FHA MAKES CHANGES TO “TOTAL SCORECARD” TO MANAGE RISK
FHA has announced that effective with case numbers assigned on or after March 18, 2019, its TOTAL Scorecard technology will incorporate changes that will better manage loans with low credit scores, high ratios and excessive risk layering.
FHA states that over the last several years they have seen a continuing increase in certain high-risk credit characteristics, including:
- a growth in cash-out refinances (in 2018, an increase of more than 60% as a percentage of all refinances);
- an increase in high debt-to-income ratios (in 2018, 25% of all FHA forward mortgages purchase transactions had a DTI of over 50%); and
- a decease in average credit scores (the lowest since 2008)
To read FHA Info #19-07, click HERE.
“VA CASH-OUT REFINANCES
On February 14, 2019 VA released Circular 26-19-5, a clarification of the new requirements for cash-out refinances, effective with loan applications taken on or after February 15, 2019. The industry had hoped that VA would delay the implementation of the requirements, since many LOS vendors are not ready. However, it appears that has not happened. Please click on the links below to view the circular and the sample disclosure.
REQUIREMENT PASSES OHIO
In the December 2018 Lame Duck session of the Ohio Legislature, Substitute House Bill 489 passed, requiring all mortgage loan servicers, including those that hold Mortgage Servicing Rights, to register with the Department of Commerce Division of Financial Institutions. The bill was singed by the Governor on December 19, 2018. To view the bill click HERE.
OHIO LEGISLATURE PASSES ELECTRONIC NOTARIZATION BILL
The Ohio Legislature has passed SB263, the Notary Public Modernization Act, a bill supported by OMBA. The legislation has been signed into law by Governor Kasich.
The bill will give the ability to consumers to choose to conduct their real estate finance transactions using remote online notarial acts, and will modernize the notary function. Notarial acts are a necessary component of the residential loan closing process. As the industry continues to serve consumers’ needs by using online , mobile and other electronic means, it had become clear that Ohio needed a law in place to support this technology shift.
The legislation makes remote online notarizations equivalent to traditional notarizations without risks and unnecessary barriers. The legislation provides appropriate safeguards that ensure that fraud and capacity issues are appropriately addressed by the remote notarization process. The legislation also provides needed reform in the notarization process as a whole, and raises the professional standards for those performing the notary act.
The full text of the bill is available by clicking HERE.
MAY 13-15, 2019
On December 22, 2017 Governor Kasich signed House Bill 199, the “Ohio Residential Mortgage Lending Act”. The bill, a working project of OMBA’s for several years, modernizes the licensing and company registration process. The effective date of the legislation is March 23, 2018. Some key provisions of the bill are:
- All loans secured by 1-4 unit residential property, both first and subordinate liens, will fall under Section 1322 of the Ohio Revised Code, requiring only one company registration and one state license per loan officer;
- All non-depository companies will become registrants, including mortgage banking companies that are currently exempt from registration when lending solely within their federal agency approvals, alleviating the possibility of unknowingly engaging in unlicensed activity;
- Special accounts will no longer be required; and
- Only unsecured loans and loans secured by collateral other than real estate will require a license under Section 1321 of the Ohio Revised Code.
IMPORTANT INFORMATION: The new law will become effective 90 days from the date of the Governor’s signing. There will be no immediate change in the current requirements. Once the law becomes effective, the Department of Commerce Division of Financial Institutions will allow lenders/brokers to operate under the new law without having to make any registration or licensing status changes until the next renewal date after. That provision reads as follows:
Section 3. (A) The Superintendent of Financial Institutions may take actions necessary to ensure full compliance with this act, including actions to facilitate the transition of existing registrants and licensees and those persons holding valid letters of exemption as of the effective date of this act.
B) Persons holding a valid mortgage lender certificate of registration or mortgage loan originator license issued under sections 1321.51 to 1321.60 of the Revised Code as of the effective date of this act and persons holding a valid mortgage broker certificate of registration or loan originator license issued under Chapter 1322. of the Revised Code as of the effective date of this act, shall not be required to be registered or licensed under section 1322.07 or 1322.20 of the Revised Code, as amended by this act, until the first renewal of that certificate of registration or license after that date. The Superintendent may treat the applications submitted by those persons as renewal applications, and may use prior application materials as the basis for issuing registrations, licenses, and
letters of exemption after the effective date of this act.
To view the final bill click HERE.