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Originally posted by reverseguy

Not correct but go ahead at your own peril. What's the name of the company I'll call my contact at HUD?

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Originally posted by Ging

he will continue to represent him self as RESPA compliant until they start handing out fines. just like the title companies did a few years ago. what would the brokers have as a defense when RESPA asks them why they didnt get FHA approved themselves

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Some states DO NOT allow brokers to hang their licenses with multiple firms, therefore YSP is not available in all states

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Originally posted by ssheasby

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Some states DO NOT allow brokers to hang their licenses with multiple firms, therefore YSP is not available in all states

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It says in your first post that it would only work if the state allowed them to hang their licenses with multiple firms. How is it that you then say that they are exclusive with you. It's not making sense. Please explain.

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Originally posted by RANDY P

The way it reads means "existing broker you work for is not FHA approved" -

not Joe Schmoe the felon who can't by law be an LO trying to originate FHA.

It is a rule that if you are originating FHA you must be exclusive a with the company you are representing. SO, if you quit where you're at and sign up - assuming you meet other state requirements you are legit. He's referring to his company as having FHA endorsements, and if you sign up you will have the right to use it assuming you meet other state qualifications.

This looks like wholesale going retail. Nothing shady here.

rjp

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Originally posted by ssheasby

I can have you running with FHA for $3k per year plus $10 per file for audits. $20k may be a little high of an estimate.

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Originally posted by ssheasby

I have CPAs nationwide that will do the audit for around $3k so contact me if you get quoted $10k.

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Originally posted by ejgoldy

Well Helali, if you keep it up you might be fitted for an orange jump suit. Here's the latest HUD letter on this subject.

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/08-17ml.doc

Looks like you'll have to rely on business the old fashioned way.

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Originally posted by reverseguy

Didn't know your company was the only HUD approved companies that the rules (mortgagee letters) don't apply to.

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• “yes, we are aware of that, however since OUR AGENTS ARE EXCLUSIVE TO FIRST WHOLESALE LENDING, that mortagee letter from HUD does not apply to us.”

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Originally posted by reverseguy

Didn't know your company was the only HUD approved companies that the rules (mortgagee letters) don't apply to.

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Originally posted by reverseguy

You're right but my guys are employees.Actually I'm just fooling with you.

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Originally posted by reverseguy

I believe there is an attorney in Orange CO> Thorsen I think who is out saying this is a loop hole for HUD. I'm not so sure, do you have a ruling from HUD on this?

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Originally posted by bmoran

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Originally posted by reverseguy

I believe there is an attorney in Orange CO> Thorsen I think who is out saying this is a loop hole for HUD. I'm not so sure, do you have a ruling from HUD on this?

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Actually his name is Herman Thordsen his website is www.lendinglaw.com
He is a HUD/RESPA expert. Our company uses his services.

The original poster is not correct. FHA isnt state specific other then licenisng laws.
In other words you have to be licensed or exempt to perform FHA loans.

In CA if you are licensed as a "salesperson" you need to hang your license with one broker it can not be with multiple brokers. If you are a "Broker" you dont even need to have your license hung anywhere you are free to do business with as many brokers as you like.

However FHA supersedes that in ALL STATES, by requiring you work for one broker or licensed company if you are originating FHA loans.

You can not originate FHA loans with one company and other loans someplace else.
If you originate or are involved in FHA loans in any capacity you can not even be employed in the "Real Estate business" other then with the company you do FHA loans.

There is a loophole to do FHA loans "advisor program" for reverse mortgages and I beleive you can do this with regular foward FHA loans however you are limited to reasonable compensation for services provided. Thats why Reverse mortgage lender only allow you to earn .25%. Its not a referral fee as many think there are certain things you have to do. Forgive me but I don't remeber what they are off the top of my head.
Many foward FHA lenders are using this same "loophole" to pay non-approved FHA brokers.
since you can not do anything on an FHA loan its hard to justify earning anyting more then the .25% and thats arguable.

If you speak with Herman about this as I would suggest you do. He will tell you HUD is fast closing in on the abuse of this "loophole".

Proceed with caution

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Originally posted by KellyVanguardNM

I as told you can sign on as a LO for one Broker to do FHA, but you can work at another non FHA office as well in New Mexico. I called HUD about this and was told "as long as only one office holds an FHA license".

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C. Companies with Joint Officers. If a mortgagee has any of the same
officers, stockholders, partners, or members as another entity, the officers
may represent more than one entity if:

1. There is a clear and effective separation of the two entities, and
mortgagors know at all times exactly with which entity they are doing
business.

2. There is a duly appointed or elected senior officer, with the required
minimum three years of acceptable experience, designated to conduct
exclusively the affairs of the mortgagee during normal business hours.

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G. Full Time, Part Time and Outside Employment. A mortgagee may
employ staff full time or part time (less than the normal 40 hour work
week). They may have other employment including self employment.
However, such outside employment may not be in mortgage lending, real
estate, or a related field. Direct endorsement underwriters are included in
this provision. An underwriter may not work on a part time basis for any
other mortgagee, even underwriting conventional mortgage loans. An
underwriter may not underwrite loans for a parent or subsidiary of the
underwriters approved employer. A direct endorsement underwriters
authority is through the employer and does not extend under any corporate
umbrella.

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Originally posted by Ms_Krista

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Originally posted by KellyVanguardNM

I as told you can sign on as a LO for one Broker to do FHA, but you can work at another non FHA office as well in New Mexico. I called HUD about this and was told "as long as only one office holds an FHA license".

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Sorry, but with all due respect I have to call BS. I'm sure QAD didn't tell you that.

While FHA does allow companies to have joint officers with more than one entity, there must be a clear distinction between the officers, shareholders, and partners duties and companies. Furthermore, smortgagors (borrowers) must always know which entity they are dealing with. In other words, Joe B. who is an officer of XYZ mortgage and a officer of ABC mortgage (which is not FHA approved) cannot fund a loan that was originated through XYZ mortgage through ABC. Furthermore, originators may not hold secondary employment with another firm related to the mortgage and real estate industry.

See 40601.1, Chapter 2, 2-9 (C 1-2) and (G)

http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601c2HSGH.pdf

(c) (1-2):

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C. Companies with Joint Officers. If a mortgagee has any of the same
officers, stockholders, partners, or members as another entity, the officers
may represent more than one entity if:

1. There is a clear and effective separation of the two entities, and
mortgagors know at all times exactly with which entity they are doing
business.

2. There is a duly appointed or elected senior officer, with the required
minimum three years of acceptable experience, designated to conduct
exclusively the affairs of the mortgagee during normal business hours.

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And (G):

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G. Full Time, Part Time and Outside Employment. A mortgagee may
employ staff full time or part time (less than the normal 40 hour work
week). They may have other employment including self employment.
However, such outside employment may not be in mortgage lending, real
estate, or a related field. Direct endorsement underwriters are included in
this provision. An underwriter may not work on a part time basis for any
other mortgagee, even underwriting conventional mortgage loans. An
underwriter may not underwrite loans for a parent or subsidiary of the
underwriters approved employer. A direct endorsement underwriters
authority is through the employer and does not extend under any corporate
umbrella.

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Originally posted by Ms_Krista

There is nothing wrong with hiring employees to originate FHA loans, however, it cannot be combined with the "independent contractor" model. If you would have just come out and said that your company was merely hiring loan officers and were paying an attractive split, you might have saved yourself a lot trouble, double talk, and back tracking. Note: A loan officer cannot be 1099 on one transaction and W2 on another.

In regard to non approved brokers participating in the FHA program, FHA has already confirmed via ML 08 14 and ML 08-17 that borrowers may deal through non approved brokers and pay the brokers compensation for actual services rendered that are not "origination duties". ML 08-14 is in regard to reverse (HECM) loans and ML 08-17 is regarding forward mortgages. The October Policy Alert was never signed or official and was merely posted to FHA's website and has since been removed. In the 08-17 letter, Commissioner Montgomery added that the non approved broker is required to provide alternatives from at least 3 other lenders (as per SOP 1999-1) to ensure that meaningful counseling and not steering had occurred. Note: FHA has not yet corrected ML 08-14 to comply with SOP 1999-1.

Just as with approved mortgagees, FHA doesn't set a limit on compensation but cites that compensation must be reasonable and earned. Most HECM lenders allow .25% of 2% which equates to .50%. Also, HECM loans allow fee splitting of financed origination while forward mortgages require that the fee be paid from the borrower out of pocket.

Currently, I am not seeing non-approved borrower fee abuse, but moreover, abuse from HUD approved lenders and brokers. The excessive margins and pricing policies of these companies not only violate RESPA, but possibly HUD's tiered pricing rules. Again, these are the HUD approved lenders and brokers that are abusing the program and RESPA- non-approved brokers are merely breaching their duty to the borrower for advising their borrower's to obtain their loan from these sources. On average, I am seeing margins ranging between 2.5% to 4% from the approved lender/broker.

The role of the non approved broker is that of agent to the borrower, the same way that an approved broker is the agent of the lender. This is not a "loop hole" and the borrower's right to exclusive representation that is authorized in the CFR code. Unfortunately, most members of this industry do not understand "Agency" (as in principal/agent relationship and duties), and as such cannot differentiate between clerical (processing) duties and consulting/advisory (agency) duties. There is a very real lack of representation and a lack of relationship disclosure in the industry- and far too weight on processing type origination duties as compensable duties especially considering that most processing firms charge less the $700 to process FHA loans.

In reviewing the IBAA list of compensable services as outlined in HUD's 1999-1 Statement of Policy on RESPA, the list includes clerical type duties and consultant type duties- although the list is said not to conclusive. Although some duties are for the lender and some are for the borrower, HUD states that all duties inure to the benefit of the borrower and the lender in that they make the loan possible.

However, here is a basic list of compensable duties for a borrower's mortgage broker who is the borrower's agent (note: does not include duties of the HUD approved broker who originates and processes the loan):

1. Educating the borrower and going over their loan options. (Item C on the IBAA list)
2. Going over interest rate and closing costs options and explaining YSP and how it can be used to reduce costs. (Item C IBAA list)
3. Helping the borrower prepare for the application by advising the borrower what documentation to provide the approved lender/broker. (Assists borrowers with part of A and D on IBAA list)
4. Provide alternatives from at least 3 other lenders. (Per IBAA noted on HUDs 1999-1 SOP)
5. Provide borrowers with information on home buyer education, budget and credit counseling, and legitimate non-profit and government programs. (part of item C on IBAA list)
6. Help resolve credit issues by assisting the borrower with credit disputes. (item J on IBAA list)
7. Help the borrower resolve title issues such as lien releases, subordination requests, prepayment penalty waivers, short payoffs, unrecorded reconveyance, etc. (advisory service not listed on IBAA list)
8. Review credit and appraisal with borrower and answer questions and make recommendations. (Advisory service not listed on IBAA list)
9. Review Goodfaith Estimate, Truth in Lending, and other disclosures with borrower and answer