Wholesale ALERT – FHA Guideline Updates and Revised VA Funding Fees

Arc Home will align with the FHA guideline updates announced in the Handbook 4000.1 Transmittal including, but not limited to, the topics noted below. The changes may be implemented immediately but must be implemented for FHA loans with Case Numbers assigned on or after April 18, 2023. The complete FHA Single Family Housing Policy Handbook 4000.1 is available HERE on the HUD website.

·         Appraisal Validity: Per Mortgagee Letter 2022-11, updated appraisal validity period to 180 days from the effective date of the appraisal and extended the appraisal update validity period to one year from the effective date of the initial appraisal report that is being updated (4000.1 Sections II.A.1.a.i(A)(1), II.A.1.a.iii(B)(6), II.A.1.a.iii(B)(10), and II.A.7.c.iii)

·         Minimum Requirements for Living Unit: Updated heading title and clarified minimum kitchen facilities needed for cooking (4000.1 Sections II.A.3.a.ii(F) and II.D.3.b.vii(A))

·         Well Testing Requirements: Removed requirement for a well water test where the distance between a well and a septic system is less than 100 feet to align with Minimum Property Requirements for individual and shared wells (4000.1 Sections II.A.3.a.ii(O)(2)(a) and II.A.3.a.ii(O)(3)(a))

·         Well Test Expiration Dates: Clarified guidance to provide that when a well test is required, the report may be up to 180 days old at the time of Disbursement Date (4000.1 Sections II.A.3.a.ii(O)(2)(b), II.A.3.a.ii(O)(3)(b), and II.A.8.i.vii(A)(6)(b))

·         Positive Rental Payment History (TOTAL): Per Mortgagee Letter 2022-17, added guidance on positive rental history for first time homebuyers (4000.1 Section II.A.4.b.iii(L))

·         Commission Income: Provided guidance for calculating Effective Income when the income has been earned for less than two years (4000.1 Sections II.A.4.c.ix(D) and II.A.5.b.ix(D))

·         Self-Employment Income: Provided guidance for calculating Effective Income when the income has been earned for less than two years (4000.1 Sections II.A.4.c.x(D) and II.A.5.b.x(D))

·         Alimony, Child Support, and Maintenance Income: Updated guidance to differentiate between court-ordered and voluntary payments (4000.1 Sections II.A.4.c.xii(B)(3) and II.A.5.b.xii(B)(3))

·         Discount Points: Updated definition to allow situations where Discount Points are paid by parties other than borrower (4000.1 Sections II.A.4.d.i(B)(2)(b) and II.A.5.c.i(B)(2)(b))

·         Secondary Financing Provided by Government Entities: Clarified guidance for nonprofits assisting a governmental entity with secondary financing to align with Nonprofit section in I.B.4.a.iii(B) (4000.1 Sections II.A.4.d.iii(J)(1) and II.A.5.c.iii(J)(1))

·         Planned Unit Development (PUD): Clarified definition of Planned Unit Development to include that a unit in a PUD consists of the fee or leasehold title (4000.1 Section II.D.3.b.i(C)(1)) and added a Required Analysis and Reporting section to align the Handbook and Appraisal Reporting and Data Delivery Guide (4000.1 Section II.D.3.b.i(C)(2))

·         Accessory Dwelling Unit: Updated section title and added guidance on the measurement of Contributory Value (4000.1 Section II.D.3.b.vii(E))

·         Attic Observation Requirements: Revised attic observation requirements to simplify and clarify (4000.1 Section II.D.3.j)

·         Crawl Space Observation Requirements: Revised crawl space observation requirements to simplify and clarify (4000.1 Section II.D.3.l)

·         Community Water Systems: Added guidance that a community water system must comply with local jurisdiction requirements (4000.1 Section II.D.3.o.iv)

·         Market Condition Time Adjustments: Updated guidance in response to comparable properties and the date of contract (4000.1 Section II.D.4.c.iii(E)(3)(i))

·         Appraisal Requirements for Market Conditions and Changing Markets: Updated title to better reflect section content, reorganized content to align with Handbook 4000.1 flow, and provided update to the market condition required reporting in connection with the removal of Form 1004MC (4000.1 Section II.D.4.c.iii(F))

Arc Home will align with the updated VA Funding Fees announced in Circular 26-23-06 and Circular 26-23-06 Exhibit B. The changes highlighted in the table below are effective for VA loans CLOSED on or after April 7, 2023.

Important Notes

·         Refer to Circular 26-23-06 Exhibit A for the Funding Fees that apply to VA loans closed prior to April 7, 2023.

·         The SPARC portal is programmed to populate the applicable VA Funding Fee based on the date entered in the Estimated Closing field of the Disclosures tab.

·         For VA Interest Rate Reduction Loan (IRRRL) transactions, the .50% Funding Fee remains unchanged.