USDA corrects handbook re: property and appraisal requirements

From USDA 5/14/2015 clarification – Property and Appraisal Requirements


May 14, 2015

Property and Appraisal Requirements

This message provides three technical clarifications to Chapter 12 of the 3555 Guaranteed Loan Technical Handbook (HB-1-3555) concerning property and appraisal requirements. The 3555 Handbook will be updated in the near future to reflect these clarifications which are effective immediately.

• HB-1-3555 makes reference to appraisers using the cost approach when appraising residential property. The regulation, found at 7 CFR 3555, requires a fair market value approach and not a cost approach. The cost approach is not required for the Guaranteed Loan Program.

• Similarly, the regulation does not require that the Agency be listed by the lender’s appraiser as an “intended user.” Whether the Agency is listed as an intended user or not has no effect whatsoever on the fair market value. While the Agency may guarantee these loans, they are the lender’s loan, and the intended user is the lender.

• The Department of Housing and Urban Development (HUD) will soon replace two of its handbooks for property standards, HUD Handbooks 4105.2 and 4905.1. The successor replacing the two handbooks will be HUD Handbook 4000.1. Chapter 12 of HB-1-3555 refers to the two handbooks which will be replaced. When HUD Handbook 4000.1 becomes effective, it will also become effective for purposes of HB-1-3555.

Questions regarding this implementation may be directed to the Single Family Housing Guaranteed Loan Division at (202) 720-1452 or your State Guaranteed Coordinator. See “Contact Us” at the following website, and then click on “Guaranteed” to select a state representative:

*this site is in no way affiliated with USDA and is only passing this notice along as a public service

FHA 2015 big changes to HUD guidelines

This is a great video to get us all off of our butts and read the new FHA guidelines.

FHA Income Documentation

FHA Rental Income

2nd FHA Loan

Just a few of the areas of change coming.

Here is a link to the new HUD handbook in PDF

Questions or comments are always welcome!


Loan Officer Compensation – All about the BPS (Part 2)

In part one of this article I outlined the importance of breaking out all revenue and costs into BPS.  Why is it important to view your mortgage branch business this way?

Because it give you an additional perspective besides using dollar amounts. Because you pay your loan officers using basis points it makes sense to use the same comparison for all income and expenses. You may net $500 on one loan and $1000 on another, looking at revenue and expenses in BPS is – at least to me – a better way to understand your costs and profit.

To understand and project targeted goals for profitability using BPS to set goals for loan officers, overhead, and revenue allows you to identify strengths and weakness and make adjustments.

How can you use this information to determine the right compensation for your loan officers?

For existing loan officers you can review their previous production and compensation to determine if they are carrying their weight.
Using a BPS cost breakdown on a loan officers previous production can reveal a lot.

For potential LO’s doing a cost / benefit analysis using BPS can be very helpful comparing companies.

What is the gross, costs ( processing, third party costs, operating expenses), and commission, in BPS historically for the LO?

I hope this information gives you some ideas that you can use evaluating your employees an your personal production.

Comments and questions are always welcome.

Loan Officer Compensation – All about the BPS (Part 1)

How do you determine what you can pay a loan officer? 

Loan Officer Comp

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As a branch manager or owner of a mortgage office hiring loan officers is (or should be) an ongoing process.  In that process the compensation question is always one of the most important pieces.

Since the compensation rules have changed it is not as easy as it used to be to determine. Before the comp rules went into effect most managers had a split fee agreement with their loan officers. If they brought in X in fees they received X percentage as a commission.

Now it’s all about the BPS (basis points) or it should be.

The place to start is to look at your offices historical numbers.

What is your total loan volume for a given period.

What are the gross fees that your office generated from that volume.

What does that represent in BPS.


If your office generated $12,000,000 in loan volume in the most recent 6 months, and generated $420,000 from that production, your office grossed 350 basis points (3.5%) per loan.

Now you need to do the same thing with your overhead – convert it to BPS.

For the same period what was your total cost of operation (not counting commissions) including all salaries?

Now do the same calculation for the same period to determine what you have paid your loan originators in BPS.

The amount that is left after you have deducted overhead and commission is the offices net represented in basis points.

Having a working understanding of your mortgage loan production numbers represented in BPS will also help you determine if your mortgage rates and fees are set correctly.

The next post – part 2 will cover how to use these calculations to determine what you should be paying loan officers.

The HUD RESPA Q&A a Must Read

Have you read the Q&A that HUD published on RESPA?

Most people in the mortgage industry seem to have missed this must read document.

Seller Paid Items, Denial, Change of Circumstance, Important Dates, Escrow Account Information, Loan Summary, among other topics.

The document answers questions like;

  • Can items be listed as POC on the GFE?
  • Are loan originators permitted to process a loan without all six pieces of information included in the definition of an application?
  • May the originator require the borrower to sign consents to verify employment, income or deposits prior to issuing a GFE?
  • Does a loan originator have to show an appraisal fee (or other fee) paid to a third party on the GFE and HUD-1 even if the loan originator wants to cover 100% of the fee?
  • If at the time a GFE is issued it is known that the seller will pay settlement charges typically paid by the borrower, how are the charges disclosed on the GFE?

Do you know the answers to these questions?

I think you may be surprised at some of the answers.

As a mortgage professional this information is vital to your work and understanding the information can help you stay in compliance.

Here is a link to the full HUD document.

I hope this information is helpfull to you. If you are a loan originator, or branch manager looking for better home please visit my home page – –  for information on the opportunity our company offers. We are a full service mortgage lender operating in 30 states.