Single Family Housing Policy Handbook 4000.1 Module 2C2: FHA Condo Approval – Mortgagee DELRAP Authority Requirements Presenter: Dorian Humphrey As of the most recent update: August 14, 2019 The information in this document is current as of the most recent update noted on this cover page. This document does not establish or modify the policy contained in FHA’s Handbooks or Mortgagee Letters in any way. .
Disclaimer • The purpose of this presentation is to provide an overview and summary of recent changes to the Federal Housing Administration (FHA) policy. It introduces and explains official policy issued in Department of Housing and Urban Development (HUD) Handbooks and Mortgagee Letters. If you find a discrepancy between the presentation and Handbooks, Mortgagee Letters, etc., the official policies prevail. Please note, the information provided in this training is subject to change. • Please consult HUD Handbooks and Mortgagee Letters through HUDCLIPS for the most recent updates and current policy. 2
Learning Agenda Overview of Changes Part 1: Mortgagee DELRAP Authority Requirements Part 2: Quality Control, Oversight and Compliance 3
Overview of Changes 4
Housing Opportunity Through Modernization Act • On July 29, 2016, President Obama signed into law the Housing Opportunity Through Modernization Act of 2016 (HOTMA). HOTMA amends the United States Housing Act of 1937 (1937 Act) and other housing laws to modify multiple HUD programs, along with the Department of Agriculture’s Single Family Housing Guaranteed Loan Program. 5
HOTMA – Section 301 • Section 301 mandates several changes to FHA’s mortgage insurance for condominiums, including changes to: – Requirements on project recertification; – Exceptions to the percentage of floor space that may be used for nonresidential or commercial purposes; – Private transfer fee covenants; and – The minimum required percentage of units that must be owner occupied. 6
HUD Policy ML 09-46A & ML 11-03 ML 11-22 ML 12-18 ML 15-27 09-46B 4000.1 II.C ML 16-13 ML 16-15 ML 17-13 Condominium Project Approval 7
Single Family Housing Policy Handbook 4000.1 Overview • The structure follows the logical process flow for stakeholders. • The five major sections are: I. Doing Business with FHA II. Origination through Post-Closing/Endorsement III. Servicing and Loss Mitigation IV. Claims and Disposition V. Quality Control, Oversight, and Compliance 8
Glossary Terms Capitalized words in this module can be found in the SF Handbook glossary. 9
Handbook Topics I. Doing Business with FHA A. FHA Lenders and Mortgagees V. Quality Control and Oversight A. Quality Control of Lenders and Mortgagees C. Mortgagee Monitoring E. Enforcement 10
Part 1: Mortgagee DELRAP Authority Requirements 11
DELRAP Mortgagee Authority Requirements Approval to participate in the Direct Endorsement Lender Review and Approval Process (DELRAP) gives a Mortgagee the authority to review, approve, and submit Condominium Projects for listing on FHA’s Approved Condominium Project list. Types of DELRAP authority: Conditional Authority Unconditional Authority 12
DELRAP Mortgagee Authority Requirements (cont.) Conditional DELRAP Authority refers to the authority of a Mortgagee that has provided notice to FHA of its intent to participate in DELRAP and requires the Mortgagee to submit all Condominium Project Approvals to FHA for review. Unconditional DELRAP Authority refers to the authority of a Mortgagee to approve Condominium Projects in accordance with HUD requirements and submit the Condominium Projects for listing on FHA’s Approved Condominium Project list without any prior Condominium Project review by FHA. 13
DELRAP Test Case Phase The DELRAP Test Case Phase refers to the time period in which a Mortgagee with Conditional DELRAP Authority is required to submit Condominium Project Approvals to FHA for review. 14
DELRAP Mortgagee Authority Requirements (cont.) A Mortgagee must meet the following requirements to apply for and participate in FHA's DELRAP. FHA Title II Unconditional Direct Endorsement (DE) Mortgagee Experience Approved Personnel Requirements Quality Control Plan 15
DELRAP Mortgagee Authority Requirements (cont.) FHA Title II Unconditional Direct Endorsement (DE) Approved: The Mortgagee must currently be a Title II Direct Endorsement (DE) approved Lender. Mortgagee Experience: The Mortgagee’s experience must include loan originations of not less than 10 FHA Mortgages in Condominium Projects that have been approved by the Commissioner. 16
DELRAP Mortgagee Authority Requirements (cont.) Personnel Requirements: • The Mortgagee must document they have at least one staff member with a minimum of one year of experience underwriting Mortgages on Condominium Units and/or reviewing Condominium Projects for FHA approval: • Must ensure staff members participating in the approval of Condominium Projects either: ▪ Meet the Experience requirement; or ▪ Are supervised by staff that meet the one-year experience requirement. ▪ Exceptions apply to certain Mortgagees created by merger, acquisition, or reorganization. Quality Control Plan: The Mortgagee’s Quality Control Plan must include specific provisions related to DELRAP. 17
Exceptions for Certain Mortgagees Unconditional DELRAP Authority may be granted without the need for the DELRAP Test Case Phase following a merger, acquisition, or reorganization, provided that: The surviving FHA-approved Mortgagee or the FHA-approved Mortgagee resulting in a new FHA Lender ID was granted Unconditional DELRAP Authority prior to the merger, acquisition, or reorganization. 18
Exceptions for Certain Mortgagees (cont.) Second Condition: If both institutions have Unconditional DELRAP Authority, then the management and staff of at least one of the Mortgagees involved with the Mortgagee’s Unconditional DELRAP Authority prior to the merger, acquisition, or reorganization must continue to exercise those responsibilities for the new Mortgagee. 19
Exceptions for Certain Mortgagees (cont.) Third Condition: If only one institution has Unconditional DELRAP Authority, then the management and staff involved with that Mortgagee’s Unconditional DELRAP Authority prior to the merger, acquisition, or reorganization must continue to exercise those responsibilities for the new Mortgagee. 20
DELRAP Application and Approval First-time Mortgagee applicants must apply for Unconditional DELRAP Authority to the Jurisdictional Homeownership Center (HOC) for the state where the Mortgagee’s home office is located. 21
DELRAP Application and Approval (cont.) HUD Homeownership Centers (HOCs) HOCs Areas Served Atlanta Alabama Caribbean Florida Georgia Illinois Indiana Kentucky Mississippi North Carolina South Carolina Tennessee Denver Arkansas Colorado Iowa Kansas Louisiana Minnesota Missouri Montana New Mexico Nebraska North Dakota Oklahoma South Dakota Texas Utah Wisconsin Wyoming Philadelphia Connecticut Delaware District of Columbia Maine Maryland Massachusetts Michigan New Hampshire New Jersey New York Ohio Pennsylvania Rhode Island Vermont Virginia West Virginia Santa Ana Alaska Arizona California Hawaii Idaho Nevada Oregon Washington 22
DELRAP Application and Approval (cont.) Required Documentation The Mortgagee must submit a letter signed by a Corporate Officer requesting entry into the DELRAP Test Case Phase that: • Specifies the Mortgagee’s home office 10-digit FHA Lender ID; and • Certifies that the staff has met the eligibility requirements prior to Conditional or Unconditional DELRAP Authority being granted. 23
DELRAP Application and Approval (cont.) Test Case Process: Mortgagees with Conditional DELRAP T e s t C a s e S u b m i s s i o n Authority must review the R e q u i r e m e n t s : Condominium Project in accordance The Mortgagee must with the Condominium Project submit all Test Cases to Approval requirements to determine if the Jurisdictional HOC. the Condominium Project meets FHA FHA will review these approval requirements. Test Cases for compliance with FHA’s Condominium Project Approval requirements. 24
Approval of Unconditional DELRAP Authority Previous DELRAP Reviews Test Cases Experience The Mortgagee must The Jurisdictional Test Cases must be satisfactorily HOC may require submitted within a complete a minimum less than five period of 12 of five (5) DELRAP DELRAP reviews and consecutive months reviews with no more will consider previous following the date of than one review experience. application. being rated unacceptable. 25
Denial of Unconditional DELRAP Authority The Mortgagee will be denied approval for Unconditional DELRAP Authority if, at any time during the DELRAP Test Case Phase, FHA determines that the Mortgagee’s submissions demonstrate a lack of knowledge of FHA requirements, or FHA identifies unacceptable practices. 26
Denial of Unconditional DELRAP Authority (cont.) Denial of Denial Decision Unconditional DELRAP Authority Process Denial Appeal Informal Conference Determination 27
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