HUD Eliminates FHA 1% Origination Fee Cap
In order to be consistent with recent changes to regulations under the Real Estate Settlement Procedures Act (RESPA), the U.S. Department of Housing and Urban Development (HUD) released a Mortgagee Letter 2009-53, December 31, 2009. The Letter will remove the 1% origination fee cap on FHA-insured loans which are originated under FHA’s standard mortgage insurance program.
With the new RESPA law, which went into effect January 1, 2009, lenders are now required to disclose a single, bundled origination fee on the Good Faith Estimate (GFE) and HUD-1 Settlement Statement. The law requires all origination administrative, processing, mortgage lender and broker’s compensation fees to be bundled into one, single origination charge. With the origination fee bundled as it is now required, the aggregate charge will often exceed the 1% origination fee cap. Because of this, HUD has removed the origination fee cap.
Although HUD is removing the origination fee cap, HUD still requires lenders to be “fair and reasonable” with FHA origination fees. Furthermore, HUD stated they intend to issue a percentage cap on the amount of fees that FHA lenders may charge their borrowers, which will potentially go into effect early 2010.
To view the Mortgagee Letter 2009-53 click here