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Volume 10 - Number 6

March 17, 2017

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Serial Rapid Refinancing Continues As VA, MBA Explore Potential Cures

Solicitation of VA purchase loans for streamline refinancing within weeks of closing is apparently continuing despite Ginnie Mae’s efforts to stop the harmful practice. The Mortgage Bankers Association has expressed concern that guidance on pooling eligibility for streamlined refinance loans, which Ginnie issued in October last year, was far less effective than expected. Although the aggressive refinancing trend has slowed due to Ginnie’s action, there are still “pockets of that activity” being reported, said Pete Mills, MBA senior vice president. Refinancing a veteran’s purchase mortgage less than six months after its origination is not in the vet’s best interest because it strips equity from the house and results in higher financing costs, said Mills. While the rapid refi trend involves only a small number of loans in Ginnie mortgage-backed securities pools, investors do not get the full benefit of their investment because of early prepayment. Mills said there are a handful of lenders and brokers that ...

Correspondent Channel Lost Some Share of Gov’t Market in 2016

Correspondent mortgage originators account for an unusually large share of FHA and VA lending, but the channel lost some market share in 2016, according to a new analysis by Inside FHA/VA Lending. Correspondent production accounted for 53.2 percent of the $275.14 billion of government-insured mortgages originated by a diverse group of lenders that included the top players in the market. That was a significantly bigger correspondent share than was seen in the conventional-conforming market (42.6 percent) or the jumbo space (16.2 percent). However, the 2016 figure was down from a 57.8 percent correspondent share of FHA/VA lending back in 2015, the first year for which data are available. Correspondent originations of government-insured lending by the group were up 31.1 percent from 2015, but their total FHA/VA lending jumped 42.3 percent. The retail share rose ... [ 1 chart ]

Quicken Loans Notches First Win After Court Narrows Scope of Case

A favorable court ruling on the statute of limitations for filing claims under the False Claims Act gave Quicken Loans its first win in a closely watched government case involving allegedly fraudulent FHA loans. Judge Mark Goldsmith of the U.S. District Court for the Eastern District of Michigan dismissed portions of the Department of Justice’s lawsuit against Quicken in a March 9 decision, narrowing the lender’s potential liability for FHA losses. The losses were blamed on sloppy underwriting, fraudulent certification and loan performance. The DOJ said the FHA would not have knowingly insured the loans had it known they were defective. The DOJ and the Department of Housing and Urban Development’s inspector general began an investigation of Quicken’s FHA lending activities in April 2012. The investigation encompassed some 246,000 FHA loans, which Quicken originated from ...

Georgia Appeals Court Finds for Wells Fargo in Provisional Win

A Georgia appellate court recently handed Wells Fargo Bank a provisional win in a lawsuit in which a VA borrower alleged breach of contract and wrongful foreclosure. In Wells Fargo Bank, N.A., d/b/a Wells Fargo Home Mortgage v. LaTouche, the court ruled that Wells did not breach its duty to the borrower to comply with VA foreclosure regulations. The court concluded that the trial court had erred in denying Wells Fargo’s motion for summary judgment as to the defendant’s claims for wrongful foreclosure that hinged upon the same VA regulations. The reversal stemmed from Wells Fargo’s request for an interlocutory review of the trial court’s denial of its motion for summary judgment on defendant Michael LaTouche’s claims for breach of contract, wrongful foreclosure and “surprise. An interlocutory review is undertaken when a question of law must be answered by an appellate court before ...

USDA Securitization Rose in 2016, Chase Home Continues to Lead

Approximately $18.8 billion in rural housing loans with a U.S. Department of Agriculture guarantee were delivered into Ginnie Mae pools in 2016, according to an analysis of Ginnie data. Securitization of USDA loans was up 3.9 percent from the previous year. Fourth quarter production, however, was off 10.3 percent from the prior quarter, slowing down production of USDA loans during the period. Ditech Financial, which ranked 15th among the top Ginnie Mae issuers of mortgage-backed securities backed by USDA loans, ended 2016 with $284.9 million. That was up a staggering 4712.9 percent from 2015. Chase Home Finance led the market with $3.6 billion in 2016, despite hefty declines quarter-over-quarter and year-over-year. Second-ranked PennyMac closed the year with a total volume of $2.1 billion, while Freedom Mortgage, in third place, reported $2.0 billion, a whopping ... [ 1 chart ]

Trump Proposes Drastic Cuts to 2018 HUD Discretionary Spending

The Trump administration has proposed deep budget cuts in 2018 for the Department of Housing and Urban Development and the U.S. Department of Agriculture, but whether the agencies’ critical housing insurance programs would be affected is unclear. The cuts are part of the administration’s plan to reduce non-defense discretionary spending dramatically in order to fund increased defense spending and President Trump’s southern border wall, and to bring down a projected $9.4 trillion U.S. deficit over the next decade.Released this week, the preliminary 2018 budget seeks $40.7 billion in gross discretionary funding for HUD, $6.2 billion or 13.2 percent lower than the department’s approved spending in 2017. The $47.3 billion in discretionary budget authority enacted for fiscal 2017 does not include offsetting receipts from FHA and Ginnie Mae, which lowered the congressionally appropriated cost for ...

HECM Originations Down in 2016, December Spike Slowed Descent

Production of Home Equity Conversion Mortgage loans was down in 2016 with an estimated $14.9 billion originated last year, compared to $16.0 billion the previous year. Year-over-year, total HECM volume fell 6.4 percent. Purchase loans accounted for 85.9 percent of FHA-insured reverse mortgages produced over the 12-month period. Originations, however, rose by 8.0 percent in the fourth quarter from the previous quarter due to a spike in HECM lending in December. Purchase HECMs with an adjustable rate appeared to be the product of choice among HECM borrowers in 2016. American Advisors Group continued to dominate the market, closing 2016 with $2.1 billion in HECM originations for a 14.0 percent market share. One Reverse Mortgage was the second top HECM producer of the year with $855 million, while Reverse Mortgage Funding was in third place with $649.8 million. Liberty Home Equity Solutions hung on ... [ 1 chart ]

FEMA Suggests Policy Changes to Expand Flood Insurance Options

The Federal Emergency Management Agency has offered Senate lawmakers some recommendations to improve the effectiveness of the National Flood Insurance Program as Congress considers reauthorization, including increasing mortgage borrowers’ access to private flood insurance. Testifying this week during a Senate hearing, Roy Wright, deputy associate administrator of the Federal Insurance and Mitigation Administration, urged the Senate Committee on Banking and Urban Affairs to reauthorize the NFIP before it expires on Sept. 30, 2017, and to extend it for multiple years. FIMA directs FEMA’s risk management, mitigation and flood-insurance programs. The stability of the real estate and mortgage markets depend on an “on-time, multi-year reauthorization,” said Wright. “All federally-backed mortgage lenders are required to verify that properties in special flood-hazard areas (SFHA) have ...

Utah FHA Lender Pays $4.25 M to DOJ, HUD to Resolve Fraud Claims

Security National Mortgage Co. of Salt Lake City has paid $4.25 million to the Department of Housing and Urban Development to settle allegations of failing to comply with FHA loan requirements. Security National, a retail lender, has been an FHA-approved direct endorsement lender since October 1993, the year it was founded. The settlement resolves a joint civil investigation by the HUD Office of the Inspector General, Department of Justice and the U.S. Attorney’s Office for the District of New Jersey into Security National’s FHA origination and underwriting practices in connection with 100 FHA-insured loans. As part of the settlement, the lender “agreed it engaged in certain conduct in connection with its origination and underwriting of the loans.” The HUD OIG provided no details about the investigation. The OIG said the loans that were certified as compliant would not have been insured had ...

Around the Industry

HUD Secretary Ben Carson Launches National Listening Tour in Detroit. Housing and Urban Development Secretary Ben Carson began a national listening tour March 15 at Benjamin Carson High School in Detroit. Carson’s three-day visit to his hometown gives him an opportunity to hear directly from HUD field personnel and stakeholders who rely upon and support public housing. This week, President Trump released his proposed preliminary FY 2018 budget, which showed among other things a drastic $6.2 billion reduction in funding for public housing assistance and affordable housing. HUD did not release an itinerary of Carson’s listening tour. IG Seeks Changes to Ginnie Mae’s Management Hierarchy, Staffing. Ginnie Mae’s outdated organizational structure and staff levels have made it difficult for the agency to properly monitor and mitigate the risk posed by the increasing number of nonbanks participating in ...

Poll

With the spring homebuying season in full swing, what percentage of your March 2017 application volume has been for “purchase” loans?

75% or higher
50% to 74%
30% to 49%
Under 30%

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