# Presentation: 546025

## FHA Lender Insurance and Electronic Case Binder Implementation

*Lender Training**	**December 2005*

## LI Implementation Overview

- Lenders must qualify to be authorized for LI
- LI approved lenders may insure their loans
- LI-approved lenders only submit case binders if the case is selected for review or has a case warning
- Case binders can be submitted in either paper or electronic (eCB) format
- HECMs are not included in the LI program

**Notes:**
Lenders can endorse their own loans via the FHAC or B2G unless a server warning exists.

Case binders can be submitted in either paper or electronic format unless the lender is an eCB lender, then they can only submit eCBs.

## Lender Insurance (LI) Regulation & Mortgagee Letter

- U.S. Code of Federal Regulations (24 CFR 203.4, 203.6, and 203.225(f))
- Mortgagee Letter 2005-36, dated September 23, 2005, explains the program changes related to LI.

## LI Implementation Schedule

- September 26 through December 31, 2005:  Pilot
- January 3, 2006:  LI and eCB open to all lenders

## Pilot Participation  

- September 26, 2005:  Wells Fargo began endorsing loans and submitting eCBs for requested cases
- October 2005:  Countrywide, Bank of America, and Kentucky Housing Agency Corporation began pilot
- November 2005:  Pacific Community began pilot

**Notes:**
Exceptions for Wells:  Paper binders will be submitted for HECM, Specialty, and Bond loans until January 1, 2006 or sooner

## Lender Eligibility

- Lenders LI criteria:
- Unconditional Direct Endorsement approval for at least 2 years
- Default and claim rate at or below 150 percent of:
- National default and claim rate or
- State default and claim rate (single state lenders only)
- Pre-closing status is not eligible

**Notes:**
For a two year period of insured loans by beginning amortization date (as shown in NW).

## Lender Eligibility Cont. 

- LI approval tracked on the CHUMS Title II Institution File – F17SIT screen
- Lenders are approved for LI at the corporate level
- Lender eligibility is automatically checked annually
- Neighborhood Watch is the system used to determine acceptable default/ claim rate

**Notes:**
The report that indicates that lenders are no longer eligible is the monthly Lenders Removed from Lender Insurance Authorization – F17LYCA which is available via depcon .  HUD staff should retrieve the report and notify lenders.

## Neighborhood Watch & LI Eligibility  

- Access Neighborhood Watch at https://entp.hud.gov/sfnw/nw/
- Select *Early Warnings*
- Select *Single Lender*
- Type the first few letters of the lender  name or the five digit lender id.

**Notes:**
Lenders LI eligibility will be determined for the two years of insured loans as of November 30, 2005.

## Neighborhood Watch & LI Eligibility  

- Select *Direct Endorsement Lender* from the *Mortgagee Selections* window
- Select *Current Defaults* from the *Default Choices* window
- Select the most recent date from the *Performance Period* window.
- Select *Nationwide Totals* from the *Show Data for* window (select State for single State lenders).
- View *Total Compare Ratio* (Compare Ratio for all Direct Endorsement loans including both retail and sponsored < or = 150%)

**Notes:**
The report that indicates that lenders are no longer eligible is the monthly Lenders Removed from Lender Insurance Authorization – F17LYCA which is available via depcon .  HUD staff should retrieve the report and notify lenders.

## Neighborhood Watch & LI Eligibility  

**Notes:**
For DE lenders that only underwrite loans in one state, select State from the Show Data For window.

## Neighborhood Watch & LI Eligibility  

## Lender Application for LI 

- Lenders must apply and be approved for the LI program
- Beginning January 3, 2006, lender Application Coordinators use a link on the **FHA Connection ID Administration Request** page to use the ***Acknowledgment of Terms and Conditions for Lender Insurance ***page
- Lenders will _*not*_ send applications to the HOC or to Lender Approval

## Lender Application for LI Link

**Link to LI application acknowledgment to be placed here**

## Acknowledgment of Terms and Conditions for Lender Insurance

## Insuring Authorization

- Once a lender is LI approved then:
- LI lender’s FHAC Application Coordinator grants the **Insuring Authorization** to  qualified employees to endorse cases via the FHAC
- Authorization is good for both FHAC and B2G
- Users with this authorization can also add/ update case information
- If the lender does not qualify for LI an error message will display

## Insuring Authorization in FHACSecurity Administrators Screen

##        LI Termination Provisions

- Failure to adopt and employ prudent review techniques
- Termination of DE approval for the mortgagee or any branch also terminates LI for the mortgagee or any branch
- Failure to maintain the eligibility criteria (reviewed annually)

##         Pre-Insurance Review

- Lenders are required to perform a pre-insurance review prior to lender insuring
- Review staff must be other than those that originated or underwrote the mortgage
- Review requirements are outlined in Mortgagee Letter 2005-36

## Case Binders and LI

- LI lenders submit binders only when the case has:
- Severe case warning:
- borrower failed SSN validation
- CAIVRS hit
- or LI deficiency exits
- Selected for Underwriter Review (PETR), or
- Selected for Appraiser Review
- Requested case binders must be submitted within five business days of the request date
- eCB approved lenders are required to submit only electronic case binders
- Yellow binders are required for paper case binder submission

**Notes:**
We should encourage lenders to check the Binder Selection screen every day to see if HUD has requested case binders.

We agreed to relax the five business day requirement to 110 days for Wells.  Failure to submit 5 or more requested case binders will result in suspension of the lender’s LI eligibility.

## Failure to Submit LI Case Binders 

- Failure to submit 5 or more case binders will result in the suspension of LI approval.
- LI Suspension will be determined by the P&U Directors and will be updated by CHUMS Coordinators
- LI will be reinstated once the LI lender submits the outstanding binders

**Notes:**
We should encourage lenders to check the Binder Selection screen every day to see if HUD has requested case binders.

We agreed to relax the five business day requirement to 110 days for Wells.  Failure to submit 5 or more requested case binders will result in suspension of the lender’s LI eligibility.

## Case Binder Submission Notification

- Case binder submission requests can be viewed via:
**Insurance Application** screen
**Binder Selection page** (available on the Case Processing menu)
**Case Query**
**Appraisal Review functions**

**Notes:**
Only authorized HUD URS and ARR contractor personnel can view eCBs online via the FHA Connection  
The eCB is displayed in Portable Document Format (PDF) 
The eCB link is only provided when an eCB is available

## About Electronic Case Binders (eCBs)

- Digitized case binder is referred to as eCB or eBinder
- To submit an eCB, lender scans closing package documentation into an XML file using the MISMO ePackage SmartDoc standard
*Electronic Case Binder Developer’s Guide* located at _[http://www.](http://www.hud.gov/pub/chums/electronicCaseBinder.pdf)__[hud](http://www.hud.gov/pub/chums/electronicCaseBinder.pdf)__[.](http://www.hud.gov/pub/chums/electronicCaseBinder.pdf)__[gov](http://www.hud.gov/pub/chums/electronicCaseBinder.pdf)__[/pub/chums/](http://www.hud.gov/pub/chums/electronicCaseBinder.pdf)__[electronicCaseBinder](http://www.hud.gov/pub/chums/electronicCaseBinder.pdf)__[.](http://www.hud.gov/pub/chums/electronicCaseBinder.pdf)__[pdf](http://www.hud.gov/pub/chums/electronicCaseBinder.pdf)_ Standards for the eCB and the test site for transmittals
- Indexing requirements for the documents included in the eCB
- HUD’s goal is to make eCBs a future LI program requirement

## Maintaining Case Binders

- The LI originator/sponsor must maintain the case binder for two years from the date of insurance
- The servicing lender must maintain the case binder for the life of the loan plus 2 years; 3 years if a claim is paid
- Ecb approved lenders must submit ecbs upon request

## Case Binder Tracking System Change

- The Case Binder Tracking System (CBTS) was modified to deny entry of eCB cases

## Tools for Tracking Case Binders

- Available to LI lenders and HUD personnel
- Provide the status of requested binder(s)
- For multiple cases: use new FHA Connection **Binder Selection**
- For a single case: use FHA Connection** Case Query**

## Case Binder Selection Links

## Tracking Case Binders by Status

- Binders Requested
- Binders Received
- Binders Not Accepted
- Binders Received for Cases Awaiting Endorsement

##             Binders Requested

**Notes:**
For Binders Requested, enter the five digit lender id and lender type.  This feature will be mostly used by lenders.

##             Binders Received 

**Notes:**
For Binders Requested, enter the five digit lender id and lender type, and begin and end date.  

##             Binders Not Accepted 

**Notes:**
For Binders Requested, enter the five digit lender id and lender type, and begin and end date.  Electronic binders are not accepted for the following reasons:  1) not valid XML file, 2) doesn’t include minimal number of documents.  Paper binders are not accepted if an eCB was already received.

## Binders Awaiting Endorsement

**Notes:**
Select Binder Status and Send to display a list of the appropriate cases.

##         Binder Selection Results

**Notes:**
The Assigned to column is not displayed for lenders.

## Case Query: New Fields

- Endorsement Processed by
- Lender
- HOC
- N/A
- Binder Status
- Awaiting Receipt
- Electronic Binder Received
- Paper Binder Received
- Not Requested

**Notes:**
N/A means loan not endorsed

## Case Query: New Fields

## Insurance Application Page Changes

- Note:
- Now displays _*all*_** **case warnings
*Endorsement Information* section is now available for authorized LI lenders
- The **Insured by** field displays for LI lenders
- the user ID of the lender employee that insured the case
- the word *HOC* to indicate insurance by a HOC staff member
- For HOC users, the ID of the person that endorsed the case is displayed
- The **Insured by** field is not displayed for non-LI lenders

## Insurance Application Page Messages

- The Insurance Application Results page displays messages when:
- Case binder submission is required due to:
- A severe case warning, or
- Selection for underwriter review (post-endorsement technical review) or appraiser review
- The binder is requested or received

**Notes:**
A manual severe case warning most often results from a lender or someone alerting HOC staff that the loan should not be made.<number> 

## Insurance Application Changes

- The **Closing Package** function is automatically processed when the case is successfully endorsed even though submission of the closing package (case binder) may not be required
- Non-severe case warnings:
- cannot be acknowledged by lenders
- are automatically bypassed at endorsement

## eCB Case Processing

*eCB Case Processing*
*Case Selected for Review*
*(Electronic Case Binder [eCB])*

## Case Selected for Underwriter (PETR) or Appraiser Review – eCB

*Case Selected for Underwriter (PETR) or Appraiser Review – eCB*

**LI lender completes Insurance Application and insures case**

**System message - ****case binder requested**
**for review**

## Case Selected for Underwriter (PETR) or Appraiser Review – eCB

*Case Selected for Underwriter (PETR) or Appraiser Review – eCB*

**LI lender completes Insurance Application and insures case**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**System message - ****case binder requested**
**for review**

## Case Selected for Underwriter (PETR) or Appraiser Review – eCB

*Case Selected for Underwriter (PETR) or Appraiser Review – eCB*

**LI lender completes Insurance Application and insures case**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**LI Lender Transmits eCB within ten days**

**System message - ****case binder requested**
**for review**

## Case Selected for Underwriter (PETR) or Appraiser Review – eCB

*Case Selected for Underwriter (PETR) or Appraiser Review – eCB*

**LI lender completes Insurance Application and insures case**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**Transmit eCB within ten days**

**Binder Selection screen**
**provides status of binders (Case Query for single case)**

**System message - ****case binder requested**
**for review**

## Case Selected for Underwriter (PETR) or Appraiser Review – eCB

*Case Selected for Underwriter (PETR) or Appraiser Review – eCB*

**LI lender completes Insurance Application and insures case**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**Transmit eCB within ten days**

**HOC views eCB contents using link **
**on select underwriter **
**or appraiser review pages**

**Binder Selection **
**provides status of binders (Case Query for single case)**

**System message - ****case binder requested**
**for review**

## Case Selected for Underwriter (PETR) or Appraiser Review – eCB

*Case Selected for Underwriter (PETR) or Appraiser Review – eCB*

**LI lender completes Insurance Application and insures case**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**Transmit eCB within ten days**

**HOC views eCB contents using link **
**on select underwriter **
**or appraiser review pages**

**Binder Selection **
**provides status of binders (Case Query for single case)**

**System message - ****case binder requested**
**for review**

**Underwriter (PETR) or appraiser review is processed**** **

## eCB Case Processing

*eCB Case Processing*
*Severe Warning*
*(Electronic Case Binder [eCB])*

## Severe Warning – eCB

*Severe Warning – eCB*

**LI lender completes Insurance Application but cannot insure case**

**Case warning**** message; ****case binder requested**

## Severe Warning – eCB

*Severe Warning – eCB*

**LI lender completes Insurance Application but cannot insure case**

**Case warning**** message; ****case binder requested**

**Use Binder Selection screen **
**to view requested binders  (Case Query for single case)**

## Severe Warning – eCB

*Severe Warning – eCB*

**LI lender completes Insurance Application but cannot insure case**

**Case warning**** message; ****case binder requested**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**LI lender transmits eCB within ten days**

## Severe Warning – eCB

*Severe Warning – eCB*

**LI lender completes Insurance Application but cannot insure case**

**Case warning**** message; ****case binder requested**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**Transmit eCB within ten days**

**Binder Selection screen **
**provides status of binders (Case Query for single case)**

## Severe Warning – eCB

*Severe Warning – eCB*

**LI lender completes Insurance Application but cannot insure case**

**Case warning**** message; ****case binder requested**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**Transmit eCB within ten days**

**HOC accesses Insurance Application and selects Next eBinder Case**

**Binder Selection **
**provides status of binders (Case Query for single case)**

**Assigns case to staff member and assigns date**

## Severe Warning – eCB

*Severe Warning – eCB*

**LI lender completes Insurance Application but cannot insure case**

**Case warning**** message; ****case binder requested**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**Transmit eCB within ten days**

**HOC accesses Insurance Application and selects Next eBinder Case**

**Binder Selection **
**provides status of binders (Case Query for single case)**

**Assigns case to staff member and assigns date**

**Binder Selection **
**provides date assigned and FHAC user ID (HUD only)**

## Severe Warning – eCB

*Severe Warning – eCB*

**LI lender completes Insurance Application but cannot insure case**

**Case warning**** message; ****case binder requested**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**Transmit eCB within ten days**

**HOC accesses Insurance Application and selects Next eBinder Case**

**Binder Selection **
**provides status of binders (Case Query for single case)**

**Using Insurance Application Update, review electronic documents (eCB, Insurance Application, and Case Warning)**

**Assigns case to staff member and assigns date**

**Binder Selection **
**provides date assigned and FHAC user ID (HUD only)**

## Severe Warning – eCB

*Severe Warning – eCB*

**LI lender completes Insurance Application but cannot insure case**

**Case warning**** message; ****case binder requested**

**Use Binder Selection **
**to view requested binders  (Case Query for single case)**

**Transmit eCB within ten days**

**HOC accesses Insurance Application and selects Next eBinder Case**

**Binder Selection **
**provides status of binders (Case Query for single case)**

**HOC “issues” MIC **
**or NOR**** **

**Using Insurance Application Update, review electronic documents (eCB, Insurance Application, and Case Warning)**

**Assigns case to staff member and assigns date**

**Binder Selection **
**provides date assigned and FHAC user ID (HUD only)**

**LI lender uses FHAC to view and/or print MIC or NOR**

## Appraiser Review Changes

- If an eCB is received for an LI case, the _***View Electronic Documents***_ link is provided for the following appraiser review functions:
- Appraiser Review Status
- Completeness Check – Pre Desk Review
- Field Review Feasibility Checklist
- Desk Review Tracking
- Field Review Submission
- Form Processing
- Completeness Check – Post Field Review
- ARR Scoring Form
- Rating Tracking

## Appraiser Review Status Update

## Summary of Requirements for Processing LI Cases

- Lenders must apply and be approved for the LI program
- Appropriate FHA Connection authorization must be granted to allow employees of the lender to endorse cases
- If the lender chooses to send eCBs, the lender’s insurance status must be changed to E on the CHUMS Title II Institution File – F17SIT screen by HUD