On December 30, 2009, FHA, in accordance with the regulatory changes to 24 CFR §203.27, issued M.L. 2009-53 that, among other matters, removed the one percent origination fee cap for FHA’s standard mortgage insurance programs. The Home Equity Conversion Mortgage (HECM) and the Section 203(k) Rehabilitation Mortgage Insurance programs retain their statutory origination fee caps. As noted in No. 2 below, in order to correct a misstatement, FHA revised M.L. 2009-53. The full text of revised M.L. 2009-53, which is attached to this memorandum, is briefly summarized below: The one percent origination fee cap is removed for standard FHA mortgage insurance programs. The statutory origination fee caps remain for HECMs and 203(k) Rehabilitation loans. The new GFE and HUD-1 forms effective January 1, 2010, must be used for FHA loans that originated on or after January 1, 2010. Our Comment: The original M.L. 2009-53 contained the following statement: “The new forms must be used for mortgages that close on or after January 1, 2010.”(emphasis added) Apparently, FHA realized that its use of the word “close” in this way was incorrect and issued a revised M.L. 2009-53, substituting the word “originated” for the word “close.” Revised M.L. 2009-53 is also dated December 30, 2009, and does not state that it is a revised letter. Although the new GFE requires that lenders disclose a lump sum for the origination charges (Block 1 on page 2 of the new GFE), “if a government program or state law requires that lenders provide more detailed information to specify distinct origination fees and charges, lenders may itemize these charges in the empty 800 lines of the HUD-1, to the left of the column.” Lenders must include the GFE in the case binder on the right hand side when the loan is submitted for insurance endorsement. If more than one GFE is issued, all prior GFEs must also be contained in the case binder. When seller-paid credits cover more than one closing cost of the borrower, the seller credit shown in lines 204-209 and 506-509 of the HUD-1 must reflect the lump sum payment.

Complete Memorandum