FHA / HUD sets standards for Mortgagee Monitoring

Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

HUD - fha loans & fha mortgages

For many that don’t know, FHA was created by the National Housing Act of 1934. What people need to understand is that FHA doesn’t make the loans, but that they insure the mortgages for the lenders sake.  The investors/lenders are the entities that make loans to borrowers. HUD, which stands for U.S. Department of Housing and Urban Development, is a government agency that was started in 1965 to help homeowners achieve that American Dream. They help borrowers with HUD approved programs, approves lenders to be FHA approved, and helps borrowers utilize the programs and guidelines set forth for FHA loans. Again, FHA is does not lend money. I only mention this because I get so many calls telling me that FHA will do this or do that, because it states it on the HUD website. The average consumer needs to understand that they set the guidelines for investors to follow, but it’s the investors that have specific overlays, meaning that they can add to the guidelines to make the loan more sell-able on Wall Street. A great example is that FHA has no specific credit scores, but most lenders won’t go below a 600 credit score. That is the investors choice, which can super-cede anything set by HUD for FHA loans



The Assistant Secretary of Housing, Brian Montgomery, put out a new mortgagee letter just recently. FHA always puts out new mortgagee letters when there are changes in guidelines, but in this case, HUD wanted to make others aware of the seriousness of this issue. This mortgagee letter, ML 2009-12, is about Mortgagee Monitoring.  The letter talks about FHA reactivating its Special Work Assessment Teams, which is called SWAT. SWAT is to conduct on-site reviews of the lenders whose loans are exhibiting signs of distress. In my opinion, this is a great sign that HUD is holding mortgagees accountable for their lending practices which will protect the FHA insurance fund which has been in trouble as of lately because of the many defaults and foreclosures.

Here is a great example of how much the usage of FHA loans has grown over the last 1 1/2 years because of the higher standards of conventional loans and because of the demise of the subprime loans. Just in New Jersey alone, in 2008, there were about an additional 500 new approved FHA underwriters. This number went from around 300 to 800. Just in the last year, there have been more 1st payment defaults, foreclosures, and certain detections of fraud. It’s been shown that many of these new underwriters are missing specific issues or are being more lienent on their approvals. Hence why HUD came out with this new mortgagee letter, letting lenders and underwriters know that they are reviewing certain practices. So here is a list of what HUD expects each lender to review and to insure a good loan : (this list has come directly from mortgagee letter 2009-12)

  • implements and maintains a comprehensive quality control plan,
  • reviews all loans with early payment defaults;
  • does not engage in false or misrepresentative advertising;  (I love this one and this should have taken place decades ago)
  • fully documents the stability and amount of borrower(s) income; and,
  • does not charge excessive and unallowable fees to the borrower.



Conclusion :  Overall, the Department of HUD would expect each mortgagee to originate a mortgage with the same care and underwriting the FHA loanjust as it would for a loan in which the lender would be entirely dependent on the property as security to protect it’s investment. In basic terms, that the lender would care for the loan as if it were it’s own child for the next 20 years. And if a mortgagee, the lender that approves the mortgage, fails to comply with HUD’s policies, then HUD would take appropriate action. Such actions would be to suspend the lender from originating FHA loans or to actually terminate that lender’s DE license. (delegated underwriting license)

In regards to my 16 years in the mortgage industry, I think it’s about time that we crack down on those that fail the integrity of lending and the lending quidelines. It’s one thing to try and to make a loan work, but another to ignore specific guidelines and or to commit fraud.





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Copyright © 2009 by Jeff Belonger

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc


Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Erica Ramus 04/09/2009 10:07 AM
  2. R K 04/09/2009 12:29 PM
  3. Yvette Gardner 04/10/2009 03:42 AM
  4. Janice Roosevelt 04/14/2009 12:19 AM
Mortgage / Finance
New Jersey Camden County Berlin
All About Mortgages/Mortgage Networking
Realtors Needing the services of the Lending Powers
The FHA Mortgage Group
mortgage fraud
fha loans
real estate
fha mortgages
mortgagee letters
fha mortgagee letters
mortgagee monitoring

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Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

Thanks for posting this, as usual, Jeff. Well written.


Apr 09, 2009 10:07 AM #13
Winston Westbrook
Westbrook National Real Estate Co - Victorville, CA

Jeff you are the FHA pimp. Great post and keep em coming. I am going to have to re-post this puppy

Apr 09, 2009 11:01 AM #14
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Jeff -- I learn a lot from your posts, and you write so clearly.  I love your background graphic!

Apr 09, 2009 11:41 AM #15
Vickie Nagy
Palm Springs, CA

Jeff, it's so challenging to find a lender who really can stay "leader of the pack". I can see you spend every waking moment staying informed.

Apr 09, 2009 12:57 PM #16
AMBER NOBLE GARLAND - Top Real Estate Expert, Property Tax Appeal Specialist & Author
Strategic Marketing Expert & Relocation Specialist Serving New Jersey and nationwide! - Marlboro, NJ
- The Agent You Can Trust To Deliver REAL Results!

I am one of those people who believe more accountability and regulation in the mortgage industry is a GOOD thing for all of us. Thanks for the info Jeff.

Apr 09, 2009 03:21 PM #17
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Jeff, They are finally cracking down here in New York...as I'm sure you know.  Thank goodness, there were more scams then ever. 

Apr 09, 2009 04:22 PM #18
John Cannata
214-728-0449 http://TexasLoanGuy.com - Frisco, TX
Texas Home Mortgage - Purchase or Refinance

Congratulations on the featured post.  We have seen a large number of FHA in our area as well.  

Apr 09, 2009 04:44 PM #19
Bo Hussung
Bell Title /Triserv LLC - Nashvle, TN

Jeff, I say it is about time. HUD has to do something to stem the amount of loans that ae gong bad. I will say hoeer, that some of these poorly performing loans are not necessarily a result of bad lending practices but the poor eceonmic status of many coommunities that homeowners rely to pay their daily bills. It is however a good start.

Good info


Apr 09, 2009 04:47 PM #20
Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services

Jeff- I am glad that there will be some expectation of accountability. Let's see how well they can follow through.

Apr 09, 2009 06:05 PM #21
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


ERICA..... . my pleasure and thanks for the support & for the kind words.

WINSTON.... . funny, the FHA pimp. thanks for reblogging this and for the compliment.

CHRIS..... . thanks, thanks, & triple thanks.  Seriously, I enjoy educating people and thanks for reading.

VICKIE..... . no, I actually sleep 3 hours a night... lol   Seriously, I appreciate the kind words. I do enjoy writing these, even though many of them are boring and not as entertaining. But I also strive for business from these and not just comments. thanks for the support.

AMBER..... . I think many of us feel the same. The problem that I have seen in the past is that they talk about it, but don't seem to enforce it as much. It makes you wonder, because I hear so many problems out there and see it often. Especially the false advertising.  thanks

CAROLE.... . I would like to see them crack down even more.  I think in many cases in the past, they didn't do as much as they should have. Just my opinion.

JOHN..... . thanks...  and yes, there has been more FHA loans in the last 6 months than in the last 2 years all together. The only part that is sad about this is that many of these loan officers pushed the subprime and conventional, when the borrower should have been put into a FHA loan first. They were more into how easy it was for them.

BO.... .  as many of us have agreed, it's been long overdue. And you are 110% correct, that it's not just the bad loan officers. Yes, the economy has made many of these loans go bad. I stress this often when others mention that most of the mortgage mess were from bad loan officers and bad loan products. I still say a lot of it was because of the economy, such as you stated.  thanks


Apr 09, 2009 06:09 PM #22
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

Jeff - The reactivation of the SWAT team is a good thing.  Weeding out all those failing to follower guidelines is so important so that the scenarios that are now playing out will not occur in the future.

Apr 09, 2009 10:19 PM #23
Mark Watterson
Salt Lake City, UT
Utah Real Estate

This was a good read.  I'm trying to keep up with the FHA stuff.  It is such a big part of the current market.

Apr 09, 2009 11:57 PM #24
Norma Brandsberg
Marks Realty Co. Inc., Lynchburg, VA, 540-586-9496 - Forest, VA

Thanks for the information. We need all the information we can get to help us.

Apr 10, 2009 01:44 AM #25
Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

AJeff: Thank you. I appreciate it. I was reading recently about the importance of us in the business staying on top of what's going on. You are my source! Thanks again!

Apr 10, 2009 02:26 AM #26
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

When I started in this business in 1989, I seem to remember that my mortgage banker said that until a borrower makes 13 payments, FHA insurance would not cover the amount of the total debt. If this is not in place now, it sure seems to be a good idea for a deterrent to making questionable loans. Lenders need to have that kind of skin in the game also. Let me know if that is still in place, or if it ever was. I trust that what I heard years ago was true. 

Apr 10, 2009 07:51 AM #27
Carlos Silva
Las Vegas, NV

Thanks for the information and clarifying FHAs function.

Apr 10, 2009 08:04 AM #28
Adrian Alvarado
MGR Real Estate Inc. - Ontario, CA
Inland Empire Real Estate

Great post Jeff you had some good info and made it very clear. Peopel always confuse the actual FHA program from the lender who is actually lending the money. Its funny they say mortgage fraud is on the rise but I think its on the decline but now banks are not turning their backs to it like they were before when anyone with a credit score and a pulse could get a loan and the pulse was optional.  Rules and Regulations as much as they may make things more difficult are necessary to protect the industry from itself. Its a great way to stabalize the market and put mortgage brokers and lenders on notice that fraud will not be tolerated.

Apr 10, 2009 11:12 AM #29
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Area Real Estate

Great info, but are they going to enforce these new guidelines?  They don't seem like they are new and mostly common sense policing.

Congrats on your feature in the newsletter BTW.

Apr 11, 2009 05:18 AM #30
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Jeff there is no question you are the master of the FHA loan!

Apr 12, 2009 08:16 AM #31
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

I had seen this too. Great that you are getting it out there. I will help by re-blogging. I'm dealing with several FHA fisrt time home buyers now and it hadn't been that way before.

Apr 14, 2009 12:19 AM #32
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