Lykken on Lending

[Alice] Hello everyone. Alice Alvey here took walkthrough the new 203K changes that we have that came out from FHA. So this is Mortgagee letter 24-13 about the 203K program. For those of you who aren’t familiar with this, FHA has a rehab program that has two different categories. There’s a 203K Limited and a 203K standard. The biggest difference between those two programs is really the size of the project. So, you think of a limited as being for those more cosmetic type things, not something that’s a major structural or a major addition. You’re just maybe updating a bathroom, updating a kitchen, doing those types of projects. Another thing about a limited is you’re not really a project where you’ve got to move out of the house for an extended period of time. It’s only two draws. You get half your money up front and the other half later and you have to get it done within nine months. So, it’s a different type of project versus the standard. It’s mandatory that you use one of the HUD consultants to walk through the project with you, make sure that they’re looking out for both HUD and the borrower’s interest in the scope and the cost of the project. So, different types of needs for each of those programs, different types of requirements. So, what HUD’s done with the mortgagee letter, Is really give us a little more leeway in both buckets. Like I may have mentioned already, the 203k program limited is now up to a $75,000 cap. It used to be 35. So this is a nice win to get a little more room to use a limited. The consultant is optional in a 203k limited. It’s still a nice to have. But it was an option and because it was optional, HUD didn’t allow you to roll in the consultant fee. Now with this new change, again, case numbers after November 4th, you’ll be able to roll in the consultant fee into the loan amount, which we hope encourages more borrowers to use one. They’ve extended the construction period, the rehab period. So, the standard can now take up to a year and the limited, like I mentioned, can take up to nine months. So a little more breathing room in there. And then the limited really was not supposed to be a move out project. It’s got to be something you can live in the home and that used to be capped at 15 days, understanding that sometimes the water’s got to get turned off or the power’s got to get turned off. So this will be a 30 day window now for the limited case. So again, a little bit more stretch for the types of projects that can be included in those. What’s other nice thing to think about in the standard K in the standard, you can roll in some mortgage payments in the financeable mortgage amount in your calculations. You cannot do that with the limited, but in the standard, you’ll now be able to roll up to 12 months of payments. And so that’s a real nice win. And then like I mentioned, you can finance a consulting fee. They’ve also. increased the fees across the board for not only the consultant fee, but also some of the inspection fees. So, a lot to digest that the main thing’s going to be, when are LOS providers going to be able to handle all these changes? This is a maximum loan amount. change in the calculation, which is automated by our LOS providers. So, we need them to be working those coders quickly, night and day right now, so we can get all her worksheets and forms filled in correctly by the time this goes into effect. So Dave, this is an exciting program. Hope everybody gets a chance to embrace 203K. They are rocket science. This is not for your average lender. Who has never touched these. So consumers, anybody listening to this, you need 203K experts. Of course, at Union Home, we are absolutely rehab experts. We do all kinds of rehab, not just the FHA, but we do conventional and we do, on USDA rehab. So we have some real exciting rehab opportunities and we are super good at them because it is a lot of paperwork, a lot of communication to get these right. And so exciting changes on the rehab front, opening up the doors for more home ownership. So back to you, Dave.

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Alice Alvey, Master CMB
Vice President Partner Education and Training at Union Home Mortgage
8241 Dow Circle
Strongsville, OH 44136
D: 440.420.4294
C: 248.941.1939

She handles development of their World Class Training program designed to support UHM partners and organizational effectiveness.

Prior to UHM, Alice served as Senior Vice President at Indecomm leading the Indecomm-Mortgage U division, Internal QA and Compliance and SaaS technologies. Indecomm acquired Mortgage U in 2013, where Alice was President/Co-founder, providing training and consulting since 1996. Prior to MU she served as SVP of Operations at a national bank overseeing operations for wholesale, retail and correspondent from underwriting through servicing, and compliance.

She has been in the trenches of mortgage lending operations from application through servicing for over 30 years. Her authoring work in training content, policies and procedures and the FHA/VA Practical guides illustrates her ability to bridge regulatory requirements with day-to-day operations.

Alice has been a weekly contributor to the Lykken on Lending show since its beginning in April 2009 and has made her weekly contributions to 450+ episodes!