While walking through the garment district in Manhattan one afternoon, a man was struck by a car while crossing the street. People immediately came to his aid and one lady, while balling up her jacket and placing it under his head, asked, “Are you comfortable?”

Shrugging his shoulders, the man replied, “ Eh, I make a living.”

Is it true that the happiest people in mortgage banking are those that are out of mortgage banking? Possibly. If one brokers FHA loans illegally, they may be out of the business sooner than later. In order for the “brokers” to originate FHA loans they should be approved as FHA Loan Correspondents (Mini Eagle).  A Mini Eagle lender must comply with the W-2 requirement also. In an FHA audit, HUD can cite the correspondent for not requiring their agents to be W-2 employees.  The Sponsor technically is only responsible for the underwriting and closing of the loans and the correspondent for originating. For example, here at NL Inc. many agents and branches are converting to W-2 status, as HUD clearly states that all originators must be employees, and paid as a W-2 employee. Some brokers/correspondents are perhaps illegally creating a team of paid W-2 agents focused on FHA but maintaining their independent contractor status, via 1099’s. This is an IRS violation as the other piece of the HUD requirements state that an originator must maintain full time employment and thus can’t work part time for the FHA group and part time as a 1099 originator.

Do you want to broker a stated loan to WaMu? It appears that they are joining the ranks of others like Downey (no stated), Wells (no jumbo stated), etc. For WaMu all stated loans require auto underwriting (although manual underwriting is permitted if the FICO is greater than 720 and the LTV is less than 70%). Otherwise WaMu requires that their stated program loans have a maximum LTV of 80% for conforming loan amounts, a 680 FICO for LTV’s greater than 65%, or 660 for loans less than 65% LTV, 3 months of the stated income reserves, and WaMu will go through a “verbal discovery” with the borrower to validate the income. WaMu no longer has a stated jumbo program.

I apologize for the late commentary today, but this morning I expected rates to improve throughout the day, gold and oil to drop in price, and the stock market to be slightly worse. And sure enough, my predictions came true!

Rob Chrisman

This post did not make Friday’s email deadline.  Because it has good info, it is being sent out on Saturday. - BC