Pursuant to Section 2133 of the Housing and Economic Recovery Act of 2008, effective October 1, 2008, and for a period of 12 months thereafter, FHA's implementation of its risk-based premiums policy, as described in Mortgagee Letter 2008-16, will be suspended. Mortgagee Letter 2008-22 reiterates the announcement of the moratorium, rescinds accordingly ML 2008-16 in its entirety, and describes the new upfront and annual premiums to be used for all forward mortgage loans insured under FHA's Mutual Mortgage Insurance (MMI) fund; the Section 203(k) rehabilitation mortgage insurance program; and individual condominium units insured under Section 234(c) for which a case number is assigned on or after October 1, 2008. ML 2008-22 also retains certain parts of ML 2008-16, which are restated therein.

The State of New York has created a new category of loans called "subprime home loans."  The new law is set forth in new Section 6m of the New York Bank Law (a copy of the bill enacting this new section is available here).  The new law applies to loans closed on or after September 1, 2008.  Many investors, including but not limited to Fannie Mae,1 have already announced that they will not purchase and/or securitize New York subprime home loans.  Below is a description of the new law along with a description of the audit DocMagic is implementing to identify New York subprime home loans.

HB 552 requires a new disclosure to be provided to the borrower at closing regarding the Homeownership Protection Center.  The Center was established pursuant to HB 552 to provide counseling to homeowners who are in default, or in danger of default, on their home loan.

In our last issue, we advised that DocMagic's default security instrument for all non-FHA, New Mexico loans, as of the middle of August, 2008, will be a deed of trust based on Fannie Mae and Freddie Mac's mandate that a deed of trust be used, beginning September 1, 2008.  However, after publication of last month's article, Fannie Mae announced by email to selected parties, including DocMagic's Compliance and Forms Departments, on August 29, 2008, that mandatory use of the deed of trust will be delayed until October 1, 2008, to give lenders adequate time to complete the transition from a mortgage to a deed of trust.  Lenders must now begin using Fannie Mae/Freddie Mac's deed of trust for loans closed on or after October 1, 2008.

DocMagic, Inc.'s Compliance Department has updated the Impound Requirements matrix to incorporate escrow cushion requirements, if any, for each state. To view the updated matrix, click here.  

On August 28, 2008, the Board of Governors of the Federal Reserve System announced that it has updated the publication "What You Should Know About Home Equity Lines of Credit" to include information for consumers on line of credit freezes or reductions in lines of credit.  You may access the updated publication here.

This month DSI posts the loan programs of CitiMortgage, Inc. (Correspondent Division), Franklin American Mortgage Company (Correspondent), and JP Morgan Chase Bank, N.A. (Correspondent) to its Compliance page.  Find out the description of each investor's loan program, which promissory notes, prepayment riders and addenda are used, and what the rate caps and interest-only periods are for variable rate loans by visiting our Investor Updates page.

Effective September 1, 2008, an updated version of the New York Consumer Caution and Home Ownership Counseling Notice will be required to be used for all New York high cost home loans.  A lender or mortgage broker must give the Notice to the borrower within three (3) days after determining that the loan is a high-cost home loan, but no less than ten (10) days before closing.

In order to keep DocMagic software users better apprised of document changes and additions as they occur, DSI posts listings of all newly created and revised documents. Here is the list of forms created or modified in August 2008.

The U.S. Treasury security yield values for September 2008 may be viewed online here.  The yield is determined as of the 15th day of the month immediately preceding the month in which the creditor receives the application.  The yield value is used for Section 32 and most state high-cost tests.  These values will, therefore, be used for loan applications received by the creditor in October 2008.

To view this month's list of announcements or newsletters related to our mortgage industry, please click here.