FHA Origination

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

November 21, 2014 - Inside FHA Lending

FHA Short Refi Production Declines in 2014

The number of underwater borrowers seeking to refinance their conventional mortgages into an FHA loan fell in fiscal 2014 from the previous year, according to an Inside FHA Lending analysis of agency data. The number of endorsements under the FHA Short Refinance program totaled 1,327 at the end of fiscal 2014, down from a record 1,662 in the prior year. Endorsements hit their peak in fiscal 2013. A total of 5,140 distressed conventional loans with a combined original mortgage amount of $784.9 million were refinanced under the program over the five-year period. In order to participate, borrowers must be current on their mortgage payments, have a credit score of 500 or greater and owe at least 15 percent more on the property than their home is actually worth. Lender participation is strictly voluntary. More importantly, the lender or investor must be ...


November 21, 2014 - Inside FHA Lending

Wells Fargo, DOJ Settlement Talks Hit Wall

Wells Fargo and the Department of Justice are reportedly at an impasse in their settlement talks in connection with a lawsuit accusing the bank of improper underwriting and false certification of certain FHA-insured loans. In an e-mailed statement to Inside FHA Lending, a bank spokesperson said Wells Fargo’s good faith effort to work with the federal government to resolve the complaint “has not yet resulted in a settlement.” Nonetheless, the bank “will move forward with presenting [its] case in support of [its] prudent and responsible FHA lending practices, which have produced high-quality FHA loans with delinquency rates that are half the industry average,” the spokesperson added. This week, citing an unidentified source, Bloomberg reported that lawyers for the government and the bank have told the presiding judge in the case that they ...


November 21, 2014 - Inside FHA Lending

HECM Portfolio Down to Negative in FY 2014

The economic value of the FHA’s Home Equity Conversion Mortgage legacy portfolio fell to negative $0.9 billion in fiscal 2014 due mainly to volatility in long-term house prices and interest rates, according to the latest independent actuarial report on the health of the Mutual Mortgage Insurance Fund. The latest result was a significant improvement from FY 2012, when the fund stood at negative $2.8 billion. In fiscal 2013, the HECM portfolio’s economic value of positive $6.5 billion appeared to be a whopping change from the previous year but that amount reflected a $4.6 billion cash infusion from the forward program and from the $1.7 billion mandatory appropriation, the report clarified. The report also showed a corresponding decline in the HECM capital ratio to negative 1.20 percent. Actuarial projections for fiscal 2015 place the HECM portfolio’s economic value at negative $1.1 billion. The fund’s capital resources for ...


November 21, 2014 - Inside FHA Lending

MMIF Value, Capital Ratio Turns Positive

FHA Mutual Mortgage Insurance Fund ended fiscal 2014 in the black but was still far short of its statutory reserve requirement, prompting critics in Congress to renew their cries for FHA reform. An independent actuarial report sent to Congress this week showed that the MMI Fund now stands at $4.8 billion after a gain of nearly $6 billion over the last year. For the first time since 2009, the fund’s capital ratio also crossed into positive territory at 0.41 percent, up 52 basis points from the negative 0.11 percent posted in fiscal 2013. Overall, the economic value of the fund has risen by $21 billion over the last two years because of the aggressive steps the agency took to stabilize and strengthen the fund, the report said. Policy changes led to improved underwriting for single-family mortgages, increased mortgage insurance premiums, stronger loss mitigation policies and higher recoveries, it added. In addition, with ...


November 7, 2014 - Inside FHA Lending

Around the Industry

Radian Reports Strong 3Q14 Results. Radian Guaranty’s new mortgage insurance written increased to $11.2 billion in the third quarter compared to $9.3 billion in the previous quarter, and down from $13.7 billion from the same period last year, according to company financial results for 3Q14. Overall, the private mortgage insurer reported net income of $153.6 million for the quarter, which executives attributed to strong credit performance, a growing MI book of business and solid performance from Clayton Holdings. Radian recently acquired the due-diligence firm for $305 million. Total primary MI in force was $169.2 billion as of Sept. 30, 2014, up from $165.0 billion the prior quarter, while persistency was 83.5 percent at the end of the third quarter. The total number of primary delinquent loans was down 4 percent from the second quarter and down by ...


November 7, 2014 - Inside FHA Lending

FHA Single-Family Production Drops in August

FHA single-family mortgage originations fell slightly in August from July as the agency’s home-purchase volume continued to falter, agency data showed. In August, the latest month for which FHA origination data are available, forward-loan originations totaled $12.6 billion, down 3.2 percent from the prior month and down 25.1 percent from the same period last year. Purchase mortgages made up 81.1 percent of all FHA-insured single-family loans originated during August, while refinances accounted for the remainder. Fixed-rate mortgages were the product of choice, as they have been in previous periods. Quicken Loans relied more on refis than on purchase lending (38 percent of new loans) as it closed the month with $534.8 million in new production, down 8.5 percent from July. Nonetheless, it was good enough for a 4.2 percent FHA market share. Second-place Wells Fargo’s total production for the month was ... [1 chart]


November 7, 2014 - Inside FHA Lending

NAR Urges FHA to Tighten Short Sale Oversight

The real estate industry is urging the FHA to tighten up its pre-foreclosure sale process and be more vigilant before referring loans to the single-fThe real estate industry is urging the FHA to tighten up its pre-foreclosure sale process and be more amily loan sales program (SFLS). Commenting on the proposed section on servicing of the FHA Single Family Policy handbook, the National Association of Realtors expressed concern that the FHA is auctioning large pools of mortgages without considering the investor’s ability to achieve neighborhood stabilization goals such as homeownership preservation and affordable housing. The first step for FHA to improve servicing and pre-foreclosure efforts is to ensure mortgage servicers’ full compliance with FHA loss-mitigation requirements before referring loans to the SFLS, the NAR suggested. In addition, the FHA should ...


November 7, 2014 - Inside FHA Lending

Reinstating 97s Could Delay Recovery for MMIF

Reinstating the government-sponsored enterprises’ conventional 97 percent loan-to-value mortgage programs would benefit first-time homebuyers and borrowers with little or no cash reserves for a downpayment but adversely affect the FHA Mutual Mortgage Insurance Fund, according to analysts. If limited to first-time homebuyers, a conventional 97 LTV loan would offer some new homeowners better home loan financing than FHA and provide greater access to mortgage credit, said analysts with Bank of America Merrill Lynch. For years, Fannie Mae offered conventional 97 LTV loans through its MyCommmunityMortgage to help first-time homebuyers purchase a home with only a 3 percent downpayment. It was a better alternative to FHA’s main product, which required a 3.5 percent downpayment. The Fannie product also had less ...


November 7, 2014 - Inside FHA Lending

HUD Rejects CFPB’s QM Cure Provision

The Department of Housing and Urban Development will not take on the new points-and-fees cure provision for qualified mortgages adopted by the Consumer Financial Protection Bureau. The agency is concerned that lenders might inadvertently violate the FHA’s statutory 3.5 percent downpayment requirement. HUD adopted other changes in the CFPB’s revised final rule on ability to repay and qualified mortgages (ATR/QM) to maintain consistency but saw no need for any further ability to cure points-and-fees errors. Reimbursement of any excess points and fees to the borrower could take away from the mandatory 3.5 percent downpayment and render the loan ineligible for FHA insurance, the agency explained in a notice published in the Nov. 3 Federal Register. HUD said it would provide lender guidance under its own QM rule on ...


October 24, 2014 - Inside FHA Lending

FHA to Modify CHUMS, Develop New System

The FHA has announced plans to modify the Computerized Homes Underwriting Management System (CHUMS) while work continues on a new, improved replacement system. CHUMS provides support for automated processing, analysis and screening of appraisal documents. Specifically, it is used on first-time homebuyer loan applications, Home Equity Conversion Mortgages, Section 203(k) property rehabilitation loans, VA-certified FHA loans and other FHA-approved programs. The system is also used to assist in evaluations of borrowers’ mortgage credit and as a complement to FHA’s credit assessment tool, TOTAL Scorecard. A new Loan Application Management System (LAMS) is in development to replace CHUMS completely in about five years. In its initial release, LAMS will enable the Department of Housing and Urban Development to start collecting and incorporating ...


October 24, 2014 - Inside FHA Lending

State FHA Originations Up, Golden State Leads

Total originations of FHA forward and home-equity conversion mortgages across the U.S. and in the territories increased from the first to the second quarter, with California accounting for the lion’s share of all FHA loans produced by state. Production of FHA-insured forwards, including jumbo loans, and HECM loans during the first half of 2014 totaled $68.3 billion, a whopping 49.0 percent drop from volume reported over the same period last year. On the other hand, total originations in the 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands rose 11.5 percent quarter-over-quarter. Originations totaled $36.1 billion in the second quarter. Forward mortgages accounted for $61.1 billion of new FHA-insured loans originated during the first six months while HECMs comprised $7.2 billion of loans produced over ... [ 1 Chart ]


October 24, 2014 - Inside FHA Lending

FHA Notifying Lenders of Possible MRB Action

The FHA warned it would soon be sending notices to lenders who are overdue in completing their annual recertification packages, a rule violation that could land them before the Mortgagee Review Board for disciplinary action. Lenders who were unable to submit their recertification packages containing the required financial reports, annual recertification statements and the renewal fee payment will be receiving notices of deficiency from the FHA. FHA extended the filing deadline to June 27, 30 days after the deployment of the new Lender Electronic Assessment Portal (LEAP) system used in the lender recertification process. Traditionally, lenders were required to access both FHA Connection and Lender Assessment Sub-System (LASS) to complete the annual recertification process. LEAP will now enable lenders to complete all ...


October 24, 2014 - Inside FHA Lending

HUD to Let Property-Flipping Waiver Lapse

Buyers, sellers and real estate agents have until the end of 2014 to take advantage of the property-flipping waiver that the FHA had put in place in 2010 to increase the availability of affordable homes for first-time homebuyers and other purchasers. After Dec. 31, the Department of Housing and Urban Development will let the waiver lapse subjecting investors again to property-flipping prohibitions. Lenders say the waiver program worked well in underserved and hard-hit areas but HUD believes the program’s initial objectives have been attained and that prudence and vigilance are again called for to prevent abuses and potential losses. As a rule, the FHA prohibits “property flipping” in which a recently acquired property undergoes a minor makeover, is appraised with an artificially high value and is resold for a considerable profit. Most property flipping occurs within a matter of days, which prompted HUD to ...


October 24, 2014 - Inside FHA Lending

FHA Silent on MIP, Will Review Pricing Further

A top-ranking housing official soon to become acting FHA commissioner assured lenders that the agency is reviewing the pricing of its mortgage insurance, but made no promises during the annual convention of the Mortgage Bankers Association held this week in Las Vegas. Biniam Gebre, now the deputy assistant secretary for housing at the Department of Housing and Urban Development, said the agency “has been reviewing our premium levels on a regular basis.” He added, “I’m sure we will come back to it over the next couple months and next year.” The pricing of FHA mortgage insurance premiums “is a very important question,” Gebre said. Many in the mortgage industry have been focused on the availability of credit, but the affordability of credit is important as well, he added. “We believe we reached a tipping point when we raised premiums in response to ...


October 24, 2014 - Inside FHA Lending

GNMA Raises Net Worth, Liquidity Tests

Ginnie Mae this week provided new details to the long-anticipated plan for increased issuer net worth and liquidity and a new performance scoring method for issuer activity – changes that could adversely affect small issuers and portfolio servicers. In remarks at the Mortgage Bankers Association’s annual convention in Las Vegas, Ginnie Mae President Ted Tozer said the changes are part of a larger effort to ensure the continuing flexibility and availability of the agency’s mortgage-backed securities program to as many entities as possible. New types of issuers and counterparties have entered the agency-backed MBS market in the wake of the financial crisis, which called for adjustments and tailored approaches to the evolving housing finance market, Tozer noted. Tozer said both policy changes and staff expertise will ensure the success of ...


October 10, 2014 - Inside FHA Lending

Around the Industry

FHA to Extend Short Refi Program. The FHA has announced its intent to extend its Short Refinance Program for borrowers in negative equity positions. A mortgagee letter will be issued soon to announce the extension. Feedback Period extended for Draft Servicing Section of Proposed Single Family Handbook. The FHA is extending the comment period for the draft servicing section of the Single Family Housing Policy Handbook through Nov. 14, 2014 to allow stakeholders additional time to study and comment on the proposed section. The original deadline date was Oct. 17. CFPB Updates Reverse Mortgage Guide. The Consumer Financial Protection Bureau recently updated its reverse mortgage guide on its website to account for recent changes made by the Department of Housing and Urban Development to its Home Equity Conversion Mortgage program. The updated guide highlights new limits to ...


October 10, 2014 - Inside FHA Lending

Ginnie Mae MBS Issuance Increases in 3Q14

Ginnie Mae issuance for the first nine months of 2014 totaled $207.5 billion as government-backed purchase-mortgage activity picked up in the third quarter, according to an analysis of agency data. New issuances rose 19.8 percent from the second quarter. FHA loans accounted for $116.9 billion of new Ginnie Mae issuances while VA and the Rural Housing Development funneled $75.9 billion and $14.2 billion, respectively, of new loans into Ginnie Mae pools. Mortgage securities backed by home-equity conversion mortgages are not included. Purchase mortgages totaling $140.6 billion comprised the bulk of new issuances over the nine-month period while the share of refinances totaled $49.8 billion. Modified loans accounted for $17.1 billion. Most of the FHA and VA loans originated during the first nine months came through the ... [ 2 charts ]


October 10, 2014 - Inside FHA Lending

Millennial Agenda Underscores FHA’s ‘Blueprint’

President Obama this week released his agenda for creating economic opportunity for millennials, including greater access to mortgage credit through FHA. While the economy has recovered and there has been some improvement in the housing market, millennials are on a much slower pace toward homeownership than previous generations, the president said. Many are in rental housing, ready to become homeowners but are locked out by the tough, restrictive lending environment, he added. Millennials – identified as those born between 1982 and 2004, also known as Generation Y – are finding it harder to purchase homes because of lender overlays, high mortgage insurance premiums and high downpayment requirements. It also has been difficult for anyone with a credit score below 680 to obtain a purchase-mortgage loan. In his agenda, Obama expressed concern over the ...


October 10, 2014 - Inside FHA Lending

FHA Details Improvements to LEAP 3.0 System

Like all new automated systems, FHA’s Lender Electronic Assessment Portal (LEAP 3.0) was not without technical glitches when the agency rolled it out back in May. Users immediately reported difficulties in certain functions, such as adding new branches, making changes to existing branches and changing cash flow accounts. The FHA ever since has been working to iron out the kinks to allow lenders to submit their annual recertification packages with ease. So far, certain fixes have been implemented allowing lenders to add, edit and delete branch and regional managers, delete attachments uploaded to LEAP and properly update cash flow accounts in the database. The FHA also changed the way lenders edit their principal affiliations in LEAP. In addition, newly approved lenders now have access to the new system. Furthermore, the FHA expanded to 250 the maximum allowable characters lenders may use when ...


October 10, 2014 - Inside FHA Lending

New Regulations Cause HECM Volume to Drop

FHA reverse mortgage volume fell in the second quarter as well as during the first six months of 2014 as regulatory changes reduced profitability and increased the cost of originating the government-backed product, according to Inside FHA Lending’s analysis of agency data. Home equity conversion mortgage volume declined 19.9 percent quarter-over-quarter and dropped 9.0 percent during the first half of the year compared to the same period last year. HECM lenders reported $7.2 billion in total originations in the first half, with purchase loans accounting for 93.6 percent. Fixed-rate HECMs comprised only 22.2 percent of total volume as most borrowers turned to adjustable-rate HECMs for their reverse-mortgage needs. The top five HECM lenders – American Advisors Group, Reverse Mortgage Solutions, One Reverse Mortgage, Liberty Home Equity Solutions and Proficio Mortgage Ventures – accounted for ... [1 chart ]


October 10, 2014 - Inside FHA Lending

OIG Calls for HUD Action Versus Errant Lenders

The Department of Housing and Urban Development’s Inspector General has recommended that HUD require an approved FHA lender to reimburse the FHA $1.6 million for improper claims on 11 preforeclosure sales, including lender and borrower incentives. An IG audit of EverBank of Jacksonville, FL, attributed FHA’s losses to the bank’s failure to determine whether or not defaulted borrowers qualified for the agency’s preforeclosure sale program. The IG looked into the bank’s short sale activities because it had the highest preforeclosure sale claims in Florida. More than 50 percent of EverBank’s FHA claims were from short sales, with more than $12.9 million paid from 2011 through 2013, the audit found. In response, EverBank questioned the accuracy of the IG report. The bank maintained that certain allegations do not constitute violations of ...


October 10, 2014 - Inside FHA Lending

HUD-OIG Reports $582M in Recoveries for MMIF

The Department of Housing and Urban Development’s Office of the Inspector General has announced a total of $581.8 million in recoveries in September to strengthen and stabilize the ailing Mutual Mortgage Insurance Fund. The recovered amounts are part of larger settlements between the federal government, U.S. Bank and Bank of America to resolve allegations of false claims and mortgage fraud in relation to FHA-insured mortgages. Both banks were investigated separately by the HUD-OIG, Department of Justice and U.S. attorneys’ offices in Michigan, Ohio and New York in connection with their lending and underwriting practices and quality-control programs for FHA-insured loans. On June 30, U.S. Bank entered into a settlement agreement to pay $200 million, of which nearly $144.2 million went to the MMI Fund. The bank admitted to poor underwriting, flawed quality control and ...


October 10, 2014 - Inside FHA Lending

Loan Reviews Continue to Find Defects

Missing or incorrect files was the most common defect found in 49 percent of the loans, of which 29 percent were deemed initially unacceptable. Flawed credit or underwriting came in second at 26 percent, of which 67 percent were rated unacceptable. Program eligibility and operational deficiencies each had a 9 percent share while defective appraisals were common in 7 percent of all reviewed loans. Properly mitigated, the percentage of initially unacceptable loans usually drops to about 7 percent. The FHA tends to blames lenders for the defects but the bottom line is mistakes cut both ways, according to compliance experts. “Lenders make mistakes that can easily be corrected,” said one compliance consultant. “FHA also can be guilty of causing a mistake.” For example, poor communication and lack of clarity caused lenders to check a yes/no box to confirm whether or not they ...


Poll

What is it going to take to convince lenders to loosen the credit box (i.e., remove underwriting overlays)?

The recent rep and warranty changes announced by the Federal Housing Finance Agency should go a long way in protecting lenders from future buybacks and help expand mortgage credit.
There won’t be any significant elimination of underwriting overlays until the government stops seeking huge mortgage-related penalties and settlements from lenders.
There shouldn’t be any expansion of the mortgage credit box since looser underwriting is what caused the recent mortgage crisis.

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