We want to thank everyone who attended our webinar “Managing Your Early Payment Default Risk.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides from the webinar.

Question 1 – HUD just eliminated the Correspondent level of FHA approval.  Will only DE’s apply to market watch?

• Answer – The market watch will now (once the regulation takes effect) only apply to the Sponsor (DE) lender. HUD no longer puts out a market watch list; however, they still do keep track of the lenders (sponsors) they have concerns about.

Question 2 – Are there other reports besides the Neighborhood watch, we the lender need to be reviewing?

• Answer – Outside of Neighborhood Watch, we suggest you practice effective communication with your lenders to determine how the loans you originate are performing.

Question 3 – A.) Is Sponsor responsible for tracking and if so How do they find out about EPD’s for 100% review, or  B.) Is the investor responsible for reviewing the loan they purchased?

• Answer – The Sponsor is responsible for finding out about the EPD through Neighborhood Watch HUD  website. The investor is not the one that would be responsible to HUD for the EPD.

Question 4 – When reviewing Neighborhood Watch, how can we determine if a company is on the HUD Watch list vs. being terminated?

• Answer – If the percentage reaches termination threshold, HUD will contact the appropriate parties. Neighborhood Watch will provide lender status as (A) active, (T) terminated or (M) merged.

Question 5 – How would a small sampling of loans affect the ratio, especially in HUD review for termination?

• Answer – When HUD is analyzing the number of default loans compared to the region, or the nation, it does consider the total number of loans that were closed to see how that affects the default ratios. While there is no guarantee that a small number of loans with just a few defaults will make HUD overlook the ratios, it is one aspect of the overall analysis.

(Mortgage Compliance Advisors, LLC (MCA) makes reasonable efforts to ensure the accuracy of the answers. MCA makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)

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