Alert November 30, 2010

HUD Solicits Comments on Warehouse Lending Arrangements

HUD is considering issuing guidance under the Real Estate Settlement Procedures Act to address possible changes in warehouse lending arrangements that have occurred since HUD issued regulations on table funding and secondary market transactions in 1992 and 1994.  In order to assist HUD in determining whether such guidance is needed and to formulate such guidance, HUD issued a notice soliciting information on how warehouse lending has evolved in recent years, and especially on how warehouse lending currently operates within residential mortgage transactions.  HUD’s suggested topics for comment include, among other things: (1) how a warehouse lender provides funding to loan originators; (2) what mechanisms are used by a warehouse lender to assure repayment of the funding; (3) whether ownership of a mortgage loan that is originated by a loan originator who is funded by the warehouse lender ever transfers to the warehouse lender; (4) the extent to which a warehouse lender is involved in the credit approval decision; and (5) the characteristics that indicate a bona fide transfer of the loan such that the transaction would be a secondary market transaction that is not covered by HUD’s RESPA regulations.  Comments are due by December 27, 2010.  Click here for the Federal Register notice.