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HUD & FAQs on Streamline Refinance Transaction Indemnification - fraud or misrepresentation - claim after the indemnification period

HUD & FAQs on Streamline Refinance Transaction Indemnification - fraud or misrepresentation - claim after the indemnification period

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Published by Mary Cochrane
Origination of a non credit-qualifying streamlined refinance of a loan originated by another
lender

Question: Is the mortgagee that originates a non credit-qualifying streamlined refinance of a
loan originated by another mortgagee liable for serious or material violations of HUD
requirements or fraud or misrepresentation on the original loan?
Answer: No. The lender who originated a loan that involved fraud, misrepresentation, or any
serious or material violation of HUD requirements is subject to an indemnification obligation
and remains subject to such indemnification obligation despite an intervening non creditqualifying streamlined refinance. The lender originating the non credit-qualifying streamlined refinance loan is liable only for its acts in originating the streamline and does not assume liability as a result of any action or omission in the original mortgage.
Origination of a non credit-qualifying streamlined refinance of a loan originated by another
lender

Question: Is the mortgagee that originates a non credit-qualifying streamlined refinance of a
loan originated by another mortgagee liable for serious or material violations of HUD
requirements or fraud or misrepresentation on the original loan?
Answer: No. The lender who originated a loan that involved fraud, misrepresentation, or any
serious or material violation of HUD requirements is subject to an indemnification obligation
and remains subject to such indemnification obligation despite an intervening non creditqualifying streamlined refinance. The lender originating the non credit-qualifying streamlined refinance loan is liable only for its acts in originating the streamline and does not assume liability as a result of any action or omission in the original mortgage.

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Categories:Business/Law
Published by: Mary Cochrane on Jun 30, 2013
Copyright:Attribution Non-commercial

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02/10/2014

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FAQs on Streamline Refinance Transaction IndemnificationOrigination of a non credit-qualifying streamlined refinance of a loan originated by anotherlenderQuestion: Is the mortgagee that originates a non credit-qualifying streamlined refinance of aloan originated by another mortgagee liable for serious or material violations of HUDrequirements or fraud or misrepresentation on the original loan?Answer:
No. The lender who originated a loan that involved fraud, misrepresentation, or anyserious or material violation of HUD requirements is subject to an indemnification obligationand remains subject to such indemnification obligation despite an intervening non credit-qualifying streamlined refinance. The lender originating the non credit-qualifying streamlinedrefinance loan is liable only for its acts in originating the streamline and does not assumeliability as a result of any action or omission in the original mortgage.
Question: If a mortgagee originates a non credit-qualifying streamline refinance of a loanthat another mortgagee has already indemnified, which mortgagee is liable in the event of aclaim on the streamline refinance that occurs during the indemnification period of theoriginal loan?Answer:
Consistent with current practice, HUD will continue to require indemnification fromthe mortgagee that indemnified the original loan if a claim occurs during the indemnificationperiod of the original loan.However, as noted above, if the origination of the non credit-qualifying streamlined refinanceinvolved serious and material violations of HUD requirements or fraud or misrepresentationwhich resulted in a claim after the indemnification period on the original loan expired, HUDcould request/demand indemnification on that streamline refinance loan from the non credit-qualifying streamlined refinance mortgagee.
Question: If a mortgagee originates a non credit-qualifying streamlined refinance of a loanthat another mortgagee has already indemnified, which mortgagee is liable in the event of aclaim on the streamline refinance that occurs after the indemnification period of the originalloan expires?Answer:
Because the indemnification period on the original loan has expired, HUD will requireindemnification only from the non credit-qualifying streamlined refinance mortgagee if therewere serious and material violations of HUD requirements or fraud or misrepresentation on thenon credit-qualifying streamlined refinance transaction.

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