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Lender May Charge the Veteran a Flat Fee

Information received from the Veterans Affairs (VA) in Circular 26-10-01 provides guidance on fees and charges a veteran may pay when obtaining a VA-guaranteed home loan. VA also announced new documentation requirements for lenders and the elimination of a previously required disclosure statement.

38 C.F.R. 36.4813 limits the fees that a veteran may pay when obtaining a VA-guaranteed home loan. Veterans may pay a maximum of a one percent origination fee charged by the lender (plus reasonable discount points) as well as reasonable and customary amounts for certain itemized fees.

The lender may charge the veteran a flat fee up to one percent of the loan amount. The flat fee is intended to cover the lender’s costs and services, which are not reimbursable as “itemized fees.” For Interest Rate Reduction Refinancing Loans (IRRRLs), this fee may not exceed one percent of the existing VA loan balance of the loan being refinanced plus the cost of any energy efficient items less any cash payments from the veteran.

Veterans may pay reasonable and customary amounts for the following services. Whenever these itemized fees relate to services performed by a third party, the veteran may only pay the actual amount charged by the third party.

Appraisal and compliance inspections Recording fees Credit report Prepaid items (taxes, assessments, and similar items) Hazard insurance Flood determination Survey Title examination Title insurance (10) Special mailing fees for refinancing loans (11) Mortgage Electronic Registration (MERS) fee (12) Other fees authorized by VA

If an origination fee is charged, lenders may NOT assess veterans any other fees on VA-guaranteed loans, other than the allowable fees noted in the paragraph above. Examples of unallowable itemized fees can be found in chapter 8, section 2d of the Lenders Handbook. Also note that VA CANNOT provide an exhaustive list of unallowable itemized fees because of the types of fees vary widely by lender and area of the county. If an origination fee is not charged, the lender may assess other fees as long as the aggregate amount does not exceed one percent of the loan.

Homeowners with loans insured by the Federal Housing Adminstration (FHA) experiencing financial hardship now are eligible for loss mitigation assistance prior to defaulting on their mortgage. Previously, borrowers with FHA-insured loans were not eligible for such assistance until after they had missed payments.

FHA also issued guidance to FHA-approved loan servicers on how to assist FHA borrowers who are facing “imminent default,” defined as an FHA borrower who is current or less than 30 days past due on the mortgage obligation and is experiencing a significant reduction in income or some other hardship that will prevent him or her from making the next required payment on the mortgage during the month that it is due.

To become eligible, borrowers must be able to document the cause of the imminent default which may include, but is not limited to, a reduction in, or loss of, income that was supporting the mortgage; or a change in household financing circumstances.

Loan servicers must document the basis for its determination that a payment default is imminent and retain all documentation used to reach its conclusion. The servicer’s documentation must also include information on the borrowers’s financial condition.

Mortgage rates in 2010 are expected to rise from 2009’s historically low levels. Early last year, the Federal Reserve announced plans to purchase debt and mortgage-backed securities from Fannie Mae and Freddie Mac to lower interest rates for consumers and spur homebuying. As a result, rates on 30-year, fixed mortgages fell to historic lows. However, the Fed’s asset purchase program is scheduled to expire at the end of the first quarter of 2010, and a lack of private demand for mortgage-backed securities could lead to a rise in rates.

Fannie Mae is offering a 3.5% incentive for buyers who purchase and close on a Fannie Mae-owned home between January 28 and April 30, 2010. The incentive for the 3.5% of the final sales price is for:
Closing costs;
The purchase of new Whirlpool® appliances by Fannie Mae; or
A mix of closing costs and appliances, at the buyer’s discretion, up to the maximum 3.5%.

To be eligible for this incentive:
Offers must be accepted on or after January 28, 2010;
Property sales must close before May 1, 2010, and;
Buyers must be owner-occupants (investors are excluded).

Richard Tegley is a Broker/REALTOR®, a Director of the California Association of REALTORS® (C.A.R.) and the National Association of REALTORS® (N.A.R.) Richard can be reached at (951) 533-9340 or email Tegley@surfcity.net
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