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Volume 10 - Number 4

February 17, 2017

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Debt Burdens Crept Slightly Higher In 2016 for FHA and VA Borrowers

FHA and VA borrowers took on slightly greater payment obligations in 2016 than they have in previous years, according to a new analysis and servicer ranking by Inside FHA/VA Lending. The average debt-to-income ratio for FHA loans securitized in Ginnie Mae mortgage-backed securities last year was 40.4 percent, up about half a percentage point from 2015. The average VA DTI ratio nudged up slightly to 38.3 percent. Average credit scores in the FHA program drifted slightly lower, while climbing 1.9 points for VA loans. The differences in credit quality between the two programs remained substantial: the VA attracts borrowers with higher credit scores and lower DTI ratios who take on larger loans. Some 36.3 percent of VA loans backing Ginnie MBS issued last year had credit scores of 740 and up, while just 13.2 percent of FHA loans fell in that category. Meanwhile, 67.1 percent of FHA loans had ...

Republicans Invoke Cloture in Upcoming Carson Confirmation

Ben Carson is a step closer to being confirmed as secretary of the Department of Housing and Urban Development after Republicans this week invoked cloture to block any attempt by Democrats to delay or prevent a Senate confirmation vote. Republicans filed their cloture motion and waived quorum call on Feb. 13, effectively ending further debate on Carson’s nomination. At least 16 senators must sign a cloture petition.]There has been no date set for Carson’s confirmation vote. The Trump administration has been slow to fill its Cabinet positions, partly due to Democrats’ stalling techniques. So far, only nine cabinet positions have been filled. There has been no Senate action scheduled since the Senate Banking Committee approved Carson confirmation by voice vote on Jan. 24, and nobody seems to have an explanation for the delay. While the committee vote was unanimous, Democrats continue to ...

4Q16 Spike in FHA Delinquencies Justifies Trump’s Premium Action

The spike in FHA delinquencies in the fourth quarter of 2016 justifies the Trump administration’s decision last month to suspend and review the outgoing administration’s lowering of FHA mortgage insurance premiums, said House Financial Services Committee Chairman Jeb Hensarling, R-TX. Commenting on the Mortgage Bankers Association’s quarterly delinquency rate survey, Hensarling praised President Trump’s decision to set aside the 25-basis-point premium reduction, which Inside FHA/VA Lending reported first on Jan. 6, 2017. “Lowering premiums at this time was a big mistake,” said Hensarling. “The sudden increase in delinquencies makes it clear that President Trump was absolutely right to undo the previous administration’s irresponsible action.” Hensarling recalled that in 2013 “taxpayers had to spend $1.7 billion to bail out the FHA.” Going forward, the FHA must be fiscally sound, with a ...

FHA-Related FCA Enforcement, Recoveries Increase in 2016

Claims relating to housing and mortgage fraud represented a huge chunk of the amount recovered by the federal government under the False Claims Act last year. An analysis by the WilmerHale law firm found that the Department of Justice continued to give high priority to FCA investigations and prosecutions in 2016, resulting in more than $4.76 billion in settlements and judgments, nearly $1 billion more than in 2015. The increase also reflected a continued focus on financial institutions and the mortgage lending industry, with approximately $1.6 billion in recoveries last year, the law firm said. The DOJ, working on referrals from the Department of Housing and Urban Development’s inspector general, has used the FCA effectively as a tool in prosecuting FHA-related fraud cases against lenders. The DOJ ...

Lender, Charity Hid Defaults from FHA to Manipulate Default Rate

Three federal agencies have announced a joint settlement agreement and consent order with a New York FHA lender and several of its top executives to resolve alleged violations of the Financial Institutions Reform, Recovery and Enforcement Act and the False Claims Act. The U.S. Attorney for the Eastern District of New York, the Office of the Inspector General for the Department of Housing and Urban Development, and the Inspector General of the Federal Deposit Insurance Corp. announced the $1.25 million settlement with Franklin First Financial, Ltd., its Chief Executive Officer Frederick Assini, Chief Operating Officer Christopher Berman, and Andrew Dauro, a manager of the company. The lawsuit alleged that the defendants made illegal payments on behalf of borrowers from February 2009 through March 2010 to keep default rates low so that Franklin First could keep its ...

GAO Report Calls for Scrutiny of FHA Insurance Fund Requirements

The Government Accountability Office released a report this week highlighting “high-risk” areas that the federal government should address, including ongoing concerns about capital requirements for the FHA’s Mutual Mortgage Insurance Fund. “As evidenced by the $1.68 billion FHA received in 2013, the current 2.00 percent capital requirement for FHA’s fund may not always be adequate to avoid the need for supplemental funds under severe stress scenarios,” the GAO said. Issues involving the MMIF first received the GAO’s “high-risk” designation in 2013. The GAO reiterated its call for Congress or the FHA to specify the economic conditions that the MMIF would be expected to withstand without requiring supplemental funds. The government watchdog noted that the issue could be addressed as part of broader efforts involving reform of the ...

Lender to Military Communities Aims for Transparency, Service

While one would usually expect a VA lender to entice military borrowers to take out a VA loan, AAFMAA Mortgage Services defies convention by giving military families the option of choosing a mortgage that best suits their financial needs. That means presenting the pros and cons of every product type – conventional conforming, FHA, VA and USDA loans – for prospective veterans and active duty military and boiling it down to the best possible loan choice, said Andy May, chief operating officer of AAFMAA Mortgage Services. AAFMAA stands for American Armed Forces Mutual Aid Association, a member-owned, tax-exempt nonprofit that provides life insurance, survivor assistance, financial planning, investment management and trust services to military communities nationwide. The association has an interesting history. According to Wikipedia, a group of U.S. Army officers ...

VA Peppers Lenders with New Policy Guidance, Instructions

The Department of Veterans Affairs has issued guidance regarding various aspects of the VA Home Loan program. On Valentine’s Day, the VA sent out a reminder to VA lenders regarding the continued use of the current National Pest Management Association (NPMA) Department of Housing and Urban Development Forms NPMA-99-A and NPMA-99-B. Circular 26-17-07 has instructions for filling out both forms. HUD NPMA-99-A, Subterranean Termite Protection Builder’s Guaranty, is completed and certified by the builder. The licensed pest control company completes the HUD-NPMA-99-B. Also on the same day, the VA announced a new requirement for staff appraisal reviewers (SARs). In 2015, VA released guidance, that established a low-risk and a high-risk appraisal review process. This requires SARs to review the LoanSafe Appraisal Manager product during the issuance of the ...

Around the Industry

Nominee for HUD Secretary Purchases House Prior to Confirmation. With his Senate confirmation still up in the air, Ben Carson, President Trump’s pick to head the Department of Housing and Urban Development, has bought a $1.3 million house in an affluent neighborhood in Fairfax, VA, the Washingtonian has reported. According to the magazine, Carson’s new abode is a 6,400-square-foot traditional-style house with five bedrooms and four and a half baths. It is located on a 1.5 acres, a short distance from the Wolf Trap concert venue and the Meadowlark Botanical gardens. The 65-year-old neurosurgeon and his wife Candy also own million-dollar homes in Florida and Baltimore County, MD. The Senate Banking Committee approved Carson’s nomination on Jan. 24 but the full Senate has yet to vote on it. No date for a confirmation vote has been set ...

Poll

With rates higher this year, there has been talk of lenders liberalizing their underwriting standards in an effort to increase volume and make up for lower refis.

Do you think your shop will loosen standards over the coming three months?

Yes, but not by much.
Yes, by a lot.
Yes and, heck, we may even do non-QM lending.
No, not at all.
No and we may even tighten credit.

vote to see results