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While Britain’s exit from the European Union is all the talk, the exit of the big banks from FHA lending offers an increased opportunity for Independent Mortgage Lenders and smaller Community Banks.
“Banxit” has left the FHA-insured mortgage financing mainly in the hands of the independents. With the turmoil over the UK’s move, it seems that mortgage rates in the US will remain at record lows.
This is good news for homeowners as well for those thinking about moving up or buying their first home. Many are, or will be, seeking FHA financing. This is good news for Independent Mortgage Lenders.
It’s not all roses for the independents. The large banks shied away from FHA lending for a good reason. Too much litigation risk; too many have been burned by FHA and/or DOJ penalties. This same risk is inherent in the FHA loans made by other lenders.
Lenders need to be very careful to originate, approve and close their FHA loans in strict compliance with all regulatory requirements and the FHA rules, requirements, and guidelines. They are certifying compliance on every FHA loan they close. In the event of a default which results in an FHA claim, they may find themselves on the wrong end of a False Claims Act violation law suit.
This is not meant to scare lenders away from FHA lending but to inform them of the risks involved. Risks that can be minimized through ongoing pre and post-closing QC reviews. Make sure that all FHA loans are being done by the rules; no shortcuts, no loose ends. Tie ‘em up in a nice, neat bow to ensure delivery, purchase and performance.
One person’s trash is another person’s treasure. The Banxit from FHA lending, coupled with Brexit offers independent mortgage lenders a golden opportunity for increased business. Just be sure it’s not fool’s gold you’re mining.
