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Volume 7 - Number 8

April 11, 2014

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FHA Rejects Industry Plea to Lower MIPs

FHA Commissioner Carol Galante quashed any industry hope of seeing mortgage insurance premiums lowered at this time, saying that while the Mutual Mortgage Insurance Fund has shown some improvement, full recovery is still far off. In remarks during the Mortgage Bankers Association’s National Advocacy Conference this week, Galante also defended a provision in the president’s FY 2015 budget proposal seeking statutory authority for the FHA to collect an administrative fee from lenders to help fund quality control improvements. Both issues are high up on the MBA’s lobbying priorities as members gathered in Washington, DC, this week to meet with lawmakers and their staff to discuss FHA and other key industry concerns. Galante said the Department of Housing and Urban Development is currently focused on strengthening the MMI Fund and expanding access to credit for all qualified borrowers. The FHA raised pricing five times from ...

Industry Calls for Transparent Loan-Limit Process

The Mortgage Bankers Association is urging the Department of Housing and Urban Development to provide a transparent process by which interested parties could request a recalculation of the FHA loan limits and present supporting evidence. By statute, maximums for FHA loan limits in high-cost areas were reduced to $625,500 from $729,750 at the beginning of the year for one-unit residential properties, the same maximum loan limit for Fannie Mae and Freddie Mac for similar properties in high-cost areas. The MBA said HUD made further reductions in FHA FY 2014 loan limits in approximately 300 counties and county equivalents across the country, with many experiencing significant reductions. The trade group believes these changes were not required by statute. To the extent that the loan-limit reductions in those areas were discretionary, the MBA strongly urged HUD to moderate its ...

BofA, Nutter Agree to Resolve HECM Violations

Bank of America and James Nutter & Co. have agreed to indemnify the Department of Housing and Urban Development to resolve allegations that they failed to perform due diligence in underwriting Home Equity Conversion Mortgage loans. An audit of the HECM program by the HUD Office of Inspector General found that the financial institutions allowed 33 HECM borrowers to take out more than one loan, a violation of program requirements. The program requires borrowers to reside in the mortgaged residence as their principal residence. In addition, borrowers may not have more than one principal residence at the same time. In BofA’s case, one borrower obtained two HECM loans on properties she owned in Massachusetts and Florida, both of which she identified as her principal residence. The HUD OIG said there was sufficient information to alert BofA and the underwriter that ...

GNMA Bars HECMs with Fixed-Rate Future Draws

Beginning June 1, 2014, securitizations backed by Home Equity Conversion Mortgages may not include HECM loans that provide for future draws at a fixed rate of interest. Specifically, Ginnie Mae warned that the potentially excessive risk associated with such HECM loans might be more than what the agency could handle in the event of an issuer default. The prohibition applies to fixed-rate HECM loans where the borrower has the option to select a payment plan that allows future advances against the principal limit. These loans give rise to the risk that such advances will become uneconomic should interest rates rise from when the loan is originated, according to Ginnie Mae. The impact of negative spreads between a fixed noted rate and future prevailing rates could be ...

FHA Volume by State Drops, State HECMs Rise

Overall FHA production fell significantly in all 50 states in 2013 apparently due to mortgage insurance premium increases and policy changes that made it difficult for even qualified borrowers to obtain an FHA-insured single-family loan. FHA volume by state dropped 27.5 percent in the fourth quarter to $35.8 billion, from $49.4 billion in the previous quarter, with all states showing varying percentages of decline during the period. Year over year, production by state declined by 9.2 percent, data showed. Total FHA originations were $211.3 billion for 2013, with the first quarter ending strongly with $63.7 billion. Production, however, lost steam over the next three quarters. Among the top five FHA states, Virginia suffered the largest quarterly drop, 35.2 percent, in FHA volume. California was the top FHA producer state with $35.2 billion for a ... [2 charts]

Deficient Files, No. 1 Cause of ‘Unacceptable’ Grade

Deficient file documentation is the leading cause of initial “unacceptable” ratings in the FHA’s most recent post-endorsement technical review (PETR) of targeted single-family FHA loans. Published in the March 2014 issue of Lender Insight, review results showed that 50 percent of the 5,504 FHA loans selected for review in the fourth quarter of 2013 had missing or flawed documentation. Of that percentage, 65 percent of loans were rated “unacceptable.” Loans are selected for post-endorsement review based on a risk-targeting methodology and do not reflect the overall FHA portfolio. An “unacceptable” rating indicates that the loan endorsement file had a material defect at the time the loan was endorsed for FHA insurance. Such ratings are upgraded subsequently if the lender provides mitigating documentation. Unacceptable ratings are due to errors or flaws in ...

April 30: Last Day to Submit Master Agreement

Ginnie Mae will provide a one-month grace period to April 30, 2014, for issuers to complete the submission of their master agreement to the Master Agreement Management System (MAMS) within the agency’s enterprise portal. The deadline for submission is March 31, 2014. The master agreements must first be accepted by the MAMS before an issuer may request or receive a “Transfer of Issuer Responsibility.” Failure to comply with this requirement could adversely affect the issuer’s ability to obtain commitment authority and to issue new pools or receive pool transfers. Although many issuers have resubmitted their master agreements, some found it difficult to complete the process within the required timeframe, according to Ginnie Mae. Providing a one-month grace period would help issuers to complete their resubmission. Issuers that still experience ...

Filing Deadline for Recertification Extended to June 9

The FHA has extended the filing deadline for lender recertification to June 9, 2014, to match the agency’s timeline for switching to the Lender Electronic Assessment Portal (LEAP). LEAP is a new system that will serve as a one-stop shop for all lender approval and recertifications. It replaces the current “Lender Approval” and “Cash Flow” web pages in FHA Connection as well as the current system lenders use to submit financial information as part of recertification. LEAP is scheduled to be fully operation this month, although consolidation of Title I and II lender identification numbers has already taken place on March 31. Last year, the FHA issued guidance extending the filing deadline for all lenders with a December 2013 fiscal year end. Although the guidance recommended that lenders be prepared to complete their recertification no later than May 31, it also stated that ...

Around the Industry

HMBS Quarterly Issuance Down by 30 Percent. Issuance of securitized Home Equity Conversion Mortgages remained low as HMBS issuers created only $510.1 million in new HMBS pools during March, the third lowest total in almost five years, according to the latest market analysis by New View Advisors. This brought HMBS issuance in the first quarter of 2014 to $1.7 billion, the lowest quarterly total in nearly five years, said NVA. By comparison, HMBS issuance totaled $2.5 billion in the fourth quarter of 2013 and $2.4 billion in the first quarter of 2014. 1Q14 has the lowest HMBS issuance since 2Q09, when the program was at its infancy. In March, 86 HMBS pools consisting of 41 original issuances and 45 tail pools were issued. Original HMBS issuances refer to a pool of HECM loans securitized for the first time, while tail HMBS issuances are pools created from the uncertificated portions of HECMs that have ...

Poll

What do you think is the biggest hurdle to meeting the new QM standards in the CFPB’s ability-to-repay rule?

A debt-to-income (DTI) cap of 43%.

48%

A 3% cap on points and fees.

29%

An interest rate cap of the average prime offered rate (APOR) plus 1.5%.

23%

Housing Pulse