 1 and 2 only)

Continued




DOCUMENTATION REQUIREMENTS IN ENCOMPASS FOR FHA LOANS, CONTINUED

Loan Processor

34. Cont.

• Gen – FHA /VA Case Number & CAIVRS: Include FHA Case Assignment showing success (borrower validation cleared)

• Gen – FHA /VA Case Number & CAIVRS: Include clear CAIVRS number for all borrowers

• Gen – FHA/VA Case Number & CAIVRS: Include refinance authorization from FHA Connection if the existing loan to be paid is also an FHA loan

• Underwriting: Acceptable AUS findings for non-Streamline loans (please note that only DU is acceptable for FHA loans, LP cannot be used)

• Credit – Credit Report – Spouse: If a community property state, a copy of the spouse’s credit report (if not on the loan) along with the spouse’s signed borrower authorization form and executed SSA-89 results

35. Additional Documentation for FHA Streamlines:

• Gen – FHA /VA Case Number & CAIVRS: Refinance Authorization printout from FHA Connection

• Credit – Note (copy) from original loan: Copy of the note with all pages on the original FHA loan to be refinanced

• Escrow/Title –Payoff demand for the original FHA loan to be refinanced

• Gen – Max Loan Amount Worksheet: FHA Max Mortgage Worksheet (completed and printed from Encompass)

• Gen – Net Tangible Benefit Worksheet: FHA NTB Worksheet (completed and printed from Encompass)

*CAIVRS and spouse’s credit reports for a community property state are not required for FHA Streamlines.



CASE TRANSFERS AND CASE CANCELLATION REQUESTS

Loan Processor

36. For case numbers transferred to AFN from another lender, a record of the case transfer confirmation must be obtained from the previous lender to support documentation of the previous assignment with another lender, justifying why the case assignment was issued prior to the disclosure receipt date by AFN.

a. Upload a copy of the transfer confirmation to the eFolder under Gen – FHA Case Transfer Documentation.

b. A separate case assignment record showing successful must also be uploaded to the eFolder in Encompass under Gen – FHA/VA Case Number & CAIVRS as required above.

c. Clear CAIVRS for all borrowers must still be uploaded to the eFolder in Encompass under Gen – FHA/VA Case Number & CAIVRS as required above.

d. Verify if an appraisal was logged by the previous lender. If so, obtain the appraisal from the previous lender and upload to the eFolder in Encompass under Property – Appraisals.

37. For an FHA Case Assignment that was assigned on

another AFN loan that had to be withdrawn, denied, or cancelled, and has since been re-started in the system, pull the notice of withdrawal, denial, or cancellation and upload to the eFolder under Gen – FHA Case Transfer Documentation.

• This will document that the case was pulled prior to the new disclosure date due to the presence in AFN's system of a previous loan that was compliant with HUD’s disclosure requirement to have all signed disclosures in file prior to the case assignment date.

38. For an FHA Case Assignment currently assigned to AFN on

a loan that is being withdrawn, denied, or cancelled, and needs to be transferred to another lender, submit a request in writing via email to the Underwriting Assistant Team [email protected] with the following information:

Continued




CASE TRANSFERS AND CASE CANCELLATION REQUESTS, CONTINUED

Loan Processor

38. Cont.

• AFN Loan Number • FHA Case Number • New Lender’s FHA ID • New Lender’s Sponsor ID (if required) • Signed letter from the borrower authorizing case

transfer Update the loan status in Encompass to confirm the loan’s disposition as no longer active (cancelled) so it is accurately reflected in the system. Note: For FHA case assignments with the incorrect originator ID for AFN (AFN has multiple HUD Originator IDs depending for its branches), request a case transfer to the correct originator ID for the branch (must match the signed 92900A and branch address on the 1003 & 92900A) as above.

39. For FHA case cancellation requests, there must be a valid reason for the cancellation request. Submit a request in writing via email to the Underwriting Assistant Team [email protected] with the following information:

• AFN Loan Number • FHA Case Number • Detailed reason for cancellation request

Note: Not all requests will receive approval. The reason must be valid and will be reviewed by executive management prior to a decision being issued as to whether the cancellation reason is acceptable to HUD and AFN policies. If approved, turn times for cancellation requests will typically take 48-72 hours once sent to FHA. The Underwriting Assistant will notify the Loan Processor of the decision to cancel, and once the case is cancelled, if approved.




CASE TRANSFERS AND CASE CANCELLATION REQUESTS, CONTINUED

Loan Processor

40. Confirm that the FHA originator ID matches the ID in Encompass on the HUD 1003 Addendum Form (screen), the initial signed 92900A, and on the FHA case assignment.

Note: If the case assignment is reflecting the incorrect FHA originator ID, follow the steps above for case transfers to request corrections.

REQUESTING PTD REVIEW AND CLEAR TO CLOSE ON FHA LOANS

Loan Processor

41. Review lender credits to confirm they are not excessive.

If a lender credit is to be issued, the amount may not exceed prepaids plus closing costs plus any discount points from details of the transaction, minus any origination credits for rate. If the UFMIP is to be credited, it may only be credited in full and must be approved by Underwriting. (No partial credit may be applied to the UFMIP; it must be all or nothing.) In the event that the UFMIP is being credited, make a note when sending the loan to Underwriting for PTD Review so the loan amount may be adjusted and UFMIP is calculated accordingly to reflect being credited in full.

42. Confirm there are sufficient assets documented in the file for funds to close based on the maximum loan amount for the purpose of loan, prior to submitting the file back to Underwriting for PTD Review (if applicable).

Continued



REQUESTING PTD REVIEW AND CLEAR TO CLOSE ON FHA LOANS, CONTINUED

Loan Processor

42. Cont.

Note: FHA purchases must meet minimum investment requirements as listed below. For FHA Streamlines, there may be a shortage due from the borrower at closing based on the loan amount calculation and maximum credits allowed that may require documentation (see below for rules on shortages with FHA Streamline refinances). If escrows are being netted, it must be reflected on the payoff demand or in writing from the settlement agent confirming the lender will accept a payoff with the escrow balance netted.

SPECIAL CLOSING CONSIDERATIONS FOR FHA PURCHASES

Loan Processor

43. Minimum Investment: For FHA purchases, it is imperative that the minimum required investment (MRI) of 3.5% down be documented and met on the loan. Review transaction details on the loan before resubmitting the loan to Underwriting for PTD Review in order to ensure that the minimum investment is met for the file.

Note: Gift funds are considered part of the minimum investment requirement and can be included in the total amount needed. Note: When real estate taxes are paid in arrears, the seller’s real estate tax credit may be used to meet the borrower’s minimum required investment. Even if using a tax credit, AFN must document that the borrower has sufficient assets to meet the total MRI and the borrower-paid closing costs.

Note: POC fees such as the appraisal fee cannot be used towards the MRI calculation for minimum funds.



SPECIAL CLOSING CONSIDERATIONS FOR FHA PURCHASES, CONTINUED

Loan Processor

44. Confirm receipt of the initial FHA Amendatory Clause & Real Estate Certification, fully executed by all parties including seller(s) and real estate agent(s).

This cannot be sent out with the closing package as all FHA loans will require an initial AND a final signed FHA Amendatory Clause & Real Estate Certification fully executed by all parties. If provided in the purchase contract, that will be acceptable for the initial disclosure requirement, provided it is completed in full and executed by all parties.

45. Confirm receipt of the FHA Identity of Interest Certification fully executed by all borrowers. The borrower(s) must complete the form to indicate if any relationships exist with other parties to the transaction, as indicated on the disclosure form.

SPECIAL CLOSING CONSIDERATIONS FOR FHA PAYOFFS

Loan Processor

46. For any FHA refinances (Streamline or not Streamline) with an existing FHA loan being paid off at closing, a Refinance Authorization may be required, as an MIP refund may still apply to the new loan even if it is not a Streamline refinance.

Confirm receipt of the Refinance Authorization for any applicable refinances and complete the FHA Management screen with the Refinance Authorization information per the instructions above.



SPECIAL CLOSING CONSIDERATIONS FOR FHA PAYOFFS, CONTINUED

Loan Processor

47. Determine whether an updated Refinance Authorization needs to be pulled in FHA Connection (may be required if the closing month has changed).

a. If an updated Refinance Authorization is required, upload the new document to the eFolder in Encompass.

b. If changes are needed to the Unearned UFMIP (MIP Refund), update the FHA Management screen per the instructions above.

48. If the borrower has made a payment or if the closing date

is changing, an updated payoff demand may be required.

49. Policy: If the FHA payoff indicates the borrower is still due

for their monthly payment in the month of closing, the loan cannot fund on the last day of the month. (For example, borrower is due for April payment and the loan is scheduled to fund in April).

This policy is for the protection of all parties and to ensure the loan is paid off without causing late payments and the assessment of additional interest and penalties. The borrower should instead make their payment and the Loan Processor should adjust the closing figures accordingly based on a closing date for the following month.

50. AFN distributes a monthly bulletin indicating particular cutoff dates for the given month that affect FHA Streamline refinances.

Review the cut off dates for closing and adjust accordingly for any FHA Streamlines based on deadlines prior to structuring the loan for Clear to Close. Ensure all information is up-to-date for the month of closing and that there is ample time for doc request and signing in the given month.



SPECIAL CLOSING CONSIDERATIONS FOR FHA STREAMLINES

Loan Processor

51. If the borrower has made a payment or the closing date is changing – an updated payoff demand may be required.

Determine if there should be any changes to the loan amount by reviewing the FHA Max Mtg Streamline Form (screen) in Encompass and repeating the steps above.

52. Policy: If the FHA payoff indicates the borrower is still due for their monthly payment in the month of closing, the loan cannot fund on the last day of the month. (For example, borrower is due for April payment and the loan is scheduled to fund in April).

This policy is for the protection of all parties and to ensure the loan is paid off without causing late payments and assessment of additional interest and penalties. The borrower should instead make their payment and the Loan Processor should adjust the closing figures accordingly based on a closing date for the following month.

53. Confirm if an updated Refinance Authorization needs to be pulled in FHA Connection. (May be required if the closing month has changed.) Upload the updated Refinance Authorization to the eFolder in Encompass if a new one is required.

Update the Unearned UFMIP (MIP Refund) on the FHA Management screen per the instructions above if changes are needed.

54. Upload a new FHA Max Mortgage Worksheet if there are any changes before submitting the loan to PTD Review so the Underwriter can review the changes before signing off on the loan for docs.



SPECIAL CLOSING CONSIDERATIONS FOR FHA STREAMLINES, CONTINUED

Loan Processor

55. For FHA Streamlines, HUD does not require asset verification for funds to close as long as funds to close do not exceed the amount of the new PITIA payment. (In other words, the borrower is permitted to “bring in their new payment” to closing without having to verify those funds.)

If the shortage of funds exceed the new PITIA amount, asset verification will be required. Review the shortage and all applicable credits carefully before sending the file in for PTD Review to ensure the shortage is either less than the new PITIA payment, or that sufficient assets are provided to verify the funds to close.

56. Verify receipt of a utility bill to confirm occupancy uploaded in the eFolder under Credit – Utility Bill. This will be required for the Underwriter to review and sign off unless the loan is for an investment property.

57. Once the file is put in line for PTD Review, prepare

the final LE and/or initial CD after confirming that the maximum loan amount is correct and all fees and credits are accurate.

Ensure the borrower is not receiving cash back in excess of program requirements.



B. UNDERWRITERS


Underwriter Note Complete steps in this procedure that are marked

“Underwriter” in addition to the customary steps for all loans.

Access FHA Connection from the web browser via: https://entp.hud.gov/clas/login_fhac.fcc. Standard hours of operation for Case Processing are: Monday – Friday 8am – 10pm EST (5am – 7pm PST).

1. Review the case assignment uploaded to the eFolder in Encompass. Ensure that the following are completed or condition the file accordingly:

• Case assignment is showing success • Case assignment date matches the date entered in

Encompass on the HUD-92900LT FHA Loan Transmittal or the FHA Management Form (screen) Tracking

• Disclosure dates on the initial 1003 and initial 92900A to validate the case assignment was generated after disclosures were received to be in compliance with HUD requirements; (if the case was pulled prior to the disclosure date by the borrower, escalate the loan to the EVP of Operations unless documentation has been provided to show the case was transferred from a previous loan or another lender)

• Originator ID on case assignment matches the originator ID in Encompass on the HUD 1003 Addendum form (screen) and on the signed initial 92900A; the correct branch address associated with the originator ID reflects on page 3 of the 1003

• The FHA loan program and term must be correct • Loan purpose is correct • Property address is correct and validated • Property type is correct; (if PUD, must include PUD

indicator)

Continued

https://entp.hud.gov/clas/login_fhac.fcc



MEETING REQUIREMENTS FOR FHA LOANS, CONTINUED

Underwriter 1.

Cont. • Condos: Property type indicator on the case assignment

is a condo; ADP code is correct; project is FHA-approved with the project ID reflecting on the case assignment

• Note: AFN only accepts HRAP approved condos at this time. If the project is DELRAP approved, the property cannot be approved in Underwriting. Please pay attention to the project approval type before issuing an approval on the loan.

• Borrower name, date of birth, and social security number are correct and validated for all borrowers on the loan

• Borrower name(s) on FHA case assignment matches the name(s) as they will be listed on the closing documents; if not, the file must be conditioned accordingly to be correctly entered as LAST NAME & SUFFIX (if any), FIRST NAME & MIDDLE INITIAL/NAME (if any)

Examples Borrower name as it will appear on closing documents: John A. Wayne, Jr. o Correct entry in FHAC Connection:

Wayne Jr, John A o Incorrect entry in FHA Connection:

Jr Wayne, John A o Incorrect entry in FHA Connection:

John A Jr, Wayne

2. Review the CAIVRS printout uploaded to the eFolder in Encompass; ensure that all borrowers have a clear CAIVRS with the correct social security number reflected on the printout (unless the loan is an FHA Streamline; CAIVRS is not required for Streamline refinances).



MEETING REQUIREMENTS FOR FHA LOANS, CONTINUED

Underwriter 3. Confirm the FHA payoff dropdown is appropriately

selected on the AFN – Borrower Summary Origination form (screen) or from the AFN – UW Summary 2 form (screen) if a refinance. If the current loan being refinanced is an FHA loan, indicate “Yes” to document in Encompass that an FHA payoff exists on the loan.

ADDING FHA CONDITIONS IN ENCOMPASS

Underwriter 4. When adding approval conditions in the Encompass

eFolder, use the appropriate FHA condition set as follows:

a. Press [Ctrl] + [N] to add a condition, and then select “Add conditions from Conditions Sets.”

Continued



ADDING FHA CONDITIONS IN ENCOMPASS, CONTINUED

Underwriter 4.

Cont. b. When the Conditions Sets dialog box appears, click the

“Cond. Set” menu and select the appropriate FHA Condition set from the following to see the available conditions (more than one may apply):

• The following Condition sets should be used in conjunction with the above condition sets when applicable: o FHA Purchase Conditions o FHA Refinance Conditions o FHA Streamline Conditions

• The following Condition sets should be used in conjunction with the above condition sets when applicable: o FHA 203K Conditions ONLY o FHA New Construction Conditions ONLY o HUD REO Repair Escrow Conditions ONLY

c. Single-click to highlight the appropriate condition(s) and then click the [Add] button. The selected conditions will appear on the right.

d. Select the correct “For” option, and then click the [Add] button below selected conditions.

e. Add any other conditions to the file as appropriate.

REVIEWING FHA APPRAISALS

Underwriter 5. For FHA case numbers assigned on or after

6/27/2016, all appraisals must be submitted through the FHA Electronic Appraisal Delivery portal by the AMC.

a. Appraisals submitted through the EAD portal will transmit all information to the appraisal logging screen of FHA Connection.

b. A submission summary report must also be provided by the AMC and uploaded to Encompass for the Underwriter to review when analyzing the appraisal report.



REVIEWING FHA APPRAISALS, CONTINUED

Underwriter 6. Ensure all information contained in the appraisal file

in Encompass matches the appraisal logging screen of FHA Connection and is accurate.

Once the information is confirmed accurate and matches the appraisal as reviewed in Encompass, log the appraisal in FHA Connection.

7. If any changes are required to the appraisal, an updated appraisal must be submitted through the EAD portal at time of revision by the AMC, along with an updated submission summary report provided by the AMC.

a. Both the updated appraisal and submission summary report should be uploaded to Encompass.

b. The Underwriter must revisit the appraisal logging screen in FHA Connection to ensure the new data is contained there.

c. If the new data is accurate, the Underwriter can then proceed to log the appraisal.

8. Upon review of the FHA appraisal, the Underwriter

must log the appraisal in FHA Connection.

To complete, log in to FHA Connection, select Single Family FHA Single Family Origination Case Processing Appraisal Logging.

Enter the FHA case number and then complete the appraisal logging after verifying all of the following information is completed accurately:

a. Select if the property is in a PUD project b. Enter the construction code c. Enter year built d. Enter effective age e. Complete the appraisal received date

Continued




Underwriter 8.

Cont. f. For purchases, complete the date of contract and

purchase contract price g. If appraiser required repairs are necessary, enter the

amount to be paid by the borrower h. Complete the location type i. Enter the predominant neighborhood price j. Complete land use percentages k. Enter the site area, either as square footage or acres l. Enter the property site type m. Indicate whether the property is manufactured housing n. Complete the foundation type o. Enter room counts p. Enter living area q. Indicate whether the property has central air

conditioning r. Select the car storage type s. Complete the estate type (fee simple or leasehold) t. Enter prior sale information u. Select the appraisal type (as-is or subject to) v. Enter the appraised value w. Enter the appraiser’s license number (include the state

prefix) x. Complete the effective date of the appraisal




Underwriter 8.

Cont.

9. Upon completion of the appraisal logging in FHA Connection, print and upload a copy of the appraisal logging results to the eFolder in Encompass under Property – FHA 92800 5-B & FHA Logging.

10. Prior to completing the PTD Review milestone, enter the logging information in Encompass on the FHA Management Tracking Form (screen) with the following information:

• Logged date • By (Underwriter’s name) • Company Name (Appraisal Company listed on the

report) • Appraiser Name • License # • Complete address • Phone • Email

11. Prior to completing the PTD Review milestone, complete the HUD-928005b Conditional Commitment Form (screen) in Encompass with the following information:

Continued




Underwriter 11.

Cont. • Conditional Commitment under Act checked • Section of the Act completed • See Below (Appraisal Done) checked • Underwriter Name and CHUMS ID completed • Action date (date of Underwriter review/clearance of

appraisal) • Lender ID & FHA Case number are completed

accurately • Confirm subject property information, value, and

construction type are accurate • Commitment Issued Date: effective date of appraisal • Commitment Expires Date: complete as 120 days

from the effective date of the appraisal • Improved Living Area: complete as gross living area

from the appraisal • Enter the remaining economic life of the property

from the appraisal • Select “Eligible for high loan to value ratio” unless

there is a specific restriction limiting the maximum LTV for the loan

• If manufactured housing, select the appropriate box




Underwriter 12. Prior to completing the PTD Review milestone, print the

HUD-928005b Conditional Commitment form from Encompass:

a. Sign and date next to the Underwriter’s name/CHUMS ID on all applicable pages, and

b. Upload to the eFolder in Encompass under Property – FHA 92800 5-B and FHA Logging

REVIEWING THE HUD 1003 ADDENDUM (92900A)

Underwriter 13. Review the initial 92900A Addendum uploaded to the

eFolder and confirm accuracy and completion of the following information:

• HUD/FHA as application type • Lender’s case number (AFN loan number) • Borrower name and present address • Property address (unless submitted as TBD) • Lender’s ID Code (originator ID, as discussed above) • Lender’s name and address match the name and

address on the 1003 and on the case assignment • First Time Homebuyer is completed for purchases • Purpose of Loan is completed appropriately • Part V borrower certification is completed accurately • Loan officer signature is completed on page 1 and

borrower signatures completed in both sections on page 2

• Signature dates are completed prior to case assignment date

14. Confirm accuracy of the same information above

completed accurately on the HUD 1003 Addendum Form (screen) in Encompass.



REVIEWING THE HUD 1003 ADDENDUM (92900A), CONTINUED

Underwriter 15. Prior to completing the PTD Review milestone,

update the Approved & Additional Conditions section of the HUD 1003 Addendum Form (screen) in Encompass:

a. Complete the date of approval as of the date of clearing the PTD Review milestone or final AUS run, whichever is later.

b. Complete the date the approval expires (should match the appraisal expiration date from the 92800 5B).

c. Complete the approval rating checkbox (accept/approve by FHA’s Total Mortgage Scorecard or refer and/or manually underwritten).

d. Print the form, sign page 3, and upload to the eFolder under Gen – 92900A pg. 3 UW signed at time of clearing the PTD Review milestone to ensure the form reflects all final terms.

COMPLETING THE HUD-92900LT FHA LOAN TRANSMITTAL

Underwriter 16. At time of underwriting review, access the HUD-92900LT

FHA Loan Transmittal Form (screen) in Encompass and review and complete the information as necessary to validate accuracy.

17. Review and complete the Borrower and Property

Information section for accuracy.

a. Confirm the FHA case assignment is correct and accurate, with the assigned date matching the printout in the eFolder from FHA Connection, and the correct SOA (Section of Act) is selected.

b. Borrower and property information should carry over from the 1003; confirm accuracy.

c. Under property information, complete the property type, additional property information, property rights, and construction type accurately.

Continued



COMPLETING THE HUD-92900LT FHA LOAN TRANSMITTAL, CONTINUED

Underwriter 17.

Cont.

18. Review and complete the Mortgage Information section for accuracy.

a. Confirm the amortization type is correct. b. If there is secondary financing, confirm accuracy of

information for the source and amount. c. Verify the Purpose of Loan is completed accurately. d. Verify the Loan Information is completed accurately and

that the MIP factors are correct. (Click Edit to refresh the Get MI fields if necessary; if MI is to be paid in cash, ensure it is marked correctly from within the Get MI fields.)

e. If there are gift funds used on the loan, complete the source of the gift and amount accurately. If there is more than one gift source, complete the second gift information with the source and amount accurately.

f. If the gift is from government funds (i.e., a DPA program), add the “Source/EIN” in the gift funds section.

Continued




Underwriter 18.

Cont. Note: Also confirm the gift funds are reflected as the source of down payment on page 1 of the 1003 (leading prefix for gift fund source should indicate "FHA" from the eligible dropdown sources), as well as listed in the asset section on page 2 of the 1003 with the amount matching the HUD 92900-LT.

19. Review and complete the Underwriting Information section for accuracy.

a. Confirm the income is accurate based on the Underwriter’s income calculations.

b. Confirm proposed monthly payments are accurate. c. Confirm debts and obligations are accurate as reviewed. d. Under Borrower Funds to Close, update the verified

asset amount, months of reserves (if any), total seller contributions on a purchase (if any), and seller contribution percentage (if any) is accurate.

e. Complete source of funds if there is a shortage on the loan.

Continued




Underwriter 19.

Cont. f. Validate the CAIVRS numbers from the FHA Connection

printout are entered accurately for each borrower (unless Streamline – CAIVRS not required for Streamline refinances).

g. Select the LDP/GSA validation (should be marked “No” if clear results).

h. Enter the Underwriter’s CHUMS ID responsible for underwriting the loan. (Enter "ZFHA" if using Total Scorecard results through AUS unless the loan has been manually downgraded.)

i. Enter Underwriting Comments on every loan to confirm at minimum comments regarding income, assets and credit.

j. Complete risk assessment (scored by Total Y/N and identify if approved or referred). This can also be completed on the FHA Management Form (screen) Tracking.

k. The Underwriter’s CHUMS ID must be completed for the Underwriter completing the appraisal review and signing the 92800.5B.

Continued




Underwriter 19.

Cont.




Underwriter 20. Prior to completing the PTD Review milestone and

upon final validation of all information, print and sign the HUD-92900LT FHA Loan Transmittal Form and upload to the eFolder in Encompass under Gen – FHA 92900 LT.

Note: The 92900 LT should not be signed in the event of an AUS approval using Total Scorecard A/A results with ZFHA entered for the CHUMS ID. Ensure completion of the form and upload to the eFolder as above with the exception of signing the form. a. In the event that the AUS is re-run later, a new 92900-

LT must be printed and uploaded (sign if necessary unless ZFHA) to confirm that the final LT matches the final AUS run.

b. An updated 92900A page 3 will also need to be signed and uploaded to match the final AUS date (see #15 above).


Underwriter 21. For FHA purchases, it is imperative that the required

minimum investment of 3.5% down be documented and met on the loan. The Underwriter shall review the details of the transaction on the loan prior to clearing the PTD Review milestone, in order to ensure that the minimum investment is met for the file.

Note: Gift funds are considered part of the minimum investment requirement and can be included in the total amount needed.

Note: When real estate taxes are paid in arrears, the seller’s real estate tax credit may be used to meet the borrower’s minimum required investment. Even if using a tax credit, AFN must document that the borrower has sufficient assets to meet the total MRI and the borrower-paid closing costs.

Continued



ADDITIONAL REQUIREMENTS FOR FHA PURCHASES, CONTINUED

Underwriter 21.

Cont. Note: POC fees such as the appraisal fee cannot be used towards the MRI calculation for minimum funds.

22. An FHA Amendatory Clause & Real Estate Certification, fully executed by all parties, must be provided: AFN requires a fully executed initial disclosure along with the final disclosure that is sent out with the closing documents.

*If this disclosure is not provided for in the purchase contract or is not fully executed by all parties, condition the file accordingly.

23. Confirm receipt of the FHA Identity of Interest Certification fully executed by all borrowers. The borrower(s) must complete the form to indicate if any relationships exist with other parties to the transaction, as indicated on the disclosure form. The Underwriter must review the completed form for any potential items affecting qualification.

24. Prior to completing the PTD Review milestone, access the FHA Management form (screen) Basic Info tab, and validate completion of the “Purchase Date” under Property Information as the date of the purchase contract (not to be confused as the funding or closing date).




Underwriter 25. Prior to completing the PTD Review milestone, access

the Encompass FHA Management form (screen), Basic Info tab, and ensure the “Previous Purchase Date” field under Property Information reflects the subject property’s prior sale date.

• Encompass will compare the Purchase Date to the

Previous Purchase Date to verify the loan falls within the allowable FHA “Flipping” timeframe.

o If Purchase Date (contract date) is ≤ 180 days from Previous Purchase Date, an alert will fire to remind the Underwriter the property is an FHA flip, so extra steps are required to ensure the loan meets all FHA requirements. This alert can be cleared by the Underwriter.

o If Purchase Date is ≤ 90 days from Previous Purchase Date, an alert will fire that prevents the Underwriter from proceeding with the PTD Review milestone. This alert cannot be cleared by the Underwriter; the file requires management review and must be referred to a manager.

ADDITIONAL REQUIREMENTS FOR FHA REFINANCES

Underwriter 26. Prior to completing the PTD Review milestone for

FHA Refinances (except Streamline Refis), access the Encompass FHA Management form (screen), Basic Info tab, and ensure the “Purchase Date” field under Property Information reflects the subject property’s prior sale date. Ensure all field are completed properly.

Continued



ADDITIONAL REQUIREMENTS FOR FHA REFINANCES, CONTINUED

Underwriter 26.

Cont.

• Encompass will compare the Purchase Date to the Closing Date (field ID 748) to check if the loan is being refinanced within 12 months of the sale date; if so, the lesser of the original cost or the new appraised value must be used to reflect the property’s value.

o If the loan falls within this 12 month period, Encompass will compare “Original Cost” (field ID 25) from Page 1 of the 1003 to the “Appraised Value” (field ID 356); if the Original Cost is lower than the Appraised Value, an alert will fire that can be cleared by lowering the Appraised Value to the Original Cost. This is done to prevent a current appraised value from being used in place of the purchase price if the loan is closing in less than 12 months from the original loan.

o If the appraised value is less than or equal to the original cost, an alert will not fire and the Underwriter can proceed.


Underwriter Note In addition to above FHA Case Assignment requirements,

FHA Streamline Refinances will require additional items to be validated prior to completing the PTD Review milestone.

27. Complete the Encompass FHA Streamline Checklist form (screen) to ensure compliance with all Streamline requirements and to verify that all required documentation is provided and conditioned for accordingly. Note: Completion of this screen is not required, but it is a useful tool to verify items needed for the loan and can help the Underwriter condition files properly.




Underwriter 28. Prior to completing the Decisioned milestone,

complete the Investor Selection – FHA Streamline Form (screen) in Encompass. Answer all questions in order for Encompass to auto-generate the appropriate investor selection.

Refer to the FHA Streamline overlay matrix located on AFN’s Intranet to verify eligible investors.

http://files.afncorp.com/WebTrac/Ratesheet/PNPs/AFN-X-Und_Investor_Overlay-FHAStrm.xlsx




Underwriter 29. Prior to completing the PTD Review milestone,

confirm the AFN – Borrower Summary Origination Form (screen) correctly reflects the loan as a Streamline Refinance. a. Under transaction details, confirm loan program code

reflects FHA with loan term and includes "STRML" in the program code to indicate it is a Streamline.

b. Loan Documentation Type Code dropdown should indicate “(B) Streamline Refinance.”

c. Documentation Type dropdown box should indicate “Streamline (without appraisal).”

d. Confirm the appraised value entered in Encompass matches the Original Property Value from the Refinance Authorization. (This must be the value used for LTV purposes and MIP rate calculations.)

30. Prior to completing the PTD Review milestone, access the

FHA Management Form (screen) Basic Info tab, and verify completion of the Loan Information section to indicate that the loan is a Streamline Refinance (w/o appraisal), and that the dropdown indicating the FHA Streamline Type (credit qualifying or non-credit qualifying) is accurate.

Continued




Underwriter 30.

Cont.

31. Prior to completing the PTD Review milestone, validate the

completion of information on the FHA Management Form (screen) Tracking in Encompass with the following information from the Refinance Authorization:

• Old FHA Case # (case number being refinanced) • MIP Refund (found on the refinance authorization as

“Unearned UFMIP”; if none, enter zero); must be accurate for the month of closing (if the closing month has changed from the time of initial underwrite, this will need to be updated)

• Prior endorsement date (found on the refinance authorization as “Original Endorsement Date”)

Continued




Underwriter 31.

Cont.

Note: Failure to complete this information accurately on the FHA Management screen may result in incorrect MIP factors. It is imperative that this information be completed prior to PTD Review with accurate data from FHA Connection.

Underwriter 32. Upon receipt of the payoff, validate the payoff balance on page 2 of the 1003 (liabilities section) and then confirm accuracy of the FHA Max Mtg Streamline Form (screen) in Encompass with the following information:

a. FHA Case # (should auto-complete based on previous entry of case number on FHA Management screen).

b. Case # Assigned Date (should auto-complete based on previous entry of case number on FHA Management screen).

c. SOA (Section of Act, verify from case assignment). d. Total Loan Amount of Current FHA Loan (obtain

from copy of note showing original loan amount or Refinance Authorization showing original mortgage amount).

e. Existing indebtedness: Enter the current principal balance from the payoff demand (this should not be the payoff balance, only the principal balance).

f. Unpaid principal balance – MIP: Enter the MIP breakdown on the payoff if listed up to a maximum of 2 months (if not itemized, cannot credit any MIP from the payoff here).

g. Unpaid principal balance – Interest: Enter the interest breakdown listed on the payoff, up to 60 days. For FHA loans with a daily per diem interest on the payoff, the maximum that may be included in the loan amount calculation is through the estimated closing date, plus 5 calendar days of interest, not to exceed the maximum 60 days allowed.

Continued




Underwriter 32.

Cont. h. Days: Enter the number of days of interest being

included in the calculated. Note: For investment properties, only the principal balance from the payoff may be included in the loan amount calculation, interest and MIP breakdown from the payoff may not be included and must be entered as zero on the FHA Max Mtg Streamline Form (screen).

i. Minus lesser of Unearned UFMIP: Enter the UFMIP refund for the month of closing (if any) from the Refinance Authorization (if none, enter zero).

j. Final computation: Once the above is completed, the screen will provide the maximum base loan amount that can be used. Update the base loan amount on the AFN – Borrower Summary Origination screen with this amount.

Return to the FHA Max Mtg Streamline screen and confirm Total New Mortgage Amount matches the gross loan amount after adjusting the base loan amount above.

Click the Print Form button at the top right corner of the screen to print the worksheet; upload it to the Encompass eFolder under Gen – Maximum Loan Amount Worksheet.




Underwriter 33. Prior to completing the PTD Review milestone, complete

the FHA Streamline NTB Form (screen) in Encompass.

Make sure the loan amount is calculated prior to completing this step, otherwise the information will be inaccurate as proposed loan information will auto-complete based on the information in Encompass.

Confirm the PI and MI payments are broken down on page 2 of the 1003 for the existing loan information before completing the form. Both the current and proposed loan information must be completed in full with the following:

• Amortization type • Amortization term • Breakdown of the monthly PI payment (do not

include escrows) • Monthly MI dollar amount • Interest rate • MIP Rate (for the current loan, this information is

listed as “Annual MIP Factor” on the refinance authorization or case query for the original case number obtained above)

• For loans that no longer have MIP being collected, determine the NTB by comparing the current interest rate to the combined proposed interest rate; do not enter MIP rate if the borrower is no longer paying monthly MIP

Note: If the subject property is an investment property, the FHA Streamline NTB Form (screen) will have the current PI and MI payment fields unlocked in order to edit from the screen itself rather than carrying over from page 2 of the 1003. (This is because page 2 of the 1003 requires the primary residence existing payment information to be entered under the existing payment breakdown.) Second homes on FHA Streamlines are generally not eligible as they must be prior approved directly by HUD.




Underwriter 34. Upon completion, confirm a PASS result for the

applicable test, print the NTB form, then sign and upload to the eFolder in Encompass under Gen – Net Tangible Benefit Worksheet.

ADDITIONAL REQUIREMENTS FOR REFINANCES WITH FHA PAYOFFS

Underwriter 35. For any FHA refinances (Streamline or not Streamline) with

an existing FHA loan being paid off at closing, a Refinance Authorization will be required, as an MIP refund may still apply to the new loan even if it is not a Streamline refinance.

a. Condition the file accordingly if this is not present in the file at time of initial underwrite.

b. Prior to completing the PTD Review milestone, confirm receipt of the Refinance Authorization for any applicable refinances with an FHA payoff, and

c. Validate the completion of the FHA Management screen with the Refinance Authorization information per the instructions above.



ADDITIONAL REQUIREMENTS FOR REFINANCES WITH FHA PAYOFFS, CONTINUED

Underwriter 36. If the loan is an FHA Simple Refinance (an FHA rate/term

refinance with an FHA payoff, where the funds are being used solely to extinguish the existing FHA loan and associated closing costs), the case assignment from FHA Connection must reflect Simple Refinance in the FHA to FHA Refinance Type.

a. Review the FHA Simple Refi Checklist screen (form) in Encompass and answer the questions to ensure compliance with all simple refinance requirements, and to verify that all required documentation is provided and conditioned for accordingly.

b. While this screen is not required in Encompass, it is a useful tool to verify what items will be needed for a particular loan and can help the Underwriter in conditioning the files properly during review.

c. For FHA Simple Refinances, confirm the program code is entered in Encompass as an FHA rate/term refinance, not a Streamline (Simple Refinances require full income/asset documentation and an appraisal).

d. Prior to completing the PTD Review milestone, access the FHA Management Form (screen) Basic Info tab, and confirm that the Loan Information section indicates the loan is a Simple Refinance, if applicable. Not all FHA payoffs are going to be a Simple Refinance, so only select this loan purpose if the loan is in fact a Simple Refinance.



CLEARING THE PTD REVIEW MILESTONE

Underwriter 37. Review lender/seller credits to confirm they are not

excessive. If a lender credit is to be issued, the amount may not exceed prepaids plus closing costs plus any discount points from the details of transaction, minus any origination credits for rate. If the UFMIP is to be credited, it may only be credited in full (no partial credit may be applied to the UFMIP, it must be all or nothing). In the event that the UFMIP is being credited, the Underwriter must review and adjust the UFMIP to be paid in cash, that the UFMIP is calculated accordingly to reflect the lender credit, and that the loan amount is correct.

38. Confirm there are sufficient assets documented in the file

for funds to close based on the maximum loan amount for the purpose of loan.

39. Prior to clearing the PTD Review milestone, pull a case

query in FHA Connection to ensure that the case is still active in FHA Connection.

If the loan has an MIP refund, confirm the correct amount is entered on the FHA Management screen (form) Tracking under the Refinance Authorization section.

40. Confirm copies of all FHA required forms for Underwriting are uploaded to the eFolder, including the following:

• HUD 92900LT

• HUD 92900A

• HUD 92800.5B (FHA loans with appraisals)

• Max Mortgage Worksheet (if FHA Streamline)

• NTB (if FHA Streamline)

• Any other program-specific requirements



CLEARING THE PTD REVIEW MILESTONE, CONTINUED

Underwriter 41. Prior to completing the PTD Review milestone and

after all updates are made in Encompass, click the Get MI button to refresh the FHA MIP information. This can be updated on the AFN – Borrower Summary Origination Form (screen), the 1003 Page 2 under proposed payments, or on the Loan Information section of the HUD-92900LT FHA Loan Transmittal by clicking the Edit field and then Get MI to refresh the MI information.

Note: If the UFMIP is being credited and to be paid in cash as paid by lender/other, the Underwriter must go back in after updating the Get MI button to confirm the figures are correct and final loan amount is correct in the system.

A Prior To Funding (PTF) condition must be added to the file that the MIP is being paid in order to alert the funder.

42. Prior to clearing the PTD Review milestone, use the Compliance Review tool (Mavent) in Encompass to ensure the loan is not HPML.

Specifically for FHA loans, if the loan is showing HPML alerts for federal and/or state but shows a passing message for FHA Safe Harbor, then the loan is not considered HPML and can be cleared without requiring any HPML review. If, however, the loan shows it does not meet FHA Safe Harbor requirements, review the loan to ensure it meets all HPML requirements. Example of pass message for Safe Harbor (not HPML):



C. DOC DRAWERS


Doc Drawer Note Complete steps in this procedure marked “Doc Drawer” in

addition to the customary steps for all loans.

1. Review the case assignment uploaded to the eFolder in Encompass. Ensure that the following are completed accurately and the information is matching on the FHA Management form (screen) in Encompass:

• Case assignment date • Case Number • ADP Code • Originator ID & NMLS ID • MIP Refund (if applicable) • Property address • Property type (PUD/Condo indicator) • If condo, project is FHA approved with the project ID

reflecting on the case assignment

2. If there is an MIP Refund on the loan, validate the amount against the FHA Refinance Authorization for the month of closing. Confirm that the MIP Refund does not exceed the amount of the new UFMIP (Upfront Mortgage Insurance Premium).

3. For files with an MIP Refund, confirm that the validated amount of the MIP Refund is showing on Section L, page 3, line 4 of the Closing Disclosure.



VALIDATING LENDER CREDITS

Doc Drawer 4. Review the Closing Disclosure (CD) and lender

credits listed in the Encompass loan file. Confirm that the lender credit does not exceed the total of the closing costs, discount fee (if applicable), and prepaid items (if reviewing from page 3 of the 1003, see items e, f, and h from the Details of Transaction).

In the example below, there is no discount fee: The maximum lender credit allowed would be 'e' plus 'f', or $8399.65.

5. If the lender credit exceeds the total costs and prepaid items as indicated above, it will result in a partial credit of the MIP. Be very careful in reviewing lender credit amounts to ensure this does not happen.

See the following section Validating Upfront Mortgage Insurance Premiums for information about calculations and terms.



VALIDATING UPFRONT MORTGAGE INSURANCE PREMIUMS

Doc Drawer 6. Validate the Encompass loan file to confirm the

Underwriter marked the UFMIP to be paid in cash prior to generating closing documents.

If not marked as paid in cash, refresh the Get MI button in Encompass to ensure the MIP percentage, terms, and amounts are correct.

7. Policy: If the UFMIP (Upfront Mortgage Insurance Premium) is to be credited, it MUST be credited in full and approved by Underwriting, as it will result in a different loan amount calculation.

*The MIP cannot be partially credited under any circumstances.

8. If marked as paid in cash by the Underwriter, proceed with refreshing the Get MI button in Encompass to ensure the percentage and terms are correct. Then update back to "paid in cash" after refreshing to match as Underwriting approved the loan.

9. If there are any discrepancies in the UFMIP amount or loan amount from what Underwriting approved after refreshing the figures, the file will need to be reviewed again by the Underwriter to approve all changes.

ADDITIONAL REQUIREMENTS FOR FHA PURCHASE

Doc Drawer 10. For FHA purchases, it is imperative that the required

minimum investment of 3.5% down be documented and met on the loan. The Doc Drawer shall review the details of the transaction on the loan in Encompass and as approved by Underwriting to validate if any changes were made and to confirm that the minimum required investment is met prior to releasing closing documents.

Continued



ADDITIONAL REQUIREMENTS FOR FHA PURCHASE, CONTINUED

Doc Drawer 10.

Cont. Note: Gift funds are considered part of the minimum investment requirement and can be included in the total amount needed.

Note: When real estate taxes are paid in arrears, the seller’s real estate tax credit may be used to meet the borrower’s minimum required investment. Even if using a tax credit, AFN must document that the borrower has sufficient assets to meet the total MRI and the borrower-paid closing costs. Note: POC fees such as the appraisal fee cannot be used towards the MRI calculation for minimum funds.


Doc Drawer Note In addition to the above requirements concerning FHA

loans, FHA Streamline Refinances require additional items to be validated prior to releasing closing documents.

11. Verify all figures for the month of closing for the FHA

Streamline. If the loan is submitted to closing past the designated cutoff date for FHA Streamlines, confirm management approval to proceed with the closing before releasing closing documents.

12. Review the FHA Maximum Mortgage Worksheet and

the payoff demand uploaded to the eFolder in Encompass. Confirm that the figures used to determine the maximum loan amount match the figures on the payoff. If an updated payoff was obtained, the loan will need to be returned to the Processor to re-validate the maximum loan amount calculations with Underwriting.




Doc Drawer 13. Confirm that the case number indicates the loan is a

Streamline Refinance and that there is a Refinance Authorization in the file.

14. If there is an MIP Refund on the Streamline loan,

validate the amount against the FHA Refinance Authorization for the month of closing. Confirm that the MIP Refund does not exceed the amount of the new UFMIP (Upfront Mortgage Insurance Premium).

15. For Streamline files with an MIP Refund, confirm that

the validated amount of the MIP Refund is showing on Section L, line 4 of page 3 of the Closing Disclosure.

16. For any FHA refinances (Streamline or not

Streamline) with an existing FHA loan being paid off at closing, a Refinance Authorization will be required, as an MIP refund may still apply to the new loan even if it is not a Streamline Refinance. Confirm a Refinance Authorization has been uploaded to the eFolder and validate the amount of the MIP refund, if any.


Doc Drawer 17. If there is an MIP Refund on the loan, validate the

amount against the FHA Refinance Authorization for the month of closing. Confirm that the MIP Refund does not exceed the amount of the new UFMIP (upfront mortgage insurance premium).

18. For files with an MIP Refund, confirm that the validated

amount of the MIP Refund is showing on Section L, line 4 of page 3 of the Closing Disclosure.



D. FUNDERS


Funder Note Complete steps in this procedure that are marked “Funder”

in addition to customary steps for all loans.

1. Review the case assignment uploaded to the eFolder in Encompass. Ensure that the following are completed accurately and the information is matching on the FHA Management Form (screen) in Encompass:

• Case assignment date • Case Number • ADP Code • Originator ID & NMLS ID • MIP Refund (if applicable) • Property address • Property type (PUD/Condo indicator) • If condo, project is FHA approved with the

project ID reflecting on the case assignment

2. If there is an MIP Refund on the loan, validate the amount against the FHA Refinance Authorization for the month of closing. Confirm that the MIP Refund does not exceed the amount of the new UFMIP (Upfront Mortgage Insurance Premium).

3. For files with an MIP Refund, confirm that the validated amount of the MIP Refund is showing on Section L, line 4 of page 3 of the Closing Disclosure.



REQUIRED FORMS FOR FHA LOANS

Funder 4. Confirm there is an uploaded 92900-LT Transmittal in the

eFolder under Gen – FHA 92900 LT in order to release the wire for funding.

The figures on the underwriting form must match the executed closing documents or the file must be returned to the Underwriter for review. Note: If the CHUMS ID indicates ZFHA, the LT does not require the Underwriter’s signature. If, however, there is an actual CHUMS ID entered (any ID other than ZFHA), then a signed LT must be provided by the Underwriter.



REQUIRED FORMS FOR FHA LOANS, CONTINUED

Funder 5. Retrieve page 3 of the 92900A HUD Addendum Form

indicating approval from the Underwriter with the Underwriter’s signature uploaded to the eFolder and merged with the remaining executed pages of the final 92900A in order to release the wire for funding.

Note: The signed page 3 should have previously been uploaded to the eFolder by the Underwriter under Gen – 92900 A page 3 UW signed for the Funder to retrieve from this folder.

6. For FHA purchases, the Funder will also need to confirm receipt of the following forms from the closing package and verify that they were fully executed by all necessary parties:

• Settlement Certification (must be executed by buyer(s), seller(s), and settlement agent)

• FHA Amendatory Statement and Real Estate Certification (must be executed by buyer(s), seller(s), and agents

VALIDATING LENDER CREDITS

Funder 7. Review the Closing Disclosure (CD) and lender credits

listed in the Encompass loan file.

Confirm that the lender credit does not exceed the total of the closing costs, discount fee (if applicable), and prepaid items (if reviewing from page 3 of the 1003, see items 'e', 'f', and 'h' from the Details of Transaction).

In the example below, there is no discount fee: The maximum lender credit allowed would be 'e' plus 'f', or $8399.65.

Continued



VALIDATING LENDER CREDITS, CONTINUED

Funder 7.

Cont.

8. If the lender credit exceeds the total costs and prepaid items as indicated above, the result will be a partial credit of the MIP. Be very careful in reviewing lender credit amounts to ensure this does not happen.

9. Validate the amount of the UFMIP on the closing documents against the loan file as approved, taking care to ensure that the correct amount and terms appear on the executed closing documents.


Funder 10. a. For FHA purchases, it is imperative that the required

minimum investment of 3.5% down be documented and met on the loan.

b. Review the details of the transaction to close on the loan in Encompass and as approved by Underwriting to validate if any changes were made, and confirm that the minimum required investment is met prior to releasing the wire for funding.

Continued




Funder 10.

Cont. Note: Gift funds are considered part of the minimum investment requirement and can be included in the total amount needed.

Note: When real estate taxes are paid in arrears, the seller’s real estate tax credit may be used to meet the borrower’s minimum required investment. Even if using a tax credit, AFN must document that the borrower has sufficient assets to meet the total MRI and the borrower-paid closing costs. Note: POC fees such as the appraisal fee cannot be used towards the MRI calculation for minimum funds.


Funder Note In addition to the above requirements concerning FHA

loans, FHA Streamline Refinances require additional items to be validated prior to releasing the wire for funding.

11. Verify all figures for the month of closing for the FHA Streamline. If the loan is submitted to closing past the designated cutoff date for FHA Streamlines, confirm management approval for funding before releasing the wire.

12. Review the FHA Maximum Mortgage Worksheet and the payoff demand uploaded to the eFolder in Encompass.

Confirm that the figures used to determine the maximum loan amount match the figures on the payoff. If an updated payoff was obtained, the loan will need to be returned to the Processor to re-validate the maximum loan amount calculations with Underwriting.

13. Confirm that the case number indicates the loan is a Streamline Refinance and that there is a Refinance Authorization in the file.




Funder 14. If there is an MIP Refund on the Streamline loan, validate

the amount against the FHA Refinance Authorization for the month of closing. Confirm that the MIP Refund does not exceed the amount of the new Upfront Mortgage Insurance Premium (UFMIP).

15. For Streamline files with an MIP Refund, confirm the

validated amount of the MIP Refund is showing on Section L, line 4 of page 3 of the Closing Disclosure.


Funder 16. For FHA Refinances (Streamline or not Streamline) with an

existing FHA loan that will be paid off at closing, a Refinance Authorization will be required. An MIP refund may still apply to the new loan even if it is not a Streamline Refinance.

Confirm a Refinance Authorization has been uploaded to the eFolder and validate the amount of the MIP refund, if any.

17. If there is an MIP Refund on the loan, validate the amount on the closing documents against the FHA Refinance Authorization for the month of closing. Confirm that the MIP Refund does not exceed the amount of the new UFMIP (Upfront Mortgage Insurance Premium).

18. For files with an MIP Refund, confirm that the validated amount of the MIP Refund is showing on Section L, line 4 of page 3 of the Closing Disclosure.

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