FHA Origination

Browse articles from all of our Newsletters related to FHA Origination.

March 20, 2015 - Inside FHA/VA Lending

Around the Industry

Loan Modification Trial Payment Plans for Forward Mortgages. The Department of Housing and Urban Development has announced requirements for trial plan duration, required signatures, and reporting for trial payment-plan agreements, and the conditions under which FHA deems a TPP to have failed.Lenders must implement the requirements in Mortgagee Letter 2015-07 for all TPPs offered to borrowers on or after June 1, 2015. FHA Publishes Additional Sections of HUD Single-Family Policy Handbook. The FHA has published additional sections for the SF Handbook, including the following: Doing Business with FHA – Lenders and Mortgagees Doing Business with FHA – Other participants in FHA Transactions – Appraisers; Quality Control, Oversight and Compliance – Lenders and Mortgagees; Quality Control Oversight, and Compliance – Other Participants in FHA Transactions – Appraisers ...


March 20, 2015 - Inside FHA/VA Lending

FHA Servicing Transfer Could Be in Spending Bill, Not in Reform Bill

The FHA’s request for authority to require specialized subservicing in certain circumstances could be included in an appropriations bill rather than in housing-related legislation, according to Sen. Jack Reed, D-RI, ranking minority member of the Senate Appropriations Subcommittee on Transportation, HUD and other Related Agencies. Reed raised the possibility during a recent hearing on the Department of Housing and Urban Development’s FY 2016 budget proposal. Among other things, the FHA has been seeking authority from Congress to require, in individual cases, inexperienced lender/servicers to transfer the function to a specialized servicer to better assist borrowers and reduce losses to the Mutual Mortgage Insurance Fund. Allowing the FHA to require transfer of servicing will help more distressed homeowners stay in their homes and avoid foreclosure, said ...


March 20, 2015 - Inside FHA/VA Lending

Advocates Say New HECM Rule is A Disaster for Surviving Spouses

Consumer advocates and attorneys are urging the Department of Housing and Urban Development to delay the implementation of a new policy that purports to provide relief to surviving spouses of reverse-mortgage borrowers and to find solutions that are more effective. The group said the policy HUD announced in Mortgagee Letter 2015-03 on Jan. 29 is so restrictive that virtually all surviving non-borrowing spouses will get no relief. A letter to the agency, drafted by the National Consumer Law Center and signed by the Consumers Union, California Reinvestment Coalition, National Housing Law Project, Housing and Economic Rights Advocates and Institute on Aging denounced the new policy. They said most surviving spouses of deceased borrowers of Home Equity Conversion Mortgage loans will not be able to meet the policy’s stringent guidelines and will ...


March 20, 2015 - Inside FHA/VA Lending

HUD Reports Significant Progress In Distressed Loan Resolutions

Half of the loans in the Distressed Asset Stabilization Program have been resolved and a significant percentage of homeowners have avoided foreclosure, according to the latest DASP progress report from the Department of Housing and Urban Development. A review of the FHA single-family loan sale (SFLS) program found that, of the 48.6 percent that have been resolved, 43.5 percent have avoided foreclosure. The anticipated alternative for these borrowers – property conveyance, where their property becomes real estate-owned – would have led to foreclosure, the report said. Specifically, short sales and deeds-in-lieu of foreclosure were the disposition methods employed in foreclosure avoidance. In addition, 16.3 percent of resolved loans were re-performing as of Feb. 6, 2015. This reflects a 49.5 percent change in the re-performing rate reported in the ...


March 20, 2015 - Inside FHA/VA Lending

Large Coastal States Account for Bulk of FHA/VA Securitizations

Security issuances backed by FHA and VA loans totaled $267.6 billion in 2014, with several large states accounting for a significant share of FHA/VA originations. An estimated $158.1 billion of FHA-insured loans, including modified loans, were securitized last year, with purchase home loans comprising most of the transactions. Approximately $30.0 billion of FHA refinance loans were securitized as well. The FHA MBS had an average loan-to-value ratio of 92.3 percent and a debt-to-income ratio of 40.1 percent. The average FICO score was 672.3, which was indicative of first-time homebuyers and borrowers with slightly tainted credit. First-ranked California, Texas (#2) and Florida (#3) combined for a total of $48.0 billion, which represented 30.3 percent of FHA loans in Ginnie Mae mortgage-backed securities in 2014. Fourth-ranked New York reported a total of $6.7 billion while ... [ 2 charts]


March 6, 2015 - Inside FHA/VA Lending

HECM Guidance for Surviving Spouses Falls Short

Although the new rules for surviving spouses of borrowers with FHA-insured reverse mortgages address many of the issues raised by non-borrowing spouses, some questions remain unanswered, according to legal experts. The guidance in Mortgagee Letter 2015-03 provides insufficient answers to the issues it was meant to address, said Robert Couch, a partner with the Birmingham, AL, law firm of Bradley Arant Boult Cummings and former general counsel at the Department of Housing and Urban Development. Servicers should take note of those issues and seek further clarification, he said. Issued on Jan. 29, the guidance provides a way for lenders to proceed after a borrower with a Home Equity Conversion Mortgage loan dies and is survived by a non-borrowing spouse. It allows a lender to assign to HUD HECMs that are in default due to the death of the borrower, as long as certain ...


March 6, 2015 - Inside FHA/VA Lending

FHA 4Q Past-Due Rate Up; Premium Cut a Boon

The FHA bucked a decreasing delinquency-rate trend for all other types of loan by posting an increase in past-due loans during the last three months of 2014, according to the Mortgage Bankers Association’s latest national delinquency survey. On a seasonally adjusted basis, the overall delinquency rate fell 17 bps for all loan types to 5.68 percent, MBA data showed. Data compiled by the Inside Mortgage Finance Large Servicer Delinquency Index also showed a sizeable decline of 32.7 basis points in the fourth quarter from the prior quarter. The 24 servicers covered by the index had a delinquency rate of 6.34 percent in the fourth quarter, down from 7.59 percent in the same period the prior year. The IMF data are not seasonally adjusted. In contrast, the FHA delinquency rate rose to 9.73 percent in the fourth quarter, up 4 bps from the previous quarter, according to the MBA. On the other hand, loans with a ...


March 6, 2015 - Inside FHA/VA Lending

FHA Originations Down Slightly in January

FHA launched into the new year with a slight dip in forward mortgage loan originations in January from December with nonbanks leading the charge, according to Inside FHA Lending’s analysis of agency data. Lenders originated $11.8 billion in FHA-insured loans in January, a 0.7 percent decrease from December and down 3.5 percent from the prior year. FHA was charging a higher annual mortgage insurance premium of 1.35 percent for most of the month until a 50 basis point reduction, effective Jan. 26, lowered the MIP to 0.85 percent for a 30-year, fixed-rate mortgage with a five percent downpayment, and down to 0.80 percent for a similar FHA loan with more than five percent downpayment. The impact of the reduced MIP on February originations is still unclear, but most FHA lenders are expecting a boost in volume because many consumers ... [1 chart]


March 6, 2015 - Inside FHA/VA Lending

MIP Cut Could Delay Buildup of MMI Reserves

The FHA’s recent decision to reduce its annual mortgage insurance premium by 50 basis points pushes back the agency’s timeline for attaining the 2 percent capital reserve requirement by 2016 and limits private mortgage insurance companies’ ability to serve borrowers with higher loan-to-value ratios, warned MI industry representatives. Testifying before the House Financial Services Subcommittee on Housing and Insurance, Clifford Rossi, chief economist of Radian Group, said the FHA sought to justify the premium cut by saying it far exceeded the amounts necessary to cover new FHA-insured mortgages. “But this ignores the higher expected losses on earlier insured loans,” he said. Comparing lifetime premiums on current borrowers to their projected average lifetime losses is not a meaningful comparison for an insurance portfolio comprised of borrower risk profiles over book years subject to different economic scenarios, Rossi argued. Moreover, comparing premiums to average losses overlooks ...


March 6, 2015 - Inside FHA/VA Lending

DOJ, HUD-IG Continue Pursuit of Errant Lenders

The Department of Justice shows no sign of letting up in its pursuit of FHA lenders that originate improperly underwritten mortgages that later result in significant taxpayer losses. MetLife Home Loans, which is no longer in operation, became the newest addition to the government’s growing list of financial institutions that opted to settle allegations brought under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act, in connection with the origination and servicing of FHA-insured mortgages. Under the agreement, MetLife will pay $123.5 million to resolve allegations that its predecessor it “[turned] a blind eye to mortgage loans that did not meet basic FHA underwriting standards,” and stuck the FHA and taxpayers with the bill when the loans defaulted. In June 2013, MetLife Bank merged into MetLife Home Loans, a mortgage finance company ...


March 6, 2015 - Inside FHA/VA Lending

GNMA to Restate Financial Statements

Ginnie Mae will restate its FY 2014 and FY 2013 financial statements after federal auditors withheld their opinion for lack of sufficient information because of accounting anomalies and poor servicing oversight. An audit report issued by the Department of Housing and Urban Development Inspector General said the issues in the FY 2014 financial statement arose from servicing problems associated with a defaulted issuer’s portfolio, which Ginnie Mae is currently managing. The portfolio once belonged to the now-defunct Taylor, Bean & Whitaker, a Florida-based loan originator and a top Ginnie Mae issuer.The FHA suspended TBW in August 2009 due to its failure to submit a mandatory annual report and to disclose certain transactions that suggested fraud. Soon after, Ginnie Mae terminated TBW as an issuer/servicer and seized the company’s $25 billion Ginnie MBS portfolio. According to the IG report, ...


February 20, 2015 - Inside FHA/VA Lending

CFPB Takes Action Against Deceptive Advertising

The Consumer Financial Protection Bureau recently sued a reverse mortgage lender and issued consent decrees against two other mortgage companies for misleading consumers with false advertising about FHA-insured mortgage products. The CFPB filed suit against All Financial Services (AFS), a Maryland-based reverse mortgage lender, in the federal district court in Baltimore alleging that the lender disseminated misleading ads for Home Equity Conversion Mortgage loans between November 2011 and December 2012. In addition, AFS allegedly failed to maintain copies of the ads as required by the CFPB under its reverse mortgage regulations. According to court filings, the CFPB alleges that the lender/broker mailed out ads using materials and language that seemed to indicate that it was a federal entity or an affiliate of a government entity. All AFS ads appeared as if they were ...


February 20, 2015 - Inside FHA/VA Lending

Lenders Urged to Study Changes in New Handbook

FHA lenders should spend the next couple of months familiarizing their staff with the requirements in the FHA’s new Single Family Housing Policy Handbook to ensure proper implementation of the changes on June 15, 2015, according to compliance experts. The impending changes in the Single Family Handbook are complex and significant. Lenders will need proper legal guidance to navigate and understand hundreds of pages of consolidated housing policies and guidance, as well as substantive changes to FHA requirements, said K&L Gates experts in a recent analysis. The handbook is a consolidated, authoritative source of single-family housing policy and is meant as a one-stop resource for FHA lenders. It gathers and streamlines all FHA requirements, which are currently spread throughout various handbooks, mortgagee letters and other documents, making it easier for lenders to ...


February 20, 2015 - Inside FHA/VA Lending

Tech Issues Delay HECM Financial Analysis Rule

The FHA has delayed the effective date of new guidance that will require reverse mortgage lenders to perform a financial assessment of applicants for a Home Equity Conversion Mortgage. The FHA indicated that the change was necessary to allow vendors and the Department of Housing and Urban Development to align their respective software before the new system can be operational. Those familiar with the technology said delivering the required system enhancements should not take long. The FHA said a new effective date should be expected within 30 to 60 days of the original March 2 effective date. It will be announced in a new mortgagee letter, the agency added. The new guidance requires lenders to evaluate HECM borrowers’ willingness and capacity to meet their obligations and to comply with program requirements. “Financial assessment” means doing a much more ...


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