1. Language Preceding Uniform Covenants: This language should be based upon the approved Fannie Mae/Freddie Mac security instrument used for the jurisdiction in which the secured property is located. With the exception of New Mexico, “the approved” FNMA/FHLMC instrument is the 1990 version, rather than the current 2001 version (see FHA ML 2009-23 & 2002-03 for details). In addition, the FHA Case Number and box should also appear on the instrument, as shown in the FHA Model Mortgage Form.

2. Uniform Covenants: The Uniform Covenants must be verbatim to the Uniform Covenants set forth in the FHA Model Mortgage Form, despite the fact that such Covenants contain typographical errors. Unlike other parts of the instrument, which may be modified to reflect HUD regulations and state and/or local laws and practices, the Uniform Covenants may not be modified for such reasons without the prior, written approval of HUD. However, there are three cases where we will be deviating from the verbiage of the Model form. In the last sentence of Uniform Covenant 4, we will be using the word “extinguishes,” rather than the enigmatic “distinguishes” on the Model form.  In both Uniform Covenant 5 and Uniform Covenant 10, “Borrowed” will be replaced with “Borrower’s” so each will read in part, “…and shall continue to occupy the Property as Borrower’s principal residence…” and “…all amounts required to bring Borrower’s account current…”.  The other typographical errors were deemed insignificant in nature.

3. Non-Uniform Covenant 17: The language of this Covenant must be the same as set forth in the FHA Model Mortgage Form, though it may be adapted if an assignment of rents is prohibited by state law. If adapted, it should be done in such a way as to allow “the lender to collect the maximum interest in rents permitted by law.”

4. Non-Uniform Covenant 18: Perhaps the most complicated Covenant in the instrument, Covenant 18 should mostly follow the covenant concerning foreclosures in the 1990 version of the FNMA/FHLMC uniform security instrument, with adaptations as necessary to conform to state and/or local practices (yet language concerning notice and acceleration should not be included). FHA does require a specific paragraph to print in the Covenant (concerning nonjudicial powers of sale under the Single Family Mortgage Foreclosure Act of 1994), as well as specific language for the first clause in the Covenant.

5. Additional Non-Uniform Covenants: Remaining Covenants should closely following those of the 1990 version of the FNMA/FHLMC instruments, with any necessary adaptations to conform to state and/or local laws and practices. The one exception is the “Riders to this Security Instrument” paragraph, which should match the language set forth in the FHA Model Mortgage Form.

6. Signatures: Signatures should be formatted to match the FNMA/FHLMC instruments. Witness lines may be removed, if not required by state law.

Pursuant to an audit of our FHA Security Instruments, we will be adjusting all of the instruments to make sure that they conform more closely to these FHA requirements.  The Uniform Covenants will be verbatim to those in the FHA Model Mortgage Form and all other provisions will more closely match the language of the 1990 FNMA/FHLMC uniform security instruments, except in cases where state law or enforceability of the instrument come into conflict, in which case we will modify the language to mitigate such an issue (mostly by utilizing the language used in the 2001 versions of the instruments, where possible).  In addition, the formatting of the Uniform and Non-Uniform Covenants has been modified to better reflect the FHA Model Mortgage Form.  Under some circumstances, the Model format edits may result in a larger page count.

One universal change that will be made, which is not explicitly required by FHA, is printing Covenant 18 in bold, so that the foreclosure language is in prominent type, which is favored in most states.

These updates to the standard assignments will be put into production as soon as they become available. The first edits will take effect June 25, 2013. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.

June 17, 2013
DR 137367

The new June 2013 version of the FHA Important Notice to Homebuyers and the new FHA MIP term calculations are also triggered for loans with an FHA Case Number Assignment Date of “06/03/2013” or later in ConformX. Please see these previous DocuTech announcements regarding the FHA Annual MIP rate and duration increases for more information:

FHA Annual MIP Rate and Duration Increases

Document Updates: Important Notice to Homebuyers (Cx40) and Informed Consumer Choice Disclosure Notice (Cx41)

New Required Field Prompt: FHA Case Number Assignment Date

The change to the preparation date on the post-June 3rd version of Cx41 will take effect June 22, 2013. If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.

June 14, 2013
DR 137553

Cx996 “MI Property Transfer Affidavit” has been updated to reflect the 04-13 version of Michigan State Form 2766. The update included modifying one of the citations on page 2 to read “MCL Section 211.27a(6)(a-j).”

Cx997 “MI Request to Rescind Principal Residence Exemption (PRE)” has been updated to reflect the 03-13 version of State Form 2602.

The update included:

• Adding a new “e. Other ______” checkbox to section “11.  I am rescinding this property because…”
• Adding the word “Representative” to sections 16 and 17.
• Removing the website reference from the bottom of page 1.
• Removing the text “our Web site at” that was previously found in the last line of the document.

All three documents are published by the Michigan Department of Treasury at http://www.michigan.gov/taxes/0,1607,7-238-43535_57482-246936–,00.html

These changes will take effect June 22, 2013. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584

June 14, 2013
DR 136459

•Widening the center area of each of the pages and narrowing the left and right columns.
•Modifying the format of the left column of text on each page, including un-bolding the text and making the font size smaller.
•Making the text in Block 2, Checkbox 1 and the first line of Block 3 a slightly smaller font size.
•Widening the “Service” column in Blocks 3, 6, and 11 to fit more text and reduce wrapping onto additional lines.

These changes will be effective on June 22, 2013. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.

June 14, 2013
DR 132861

The instructions for Covenant 17 in the FHA Model Mortgage (which can be found in the Model Mortgage), which deals with the assignment of rents, stipulates the following:

“Use the following language unless prohibited by state law . . .

Note: If changes are necessary to create an assignment of rents enforceable under state law, the lender should make necessary changes but the revised paragraph should grant the lender the maximum interest in rents permitted by law.”

After thorough legal research, we have determined that Mich. Comp. Laws Ann. § 554.231(1) may prohibit an assignment of rents in connection with family residences. This statute protects a mortgagee’s right to assign rents, but it does not extend such protections to mortgages secured by a family residence (neither does it prohibit them). No other provision of Michigan law allows for an assignment of rents for such properties, save Ibid. § 554.211, but this section only applies to trust mortgages and deeds of trust, which the FHA Mortgage is not.

We will therefore be modifying the text of Covenant 17, pursuant to FHA’s instructions. Due to the ambiguity of Michigan’s law, we will not be deleting Covenant 17, but rather change the first clause so that it is as follows:

“To the extent permitted by applicable law . . .”

Such caveat allows the language of Covenant 17 to continue being used, yet also allows both the covenant to comply with (rather than be contradictory to) Michigan’s laws and the mortgagee to secure a maximum interest in rents (if any).

This change will take effect on June 15, 2013. If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.

June 11, 2013
DR 136347

Currently, Cx4549 contains a signature line for a lender’s representative to sign, which is not required by Texas law. Upon further review and pursuant to our policy of only including lender signature lines where necessitated by statute, regulation, or investor requirements, we will be removing such signature line from Cx4549. Clients who wish to preserve the lender representative signature may request to have it added back in as a custom change.

This change will take effect on June 18, 2013. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.

June 11, 2013
DR 137299

If you change information on a loan and re-import that loan, your doc list will show the word modified by all documents that were affected by your changes making it quick and easy to see what documents need to be re-sent for your closing or to the borrower in the case of initial disclosures.  Any documents that are new to the list will have the word new next to them and any documents that were removed based on the new information will be listed at the bottom.  For more information on this feature or to have it turned on, contact our client support team at 1-800-497-3584 and choose option 3.

Posted in CFPB Rulemaking, MortgagesOn May 29, 2013, the CFPB adopted amendments to the final ability to repay rule. The CFPB had proposed the amendments on the same day that it issued the ability to repay rule in January 2013. The amendments are effective on January 10, 2014, the same date that the ability to repay rule becomes effective.

Among other changes, the amendments:

• Carve out from the inclusion of loan originator compensation in points and fees, the compensation paid by a mortgage broker to an employee loan originator and the compensation paid by a creditor to an employee loan originator. Although the CFPB had proposed to tie the ability to exclude compensation paid by a creditor to an employee loan originator to the amount of origination fees imposed by the creditor, the CFPB decided to simply exclude the compensation from points and fees without conditions. Compensation paid by a consumer or creditor to a mortgage broker will still be included in points and fees.
• Create a broader qualified mortgage for small creditors. The small creditor qualified mortgage is not subject to the strict 43% debt-to-income limit that applies to the general qualified mortgage. Also, the small creditor qualified mortgage is eligible for the safe harbor as long as the annual percentage rate does not exceed the applicable average prime offer rate by 3.5 or more percentage points for a first or subordinate lien loan. In contrast, the general qualified mortgage is eligible for the safe harbor only if the annual percentage rate does not exceed the applicable average prime offer rate by 1.5 or more percentage points (3.5 percentage points for a subordinate lien loan). To be a small creditor, a creditor must have assets less than $2.0 billion and make (together with its affiliates) 500 or fewer first lien loans per year that are subject to the rule.
• Create a transition period in which small creditors may make balloon qualified mortgages even if they do not satisfy the requirement that most of their transactions subject to the rule are made in rural or underserved areas. The transition period will end January 10, 2016. Balloon qualified mortgages also will be eligible for the safe harbor if the annual percentage rate does not exceed the applicable average prime offer rate by 3.5 or more percentage points for a first or subordinate lien loan. During the transition period the CFPB intends to assess whether the definitions of “rural” and “underserved” should be modified, and to work with small creditors to transition to alternative products, such as adjustable rate loans.
• Exempt from the ability to repay rule are loans:
• Made by a housing finance agency, or by private creditors pursuant to a program administered by a housing finance agency.
• Made by certain community development creditors and certain non-profit creditors, subject to conditions.
• Made pursuant to certain homeownership stabilization and foreclosure prevention programs authorized by sections 101 and 109 of the Emergency Economic Stabilization Act of 2008 (12 USC 5211, 5219), such as a State Hardest Hit Fund program.

The CFPB decided not to adopt a proposed exemption for a refinance loan made pursuant to an eligible targeted refinancing program and that was eligible to be purchased for Fannie Mae or Freddie Mac while they remain in conservatorship. The exemption would have covered HARP loans.