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Volume 9 - Number 23

October 21, 2016

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Nonbanks Took Over GNMA Servicing Market in 3Q16

Nonbanks crossed a threshold in the third quarter of 2016, posting a hefty 6.3 percent increase in their combined Ginnie Mae servicing portfolio, according to a new Inside FHA/VA Lending analysis. Nonbanks serviced $826.6 billion of Ginnie single-family mortgage-backed securities as of the end of September. That represented 51.3 percent of the total Ginnie market. The nonbank servicing total includes a small amount of Ginnie servicing held by state housing finance agencies, roughly 1.0 percent of the entire market. But it doesn’t include the significant amount of Ginnie servicing that nonbanks do as subservicers for both depository and nonbank clients. Interestingly, the biggest gain for nonbanks in percentage terms came in servicing VA loans, which rose 8.1 percent from the second quarter to $252.1 billion, or 51.0 percent of the market. The VA sector is one business from ... [4 charts ]

GNMA Revises Pooling-Eligibility Rules for Streamlined Refi Loans

Ginnie Mae this week announced a policy change to ease investor fears about the rapid streamline refinancing of some loans in Ginnie I mortgage-backed securities pools and the effect of faster prepayments on mortgage securities investments. The revised policy establishes new criteria for pooling for streamlined refi loans. The revised policy addresses confusion regarding the Department of Veteran Affairs’ streamlined refi program, also known as the Interest Rate Reduction Refinance Loan (IRRRL) program, which is at the core of the rapid refi dispute. Under the VA’s interim qualified mortgage rule, a borrower must show six consecutive months of payments on the original loan before they can refinance into an IRRRL. With an IRRRL, borrowers get net tangible benefits of a lower interest rate, limited underwriting and no appraisal. As a qualified mortgage, an IRRRL provides ...

HUD Urges IG to Reconsider Cost of Delayed Conveyance, Foreclosure

The Department of Housing and Urban Development called on its inspector general to reassess estimated financial losses to the FHA insurance fund, which an IG audit attributed to lengthy delays of servicer foreclosures and property conveyances. A recent audit report by the HUD inspector general alleges that HUD paid approximately $2.23 billion in claims for an estimated 239,000 properties that missed foreclosure and conveyance deadlines. According to the IG report, HUD paid an estimated $141.9 million for servicers’ claims for “unreasonable and unnecessary” debenture interest on the distressed loans, as well as $2.09 billion in servicer claims for holding the properties past their foreclosure and conveyance deadlines. While it was necessary for servicers to pay for property-preservation costs, HUD should not have paid for holding costs, the ...

Recent Nonbank Settlements Boost Total Recoveries for MMIF

Two nonbanks in Salt Lake City recently joined a growing list of FHA lenders paying substantial penalties to resolve False Claims Act lawsuits brought by the Department of Justice.Primary Residential Mortgage Inc. and SecurityNational Mortgage Co. have agreed to pay nearly $10 million to settle charges they knowingly originated and underwrote loans that were ineligible for FHA insurance. So far, the Department of Housing and Urban Development has reported more than $29.6 billion in FCA and Financial Institution Reform, Recovery and Enforcement Act settlements with FHA lenders since 2014. Portions of the settlement funds were used to help strengthen the FHA Mutual Mortgage Insurance Fund. As part of the settlement, both PRMI and SecurityNational Mortgage Co. admitted they endorsed loans that did not meet FHA requirements. Both companies are direct endorsement lenders in the ...

New VA Lender Looks to Make an Impression in a Familiar Market

Norwich Commercial Group has launched a new division, Military Direct Mortgage, to focus exclusively on VA direct-to-consumer lending. Based in Avon, CT, just down the road from its parent company, Military Direct opened for business in August this year and the timing could not have been better. In September, issuance of securities backed by VA loans totaled $22.3 billion, up from $18.1 billion in August, according to Ginnie Mae data. VA loan originations saw a 17.4 percent increase in the third quarter from the previous quarter, and were up 22.3 percent over the nine-month period compared to last year. VA purchase-mortgage volume for September totaled $9.9 billion, up after a slight drop in August. Purchase-mortgage activity also improved by 26.1 percent in the third quarter, and by 16.5 percent year-over-year. VA refinance volume featured a huge 34.0 percent increase in ...

HUD-IG Bares Additional Penalties, Settlements, Actions Against Firms

The Department of Housing and Urban Development inspector general, over the last several weeks, has reported a series of final civil actions that resulted in an enforcement action or monetary settlement between an FHA lender and the federal government. On Oct. 6, the IG announced the results of an audit of TXL Mortgage Corp., a direct endorsement lender, in Houston. The audit found TXL in violation of HUD requirements and that it had no acceptable quality-control plan in place. Specifically, 16 of the 20 sample loans the IG reviewed did not comply with HUD standards. Of the 16 loans, eight had significant underwriting defects and failed to qualify for FHA mortgage insurance. Two loans qualified but were over-insured, according to the report. As a result, TXL exposed HUD to more than $713,000 in unnecessary insurance risk and caused the department to incur more than ...

SCRA ‘Bug’ Spit Out False Reports On Soldiers’ Active-Duty Status

A glitch in the federal government’s Servicemembers Civil Relief Act website that had been churning out false verifications of soldiers’ active-duty status has been fixed, the Defense Manpower Data Center of the Department of Defense has announced. The bug responsible for the false negative results was removed after rendering the website inoperable for several days. The DMDC is urging active servicemembers to re-run their SCRA certificate requests if they have reason to doubt any negative results returned by the website. The DMDC shut down the website temporarily on Oct. 4 making it impossible for mortgage lenders to verify their or their vendor-partners’ compliance with the SCRA. The statute provides certain protections from civil actions against servicemembers who are called to active duty. It restricts or limits actions against active-duty military personnel in areas such as mortgages, rental and lease agreements, credit-card interest rates, tax liability, lawsuits and other debt obligations. The SCRA certificate provides information only for the purpose of verifying an individual’s active-duty status for a given time period to ...

VA Spells Out Requirements for Obtaining Key Eligibility Doc

One of the key documents VA lenders require veteran borrowers to submit is the certificate of eligibility (COE). A VA loan application will not move forward without a COE, a requirement for any active-duty servicemember or veteran seeking to take advantage of the VA’s home-loan guaranty program. The COE verifies to the lender a loan applicant’s eligibility for a VA loan. The evidence a lender might require depends on the nature of the applicant’s eligibility. Veterans and current or former National Guardsmen or reservists who have been called to active duty must submit DD Form 214. The form would show the character of service and the reason for separation from the service. Active-duty servicemembers must submit a current statement of service signed by a superior, the unit commander or the adjutant, higher headquarters or the personnel office. The statement must contain the ...

VA Not Issuing ‘No Bids’ on Pending Mortgage Loan Terminations

The Department of Veterans Affairs is reminding servicers that it does not issue “no-amount-specified bids,” commonly known as VA “no-bids,” on pending loan terminations. A regulatory change in 2008 allowed VA only two bid types: net value bid and total debt bid. Prior to the change, when VA issued a no bid, servicers were barred from conveying the property to VA following a completed termination action. A allows servicers the option to convey property to VA on loans that have been terminated through foreclosure or deed-in-lieu of foreclosure. The option to convey reduces additional mortgage-industry expenses associated with missed foreclosure sales, maintenance and marketing of properties that could not be conveyed, the VA explained. Other servicer news from the VA Loan Electronic Reporting Interface (VALERI): Oregon Appraisals. Effective Sept. 1, 2016, all Oregon liquidation ...

Investors Ramp Up Streamline Refi Offers to FHA, VA, USDA Borrowers

Mortgage credit availability increased in September as more investors offered streamlined refinancing programs to borrowers with FHA and U.S. Department of Agriculture rural housing loans, according to the Mortgage Bankers Association’s mortgage credit-availability index (MCAI) report. The government MCAI, one of four component indices of the trade group’s MCAI, saw the greatest increase in availability over the month (up 1.9 percent). Conventional MCAI also was up 0.7 percent and so was the conforming MCAI by the same percentage. The jumbo MCAI rose by 0.6 percent. The increases reflected an improvement in the MCAI, which grew 1.4 percent to 167.0 in September. A drop in the MCAI indicates a tightening of lending standards, while an increase suggests loosening of credit, the MBA said. “Streamline [refinancing] programs allow borrowers who have been consistently making their ...

Around the Industry

VA Special Relief Following Hurricane Matthew. VA encourages holders of guaranteed loans to extend forbearance to borrowers in areas that were ravaged by Hurricane Matthew. Careful counseling with borrowers is recommended to help determine whether their difficulties are related to the hurricane or to some other cause that needs to be addressed. Lenders may reapply prepayments to cure or prevent a loan default, or modify the terms of an existing guaranteed loan without the prior approval of VA, provided certain regulatory conditions are met. In addition, VA has requested lienholders institute a 90-day freeze on all new foreclosures on loans affected by Hurricane Matthew. Lienholders must review all foreclosure referrals to ensure that servicers are justified in delaying foreclosure action. Further, the VA asked servicers to waive late charges and to suspend credit bureau reporting on ...


After the November elections, how long will it take for a new Congress and White House to pass GSE reform legislation?

I’m confident a bill will be passed the first year.


2 to 3 years. GSE reform is complicated.


Sadly it won’t happen in a Clinton or Trump first term.


Not in my lifetime.


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