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Bob H
245 Posts |
 Posted - 04/08/2008 : 2:32:10 PM
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| Does FHA require all people on title to be borrowers on a loan? One of my LO's is doing an FHA refi and the underwriter is requiring us to remove the son from title since he is not on the loan. Is this right? |
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MWOLF
27 Posts |
Posted - 04/08/2008 : 2:37:02 PM
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| yeah that could be, no problem.. just put him back on via quit claim as soon as it funds |
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dkendall1979
8695 Posts |
Posted - 04/08/2008 : 2:38:52 PM
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| If that is what the underwriter is requiring to do the loan, then yes. |
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jvanpetten
2168 Posts |
Posted - 04/08/2008 : 2:39:37 PM
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| I don't understand why they want him off the title? I just closed one that the husband was the only borrower, the wife was not on the loan. Due to it being a son, he would just have to sign the mortgage and a few other docs at closing. This could be a lender requirement, so if you want to close with this lender, you might need to do it or change lenders. |
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Bob H
245 Posts |
Posted - 04/08/2008 : 2:44:24 PM
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| I'm a little confused myself. The underwriter says it is an FHA requirement. Problem with removing and adding is the transfer taxes. The loan amount is over $300k so transfer taxes could be pretty big. I need to follow up on this one. |
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jvanpetten
2168 Posts |
Posted - 04/08/2008 : 2:46:24 PM
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| I saw another post that the LO called HUD directly and they emailed him and the lender their requirements. Maybe you can win this one that way. He also said he was on hold for 90 minutes. |
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MortgageBoarder
3025 Posts |
Posted - 04/08/2008 : 2:48:22 PM
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Your UW is not so smart if he says FHA requires it, it would ONLY be a lender requirement. FHA requires anyone who will be on title to also submit a credit report for review, but they are NOT required to go on the loan. This is to insure that the individual added to title does not come with any current liabilities that could cloud title after he/she is added.
And for the 8 millionth time people, QUIT CLAIMS are for when someone is coming off of title, hence the word Quit. GRANT DEEDS are used when you need to add someone to title, hence you are Granting them vested interest in the property.
Hope that helps!! |
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ML
2113 Posts |
Posted - 04/08/2008 : 2:50:54 PM
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quote:
Originally posted by Bob H
I'm a little confused myself. The underwriter says it is an FHA requirement. Problem with removing and adding is the transfer taxes. The loan amount is over $300k so transfer taxes could be pretty big. I need to follow up on this one.
In most states I've done title in this type of transfer (family addition to title) is exempt from transfer tax, just pay filing fee $10-25. |
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ML
2113 Posts |
Posted - 04/08/2008 : 2:53:51 PM
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quote:
Originally posted by Bob H
Does FHA require all people on title to be borrowers on a loan? One of my LO's is doing an FHA refi and the underwriter is requiring us to remove the son from title since he is not on the loan. Is this right?
Is kid a minor?
Does he NOT reside there? FHA O/O only.
Judgments, liens on kid?
Kid pay C/S? |
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Bob H
245 Posts |
Posted - 04/08/2008 : 2:57:42 PM
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Son is not a minor. Title company does bk & judgement searches on all title holders.
Nothing hanging on this guy. Why would FHA differ than conventional on this subject?
I'm not 100% certain but I think the County they live in does not make family members exempt from transfer taxes. They are titled as tenants in common (50/50 ownership). |
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jvanpetten
2168 Posts |
Posted - 04/08/2008 : 2:59:06 PM
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| I don't think that they do. |
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MortgageBoarder
3025 Posts |
Posted - 04/08/2008 : 3:12:21 PM
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Well I was partially right and partially wrong. Here is the exact verbiage from Allregs.
2-2: MORTGAGE ELIGIBILITY (BORROWERS) (10/03)
Generally, we will insure mortgages made to individuals only. Under the conditions described in Chapter 1, we will also insure mortgages made to state and local government agencies and approved nonprofit organizations.
A. Borrowers, Co-Borrowers and Cosigners. Borrowers and Co-borrowers take title to the property and are obligated on the mortgage note and must also sign the security instrument. The co-borrower's income, assets, liabilities, and credit history are considered in determining creditworthiness.
Cosigners do not hold ownership interest in a property, but are liable for repaying the obligation and must sign all documents with the exception of the security instruments. The cosigner's income, assets, liabilities, and credit history are considered in determining creditworthiness for the mortgage and the cosigner must complete and sign the loan application.
We do not permit an individual to take an ownership interest in the property at settlement without signing the mortgage note and all security instruments.
So yes, they MUST be on the loan. FHA does not allow for title only ownership. |
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rhelali
187 Posts |
Posted - 04/08/2008 : 6:53:58 PM
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quote:
Originally posted by Bob H
Does FHA require all people on title to be borrowers on a loan? One of my LO's is doing an FHA refi and the underwriter is requiring us to remove the son from title since he is not on the loan. Is this right?
if the underwriter is requiring it just do it to get the loan closed and funded asap.. after the loan is finished just throw the kid back on title |
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Bob H
245 Posts |
Posted - 04/10/2008 : 06:24:51 AM
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Still trying to find clarification on this. Loan is closing tonight. The underwriter said the condition is based on her interpretation of the 4155. Removing and adding the son back will cost almost $7,000 in transfer taxes. I feel that this condition is ridiculous.
I think what mortgageboarder posted only applies to purchases (I hope!).
The underwriter and manager said if I can provide HUD guidance to support my case, they will remove the condition. This loan is closing @ 5pm eastern. Any help locating HUD will be greatly appreciated!!! |
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jvanpetten
2168 Posts |
Posted - 04/10/2008 : 06:49:25 AM
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| Did you try to call HUD? |
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nowbroker
1058 Posts |
Posted - 04/10/2008 : 08:56:51 AM
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| The rule would apply to purchases and refinances. HUD's concern is that if the other person has major debts or other obligations that are delinquent and may turn into a judgment, it could affect the marketability of the property, even though it may be in 2nd position. |
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Bob H
245 Posts |
Posted - 04/10/2008 : 09:03:47 AM
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| Thanks for all the responses. I called HUD and talked to a head underwriter at another bank. It is a condition. The only exception can be non-borrowing spouses (and that is case by case). Oh well, loan is still closing tonight and everyone is on board. Unfortunately it will cost the borrower $3,500 in transfer taxes. |
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MortgageBoarder
3025 Posts |
Posted - 04/10/2008 : 10:47:37 AM
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| Well hey, glad it still worked out for you bud! |
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RyLoans
27 Posts |
Posted - 04/10/2008 : 10:52:43 AM
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Sorry I agree with the underwriter. If the son is not on the loan the vesting is totally messed up. You will have to have the son quit claim the property at closing, otherwise FHA, Fannie Mae, Freddie Mac wont buy it. Its more of a title issue they are worried about then an underwriting issue. I dont see any FHA underwriter allowing it unless they missed it. You could always add him after the loan is closed but I dont see how you can do it before. Then again if you add him after they could foreclose. Good Luck
Trained FHA underwriter. Here is a copy of the 4155.
http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.1/index.cfm |
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crankyusi
382 Posts |
Posted - 05/09/2008 : 4:02:44 PM
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quote:
Originally posted by RyLoans
Then again if you add him after they could foreclose. Good Luck
Trained FHA underwriter. Here is a copy of the 4155.
http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.1/index.cfm
What basis would the lender foreclose? |
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