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Volume 12 - Number 2

January 18, 2019

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FHA/VA Default Rates Edge Up, Nonbanks Stalk Wells

Delinquency rates for FHA and VA loans in Ginnie Mae mortgage-backed securities rose in the fourth quarter of 2018, but loan performance was generally stronger, according to a new Inside FHA/VA Lending analysis. As of December-end, 5.38 percent of FHA and VA loans were 30 to 90 days past due, up 27 basis points from the previous quarter, but lower than 5.98 percent a year ago. The serious delinquency rate was a different story. At the end of 2018, 1.09 percent of FHA and VA loans were over 90 days past due, up from 1.00 percent in September and 0.99 percent a year ago. Late payments remain a big issue for FHA loans. The number of loans over 90 days past due rose 10.5 percent in the fourth quarter, pushing the rate up to 1.16 percent of the total outstanding. In its analysis as of September, CoreLogic noted that the serious delinquency rate for FHA loans is three times higher than those ... [Charts]

Servicers Urged to Offer Relief to Laid-Off Workers

FHA and VA are calling on servicers to provide special relief to furloughed federal workers and contractors as the partial government shutdown neared a full month with no end in sight. In their respective guidelines, the agencies expressed concern over the financial hardships experienced by borrowers as a result of the shutdown. They urged servicers to be sensitive to those who have been temporarily laid off or have been experiencing a loss or reduction of income. The shutdown is nearing a full month as conflict between President Trump and House Democrats over funding of a wall at the U.S.-Mexico border remained unresolved. The Democrat-controlled House has passed a number of temporary spending bills with provisions for border security but the president has threatened to veto any funding measure that does not have the $5.7 billion he is seeking for the wall. Chances of passage in the ...

VA Stakeholders Struggle With Interim Cash-Out Rule

More clarity is needed with regards to the Department of Veterans Affairs’ proposed changes to its rules on cash-out refinances, VA lenders said. Most lenders are confused by the regulatory language on the interim final rule published a month ago in the Federal Register. Some warn that the rule may hurt VA borrowers. The rule is out for comment until Feb. 15, the same day it becomes effective. The rule is intended to curb abusive lending practices of cash-out refinances even as consumer preference for such loans grows. It separates cash-out refis into two types. Type 1 is a loan being refinanced that is already guaranteed by VA and where the new loan amount is equal to or less than the payoff amount of the original loan. Type 2 cash-out loans are those in which the amount of the principal for the new loan is larger than the payoff of the refinanced loan. Under the interim final rule, both types of cash-outs would be ...

Bright’s Hasty Exit Leaves a Vacuum at Ginnie Mae

Ginnie Mae has reached the halfway mark of President Trump’s first term without a permanent leader and appears likely to remain so until after the 2020 presidential election. Last week, Michael Bright, President Trump’s nominee to head Ginnie Mae, abruptly announced his resignation after waiting for months to be confirmed. Bright, who was executive vice president and chief operating officer, served as acting president of the agency after former President Ted Tozer resigned at the end of the Obama administration. Senate rules require resubmission if a nominee is not confirmed within the year he or she was nominated. This means going through the Senate vetting and confirmation processes all over again. It appears Bright no longer wanted to do that, opting instead to join the Structured Finance Industry Group, which represents all segments of the securitization industry, as president. In a Jan. 9 resignation letter to ...

Plan Afoot to Reintroduce VA ‘Orphan Loan’ Measure

Congress reportedly plans to reintroduce legislation that would restore Ginnie Mae eligibility for hundred-million dollars’ worth of so-called orphan VA streamline refinance loans. H.R. 6737, Protect Affordable Mortgages for Veterans Act of 2018, was passed by the House by voice vote on Sept. 26 last year and was sent to the Senate, where it was stalled on a technicality. The bill aimed to clarify new seasoning requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (S. 2155) that specifically applied to VA’s Interest Rate Reduction Refinance Loans and which became effective upon enactment. The requirements were designed to curb churning of VA loans that were triggering unusually fast prepayments in Ginnie Mae mortgage-backed securities. Some lenders and brokers were soliciting homeowners to refinance their VA mortgages more than once to ...

Around the Industry

DOJ, HECM Servicer Agree to False Claims Act Settlement. Compu-Link Corp. agreed to a civil settlement with the U.S. Attorney’s Office of the Middle District of Florida. The company will pay $4.25 million to the government to resolve alleged violations of the False Claims Act in connection with the servicing of FHA-insured reverse mortgages. According to federal prosecutors, the Michigan-based servicer of Home Equity Conversion Mortgages obtained insurance payments from FHA without disclosing that the mortgagee had missed appraisal deadlines and, therefore, was ineligible for such payments. In addition, the company allegedly failed to initiate foreclosure proceedings as required and see to their completion. Consequently, between Nov. 1, 2011, and May 1, 2016, the mortgagee in question allegedly obtained additional interest it was not entitled to, prosecutors said. Essent Announces Launch of EssentEDGE. Essent Guaranty’s EssentEDGE, a new platform supporting a fully integrated pricing engine, will be available to customers on Jan. 21. The platform enables lenders to price more attributes at the loan level, unlike the current rate-card pricing structure, which is generally based on broad FICO and loan-to-value ranges.

Poll

Do mortgage lenders really need a new credit-scoring model or is the current FICO system adequate?

It’s fine. Stick with what works.
Time for a change. Borrowers are different today.
Undecided, still assessing the situation.

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