Mortgage Banking Profitability

Browse articles from all of our Newsletters related to Mortgage Banking Profitability.

August 22, 2014 - Inside The GSEs

GSE Shareholder Group Calls on FHFA to End Conservatorship

The head of a group of disenfranchised Fannie Mae and Freddie Mac investors has called on Federal Housing Finance Agency Director Mel Watt to end conservatorship of the two GSEs and undo what stakeholders consider the illegal government “net worth sweep” of Fannie and Freddie profits. Tim Pagliara, executive director of Investors Unite, followed Watt to Atlanta to seek a meeting with and to put pressure on the director to acknowledge the concerns of GSE shareholders.


August 22, 2014 - Inside Mortgage Trends

FASB Clarifies TDR Guidance for FHA, VA Loans

The Financial Accounting Standards Board has announced changes to the way it accounts for government-backed mortgage loans upon foreclosure. The change, which is being made through FASB’s rule, “Receivables – Troubled Debt Restructurings by Creditors,” is aimed at reducing diversity in the accounting treatment of FHA and VA loans that have been subject to foreclosure, according to FASB’s Emerging Issues Task Force. The EITF ...


August 22, 2014 - Inside Mortgage Trends

Mortgage M&A is Making Tiny Bubbles

Mid-sized nonbanks the likes of Prospect Mortgage and Guaranteed Rate reportedly have teams of employees whose job it is to look at company acquisitions, but whether any deals of size get completed by year end is another matter. According to interviews conducted by Inside Mortgage Trends, investment banking firms appear to be quite busy with buy- and sell-side clients. Many advisors believe smaller transactions could be plentiful in the second half of the year ...


August 22, 2014 - Inside Mortgage Trends

Real Estate Agents Strongly Prefer Local Lenders

Real estate agents put an emphasis on local lenders over call center lenders, according to qualitative survey results from the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Real estate agents indicated that delayed closings are much more common when a buyer is obtaining a mortgage from a call center lender than from a lender with a local office. “Agents crave information and certainty of closing,” said Tom Popik ...


August 22, 2014 - Inside Mortgage Trends

2Q14 Profits Climb on Both Sides of Ledger

Mortgage banking income rose significantly in the second quarter of 2014 for both production and servicing activities, according to a new Inside Mortgage Trends analysis of earnings reports from 11 major lenders. The group, which includes most of the top publicly owned companies in the mortgage industry, reported a combined $1.371 billion in production-related income during the second quarter. That was up 57.0 percent from ... [Includes one data chart]


August 22, 2014 - Inside Mortgage Trends

Banks Report Solid Gains in Mortgage Banking Income During Second Quarter

A new Inside Mortgage Trends analysis of bank call-report data confirms that mortgage banking profits strengthened significantly during the second quarter of 2014. Banks reported a combined $4.910 billion in mortgage banking income for the second quarter of this year, a 45.5 percent increase over the first three months of the year. Earnings releases from 21 publicly traded banks and thrifts showed a 31.5 percent increase in ... [Includes one data chart]


August 15, 2014 - Inside FHA Lending

Reverse Mortgages Reportable Under HMDA

Reverse mortgages would be included in Home Mortgage Disclosure Act reports under a proposed rule published recently by the Consumer Financial Protection Bureau. The proposed rule would expand the definition of a “covered loan” under HMDA to include reverse mortgages and home-equity lines of credit (HELOCs), which include reverse mortgages structured as open-end HELOCs. Currently, HMDA regulations do not require reporting of HELOCs, although lenders may do so if they choose. Currently, financial institutions only have to report information on a closed-end reverse mortgage if the transaction involves a home purchase, home improvement or refinancing. Among other things, the CFPB has proposed to require that all reverse mortgages and HELOCs be identified by loan type to distinguish them from other categories of ...


August 15, 2014 - Inside FHA Lending

GNMA’s Conversion Plan: Devil is in the Details

Two industry trade groups expressed support for consolidating Ginnie Mae’s mortgage-backed securities program and creating a new MBS but they are at loggerheads on some of the details. Commenting on the Ginnie Mae proposal, the Securities Industry and Financial Markets Association (SIFMA) and the Mortgage Bankers Association (MBA) said the disagreements are mostly on how to resolve issues related to winding down the Ginnie Mae I MBS program and providing a conversion option for existing securities. “It is clear that further discussion is warranted, and direct engagement with key stakeholders should be beneficial,” the trade groups suggested. Ginnie Mae has received considerable support from a variety of industry players for its “straw man” proposal to shift to a single MBS program based on the existing Ginnie II. The program now accounts for more than 90 percent of all ...


August 15, 2014 - Inside FHA Lending

Private MIs, VA Overtake Faltering FHA Program

Weighed down by high premium costs and lender overlays, FHA lost more primary market share to private mortgage insurers and the Department of Veterans Affairs during the second quarter of 2014. Although June’s FHA endorsement numbers have not yet been released, the trend seen in April through May, along with Ginnie Mae securitization data, suggest that FHA business was up a modest 11.5 percent from the first quarter. But that increase provides no comfort to FHA, which saw its market share go down to 33.7 percent, a six-year low. From April to May, FHA forward endorsements rose by 2.4 percent to $10.61 billion. On a year-over-year basis, however, endorsements were down from $21.9 billion in May 2013, according to an Inside FHA Lending analysis of agency data. On the other hand, private MI companies reported a total of $44.19 billion of new insurance written (NIW) during the ... [2 charts]


August 15, 2014 - Inside FHA Lending

More Indemnification Demands Anticipated

The False Claims Act (FCA) and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) not only have become strong enforcement tools in the fight against FHA mortgage fraud but also an efficient means of recovering taxpayer losses. Having used both federal statutes effectively to wrangle huge settlements from large banks, federal prosecutors now have their eyes set on mid-level banks, according to compliance experts during a recent webinar hosted by Inside Mortgage Finance Publications. “Because these FCA [and FIRREA] lawsuits have been a cash cow for the Department of Justice and the Inspector General of the Department of Housing and Urban Development, I think these agencies will target mid-level banks next,” said ...


August 15, 2014 - Inside FHA Lending

IG Audit Finds Flaws in Indemnification Recovery

The Department of Housing and Urban Development failed to bill lenders for 486 loans with enforceable indemnification agreements that created losses for the FHA, according to the HUD Inspector General. The loans were originated between 2004 and 2014 and were either in the Accelerated Claims Disposition program or the Claims Without Conveyance of Title program, or they went into default before an indemnification agreement expired. Due to procedural errors and apparent lack of oversight, HUD failed to recover $37.1 million for 486 loans that had enforceable indemnification agreements. The unbilled loans represented 8.0 percent of total activity in the programs during that period. In addition, HUD did not ensure that indemnification agreements were extended to 64 of 2,078 loans that were streamline financed. As a result, HUD incurred losses of ...


August 15, 2014 - Inside FHA Lending

FHA Chief Galante to Resign in the Fall

FHA Commissioner Carol Galante has announced plans to step down from her current post, leaving behind a Mutual Mortgage Insurance Fund that appears well on its way to recovery and a slumping FHA business. Industry response to Galante’s Aug. 12 announcement was mixed. Some stakeholders applauded her toughness and resolve in steering FHA through hard times, while others criticized her for policies that made it more difficult and costly for first-time homebuyers to obtain an FHA-insured mortgage loan. Galante’s nearly three-and-a-half year stint as FHA commissioner was highlighted by her efforts to stabilize the FHA’s ailing Mutual Mortgage Insurance Fund, reduce losses and improve lender oversight. She achieved these goals by creating a comprehensive risk-management structure at FHA, revamping FHA pricing and credit policies, and ...


August 14, 2014 - Inside Mortgage Finance

Fannie, Freddie Post $5.0 Billion Profit in 2Q14 As GSEs ‘Substantially Achieve’ Repurchase Goals

Fannie Mae and Freddie Mac reported a combined $5.0 billion in net income during the second quarter of 2014, down 46.2 percent from the first three months of the year as the two government-sponsored enterprises reported a significant downshift in repurchase activity. Through the first six months of the year, GSE profits were down nearly 81.7 percent from the first half of 2013. But Fannie and Freddie reaped huge profits in 2013 through hefty legal settlements, the capture of deferred tax assets and seller buybacks. “When you look back on 2013, our goal was...


August 14, 2014 - Inside Mortgage Finance

Private MI Market Share Reached Post-Crash High In 2Q14; Industry Profitability Continues Climbing

Private mortgage insurance companies continued their roll during the second quarter of 2014, capturing a larger share of the primary MI market away from the faltering FHA program, according to a new Inside Mortgage Finance analysis. Private MIs reported a total of $44.19 billion of new primary mortgage insurance written during the second quarter, a 38.0 percent jump in new business from the first three months of 2014. Private MIs accounted for 41.4 percent of total primary MI new business, the industry’s highest share of the market since the second quarter of 2008, when the housing market landslide was gaining speed. The Veterans Administration’s home loan guaranty program is also building...[Includes three data charts]


August 8, 2014 - Inside The GSEs

Fannie, Freddie Post ‘Normal’ 2Q Profit Minus One-Time Boosters

Fannie Mae and Freddie Mac reported a combined $5.0 billion in net income during the second quarter of 2014, down 46.2 percent from the first three months of the year. Compared to the first half of 2013, GSE profits were down nearly 82 percent, though both companies posted strong earnings during the three-month period ending June 30, 2014. Both GSEs are coming off a banner 2013 when each company’s earnings were super-charged by several one-time items – including the capture of each company’s deferred tax allowance, and numerous non-agency lawsuit settlements.


August 8, 2014 - Inside The GSEs

Experts: Buybacks Will Continue As GSE Regulators ‘Emboldened’

Mortgage buybacks and indemnifications may be off their peak in terms of volume, but they are widely expected to continue for the foreseeable future, especially for Fannie Mae and Freddie Mac loans, according to experts during a webinar sponsored by Inside Mortgage Finance Publications last week. Amanda Raines, a partner in the Washington, DC, office of the BuckleySandler law firm, told webinar participants that more buybacks are definitely on the way. On the Fannie /Freddie front, the attorney pointed out that despite recent settlements, the Federal Housing Finance Agency’s Office of Inspector General encouraged the continued pursuit of buyback claims and repurchase rights.


August 8, 2014 - Inside The GSEs

Freddie’s Sale of Distressed SF Loans One-Off or More to Come?

In keeping with its strategy to reduce its holdings of less-liquid assets, Freddie Mac announced last week the GSE’s first sale of what it calls “deeply” delinquent loans. It remains to be seen if the sale of the $659 million package of distressed single-family mortgages from its portfolio is a one-off or the first of more to come. Asked whether more non-performing loan auctions might be ahead, a company spokesman declined to comment.


August 8, 2014 - Inside Mortgage Trends

Many Believe in Home Purchase; Many Unprepared

An overwhelming majority of prospective homebuyers believe purchasing a home is a good investment decision, but many of them “haven’t done the math” and feel overwhelmed by the amount of information that have to contend with, according to a new Discover Home Loans/Versta Research poll. Five years after the Great Recession, most participants generally had positive views and expectations about their upcoming participation in the housing and mortgage markets ...


August 8, 2014 - Inside Mortgage Trends

House-Price Spikes Hurt First-Time Buyers

The first-time homebuyer share of purchase-money mortgages differs a great deal across the states, and house price growth may have something to do with it, according to a new study by the Federal Housing Finance Agency. FHFA researchers looked at first-time buyer activity from 1996 to 2013 and how it is affected by nationwide house-price trends. They found a symbiotic relationship that may or may not be beneficial to first-time homebuyers, depending on ...


August 8, 2014 - Inside Mortgage Trends

Demand, Efficiencies Set to Help Profit Margins

Lender profit margins appear set to stop declining, according to a new survey by Fannie Mae of senior executives at 181 institutions. Industry participants suggest that increased demand from borrowers along with operational efficiencies will help steady profit margins. Doug Duncan, senior vice president and chief economist at Fannie, said the significant decline in volume in recent quarters put pressure on profit margins. “That would be expected to ease somewhat ...


August 8, 2014 - Inside Mortgage Trends

GSE Repurchase Activity Slowed in 1Q14

Fannie Mae and Freddie Mac continued to whittle down their caseload of unresolved mortgage repurchase requests during the first quarter of 2014, according to a new Inside Mortgage Trends analysis of disclosures by the government-sponsored enterprises. Fannie and Freddie had $3.23 billion of pending and disputed buyback demands outstanding at the end of March, down 30.3 percent from the previous quarter. Although both GSEs ... [Includes two data charts]


August 8, 2014 - Inside Mortgage Trends

Nonbank Lenders Show Mixed Results, Track Industry’s 2Q Earnings Rebound

Nonbank mortgage companies reported mixed results in the second quarter of 2014, according to a new analysis by Inside Mortgage Trends. A group of seven publicly traded nonbank lenders more than doubled their income compared with the first quarter, mostly because of an outsized gain at Nationstar Mortgage and lower losses at PHH Mortgage. Midway through the year, the group’s mortgage banking income was down 64.7 percent from ... [Includes one data chart]


August 8, 2014 - Inside MBS & ABS

Trustees Ask Court to Clear $4.5 Billion Settlement With Chase, Goldman Sachs Faces $1.2 Billion Hit

Mortgage trustees are still awaiting state court approval of a $4.5 billion settlement with JPMorgan Chase in relation to faulty residential MBS issued by the bank and the now-defunct Bear Stearns between 2005 and 2008. If approved by the New York State Supreme Court, the agreement would resolve representation and warranty claims as well as servicing claims related to loans in 330 mortgage securitization trusts, as well as claims over document delivery. In addition, the bank agreed to change its servicing procedures with respect to mortgage loans in the trusts. The proposed settlement does not resolve...


August 7, 2014 - Inside Mortgage Finance

FHA Indemnifications Still an Issue, But Lenders Do Have Options for Defense, Ex-HUD Official Reminds

As Fannie Mae and Freddie Mac buyback demands have tapered off, lenders continue to face aggressive government efforts to indemnify the FHA for losses, but they do have options available to them that can work in their favor. During a webinar sponsored last week by Inside Mortgage Finance, Amanda Raines, a partner with the BuckleySandler law firm in Washington, DC, emphasized that FHA indemnification demands have continued this year, with an aggressive use of the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act. That has led...


August 1, 2014 - Inside FHA Lending

Around the Industry

Comment Period for Single Family Handbook Extended. The FHA has extended from July 29 to Aug. 15, 2014 the deadline for submitting feedback on certain sections within the draft Single Family Handbook. Comments are being sought on sections “Doing Business with FHA – FHA Lenders and Mortgagees” and “Quality Control, Oversight and compliance." Both sections’ contents, as well as supporting information, are posted for review and feedback on the SF Drafting Table in the FHA website. Each section’s web page also contains highlights of changes, frequently asked questions (FAQs) and a feedback response worksheet. Julian Castro as New HUD Secretary. Julian Castro was sworn in as the 16th Secretary of the Department of Housing and Urban Development on July 28. He replaces Shaun Donovan, who is now director of the ...


August 1, 2014 - Inside FHA Lending

FHA Delinquency Rates Fall Midway Through 2014

The delinquency rate for residential FHA-insured mortgages fell at the halfway mark of 2014 from the end of the fourth quarter last year, a result of improved overall loan performance, strong credit standards and an improving, albeit slowly, economy, an Inside FHA Lending analysis of agency data suggests. Although the number of FHA lenders included in the analysis has doubled since year-end 2013, delinquency rates in the 30-60 days and 90-day plus buckets appear to be trending downward. As of June 30, FHA delinquencies across the board were down to 13.3 percent from 15.2 percent as of Dec. 30, 2013. The seriously delinquent rate – the percentage of loans that are 90 days or more past due – has dropped to 7.14 percent from 8.08 percent over the same period. The delinquency rate of FHA loans that are at least one payment past due also fell to ... [1 chart]


August 1, 2014 - Inside FHA Lending

FHA Lower Loan Limits Hit Some Markets

The FHA’s widespread reduction in loan limits for 2014 has had a mixed impact on production levels so far this year, according to a new Inside FHA Lending analysis of FHA endorsement data. Through the first four months of 2014, FHA endorsements were down 55.6 percent from the same period last year. But in counties where loan limits were lowered, FHA production was down 57.5 percent from early 2013. In the relatively few counties where loan limits actually increased in 2014, FHA endorsements were also down from a year ago, but by a less severe 47.4 percent. The biggest decline in endorsements has been in refinances, especially FHA-to-FHA refinances. In areas with lowered loan limits, production of these loans has plummeted 87.0 percent, and even areas with raised loan limits saw an 81.1 percent drop in streamlined refis. Purchase-mortgage originations have taken less of a ...


August 1, 2014 - Inside FHA Lending

MRB Penalizes 46 Lenders, 25 Lose FHA Approval

Twenty-five lenders either settled or lost their FHA approval for a full year because they failed to complete their annual recertification requirement, while 21 others were subjected to enforcement actions because their origination or servicing files did not meet FHA requirements. Results from cases heard by the Department of Housing and Urban Development’s Mortgagee Review Board in 2012 and 2013 showed that the board used all enforcement tools at its disposal. Specifically, the board took the following actions: Assessed money penalties of more than $1.5 million; imposed fees, refunds and principal buydowns totaling $1.2 million; required indemnification on 163 FHA-insured loans; withdrew FHA approval of four lenders; suspended the FHA approval of one lender; and placed one lender’s approval on probation. Violations were related to ...


August 1, 2014 - Inside FHA Lending

Lenders Reassess FHA Business, Exposures

For FHA lenders, the idea of a large lender exiting the FHA market and creating opportunities for market share has been overshadowed by concerns regarding liability in the wake of recent fraud-related settlements between lenders and the federal government. Compliance experts said many of their FHA clients are quietly reassessing their FHA business after JPMorgan CEO Jamie Dimon, during a recent earnings call, spoke out loudly against the government’s stringent enforcement actions aimed at recovering “wrongfully” claimed funds. Lenders fear that FHA enforcement actions have taken a turn for the worse in recent years, and that even errors that have nothing to do with loan default are construed as fraud by government prosecutors, resulting in billion-dollar penalties against FHA lenders. Seven major banks, so far, have paid ...


August 1, 2014 - Inside MBS & ABS

Buybacks, Indemnifications Will Continue, But There Are Many Coping Strategies Available, Experts Say

Mortgage buybacks and indemnifications may be off their peak in terms of volume, but they are widely expected to continue for the foreseeable future, industry experts said this week. But the good news for the industry is that there are a variety of defenses and coping strategies available, depending on the particulars of a given situation. Amanda Raines, a partner in the Washington, DC, office of the BuckleySandler law firm, told participants of an Inside Mortgage Finance webinar this week that more buybacks are definitely on the way. “The Department of Justice is still making financial fraud a priority,” she said. Raines noted...


July 31, 2014 - Inside Mortgage Finance

GSE Buyback Activity Continued to Decline in 1Q14; $3.2 Billion Still Unresolved in March

Mortgage lenders repurchased just $522.5 million of home loans from Fannie Mae and Freddie Mac during the first quarter of 2014, according to disclosures filed by the two government-sponsored enterprises with the Securities and Exchange Commission. That was by far the lowest quarterly repurchase volume reported by the GSEs, according to an analysis by Inside Mortgage Trends, an affiliated newsletter. Because Fannie and Freddie this year stopped providing detailed repurchase activity data in their quarterly earnings, the SEC disclosures are the only comprehensive source of GSE buyback activity. First-quarter repurchase volume was...[Includes one data chart]


July 25, 2014 - Inside Mortgage Trends

Servicing Profits Held Up Better in 1Q14

Mortgage lenders generally earned more on their servicing operations than on production activity during the first quarter of 2014, according to an Inside Mortgage Trends analysis of earnings reports from firms that disclose such information. The 10 companies in the sample group reported a combined $850.4 million in production-related income during the first three months of 2014, compared with $1.33 billion in servicing income ... [Includes one data chart]


July 25, 2014 - Inside Mortgage Trends

Lenders Mum on Marketing Costs

Trying to find out how much money an individual mortgage company spends each year in marketing its products to consumers is no easy task. A quick survey of some of the nation’s largest lenders on advertising dollars conducted by Inside Mortgage Trends yielded the same exact response: “We don’t disclose that information.” Many large lenders don’t even engage in specific mortgage-related advertising, at least not on a national level. The one exception is ...


July 25, 2014 - Inside Mortgage Trends

Interest Rate Hedging in Fluctuating Environment

Lenders facing rising interest rates might be overlooking valuable hedging options, according to officials at Mortgage Capital Management. The firm offers pipeline risk-management services and is touting float-down locks, or put options on interest rates, which MCM claims will increase earnings stability and grow production. A float-down lock allows a borrower to receive a lower interest rate on their mortgage if rates decline between when ...


July 25, 2014 - Inside Mortgage Trends

Low Payments Won’t Deter Potential Movers

Concerns that rising interest rates will prompt current homeowners to stay in place are overblown, according to a number of industry analysts. A panel at Zillow’s latest housing forum this week focused on the issue of borrower lock-in, with most speakers downplaying the issue. Joseph Tracy, an executive vice president and senior advisor to the president at the Federal Reserve Bank of New York, said his research has found that rising interest rates ...


July 25, 2014 - Inside Mortgage Trends

Firms Offering Hefty Signing Bonuses for LOs

Not only are residential originations on the rise once again, but so are “signing bonuses” for top-flight loan officers who can bring in the volume. According to research from Garrett, McAuley & Co., signing bonuses being paid today range from $20,000 to $30,000, but “with some going much higher.” With production shifting toward purchase-money lending, LOs with deep ties to Realtors and homebuilders can fetch the most. But according to interviews ...


July 25, 2014 - Inside Mortgage Trends

Banks Report Substantial Increase In 2Q14 Mortgage Banking Income

Second-quarter bank earnings reports show a strong increase in overall mortgage banking profitability as new origination volume rebounded from historic lows set in the first three months of 2014. A new Inside Mortgage Trends review of earnings reports from 21 banks, including eight of the 10 largest banks in mortgage lending, reveals that the group generated $3.81 billion in second-quarter mortgage banking income. That was up 31.5 percent from ...


July 24, 2014 - Inside MBS & ABS

Fannie Prices Fourth, Largest Credit Risk-Share Transaction, More to Come

Fannie Mae late last week priced its third credit risk-sharing deal of 2014. The $2.05 billion note is the government-sponsored enterprise’s fourth and largest transaction under its Connecticut Avenue Securities series since the Federal Housing Finance Agency ordered both Fannie Mae and Freddie Mac to shrink the GSEs’ role in the U.S. housing market last year. In its latest offering – Series 2014-C03 – Fannie included reference loans with original loan-to-value ratios of up to 97 percent and “is consistent with prior transactions.” Previous C-deal offerings included reference loans with up to 80 percent LTV ratios. “We’ve continued...


July 18, 2014 - Inside FHA Lending

House Democrats’ Bill Features Amped-Up GNMA

Ginnie Mae would play a greater role in a private-market partnership model envisioned in proposed housing finance reform legislation introduced recently by House Democrats. However, many in the industry doubt whether a Democrat-sponsored reform bill will pass in this Congress. Sponsored by Reps. John Delaney (MD), John Carney (DE) and Jim Himes (CT), the Partnership to Strengthen Homeownership Act would put Ginnie Mae in charge of all single- and multifamily mortgage-backed securities with government backing. Among other things, H.R. 5055 would create a new Ginnie Mae MBS for conventional mortgages backed by the full faith and credit of the federal government with minimum support from the private sector. Under the proposed model, private entities would assume up to 5 percent of the first-loss capital on the MBS. The remaining 95 percent would be shared between ...


July 18, 2014 - Inside FHA Lending

Ginnie Mae Servicing Remains Flat in 2Q14

Ginnie Mae servicing remained flat in the second quarter of 2014, continuing a trend that began in the third quarter of last year as FHA refinancing fell and purchase activity slowed, according to Inside FHA Lending’s analysis of Ginnie Mae data. Servicing volume rose by only 0.7 percent from the first quarter, slightly lower from the 0.9 percent increase reported by Ginnie Mae servicers for the first three months of 2014. On the other hand, volume was up modestly by 5.9 percent year-over-year, data showed. Ginnie Mae servicers ended the second quarter with a total of $1.46 trillion in unpaid principal balance, up from $1.45 trillion in the prior quarter. Four out of the top five Ginnie Mae servicers were banks. Wells Fargo closed out the second quarter with $425.9 billion in servicing volume, a 0.2 percent decrease from the previous quarter but up 2.1 percent from a year ago. Its 29.2 percent market share put it ... [1 chart]


July 18, 2014 - Inside FHA Lending

VA Clarifies Impact of Same-Sex Marriage Policy

Same-sex couples are entitled to veteran benefits, including home loan guaranty, if their marriage is recognized by the state where they live or where they lived when they filed a claim for benefits – and not where the marriage took place.The VA made the clarification in the wake of guidance the agency issued regarding the benefits and services same-sex married couples are entitled to under current laws and regulation. On June 26, 2013, the U.S. Supreme Court, in United States v. Windsor, struck down Section 3 of the Defense of Marriage Act (DOMA), which governs the definitions of “marriage” and “spouse” for all federal agencies, because it was unconstitutional. The court held that the provision deprives a person of the right to equal liberty, which is protected by the due process clause of the Fifth Amendment. Prior to the SCOTUS opinion, DOMA defined “marriage” as a ...


July 18, 2014 - Inside FHA Lending

Infractions that Could Trigger MRB Enforcement

One deficiency commonly noted in cases heard by the Department of Housing and Urban Development’s Mortgagee Review Board is failure by FHA lenders and servicers to implement and maintain a quality control (QC) plan. FHA’s focus on quality control has increased over the last couple of years as the agency strives to correct underwriting flaws that have contributed to the massive losses and severe depletion of the Mutual Mortgage Insurance Fund. After years of guiding and helping clients comply and cope with FHA regulations, requirements and enforcement actions, the Collingwood Group reports that a common QC-related mistake among FHA lenders is failure to document steps taken to correct deficiencies – or to take any corrective action at all. Tied to this issue is ...


July 18, 2014 - Inside FHA Lending

FHA to Lenders: Try PFS First Before DIL Option

If an FHA borrower runs out of options for loss mitigation and home retention, a lender must first consider a pre-foreclosure or short sale, with deed-in-lieu (DIL) of foreclosure as a second option, according to new FHA guidance. Mortgagee Letter 2014-5 states that the lender must first determine whether the borrower facing default or at risk of default qualifies for a pre-foreclosure sale (PFS). The FHA allows pre-foreclosure sales to be processed as either a “standard PFS” or a “streamline PFS.” The former is available only to owner-occupants while the latter is for both owner- and non-owner-occupied single-family properties. In determining standard PFS eligibility, the lender must use a “deficit income test” to determine whether the borrower is experiencing hardship and is able to sustain his or her mortgage. A DIT resulting in a negative amount would likely qualify the borrower for a ...


July 18, 2014 - Inside FHA Lending

JPMorgan Chief Seeks FHA Safe Harbor for Bank

JPMorgan Chase chief executive Jaime Dimon this week warned that the investment bank may rethink its FHA business without some type of safe harbor to shield it from potential future liabilities arising from the Financial Institutions Reform, Recovery and Enforcement Act and the False Claims Act. In February this year, JPMorgan agreed to pay $614 million to the federal government to settle allegations that it falsely certified poorly underwritten loans for FHA endorsement, causing massive losses to taxpayers in paid claims. Dimon lashed out at the government during a telephone briefing on the company’s second-quarter 2014 earnings report. He said JPMorgan lost a tremendous amount of money over what the government claimed was fraud but was in fact a “commercial dispute” between FHA and the bank. “We collected $600 million in insurance, the [government] disputed $200 million [alleging] it was fraud ...


July 18, 2014 - Inside FHA Lending

Endorsements Up for 620-679 Credit Scores

Mortgages with 620-679 credit scores accounted for more than half of FHA’s mortgage insurance business in the first quarter of 2014, up from 42.0 percent a year ago, according to the Department of Housing and Urban Development’s latest quarterly report to Congress on the state of the FHA Mutual Mortgage Insurance Fund. Data showed FHA-insured mortgages in the 620-679 credit score range, a band typically identified with borrowers with slightly tainted credit, comprised 51.1 percent of new endorsements in the first quarter. This was up from 50.1 percent in the fourth quarter of 2013. FHA endorsements in the 620-plus category started trending upward in the first quarter of 2011, while endorsements in the 720-850 credit score range began a slow decline during the same period. The distribution of borrower credit scores continued the migration seen in previous quarters, though at a ...


July 17, 2014 - Inside Mortgage Finance

Most of the Megabanks Saw Mortgage Profits Increase Firmly in 2Q; A Barometer for the Rest of the Industry?

The nation’s megabanks reported fairly strong mortgage earnings during the second quarter thanks to a jump in new originations, robust servicing revenue and expense cuts. If the results reported by Wells Fargo, JPMorgan Chase, Bank of America and Citigroup are any indication, the industry may be rebounding from a rough stretch in late 2013 and early 2014. But the first quarter of this year was so bad – and originations so weak – that lenders had no place to go but up. Larry Charbonneau, a warehouse lending analyst, said...


July 17, 2014 - Inside Mortgage Finance

Mortgage Brokers Peeved as CFPB Targets Those Acting as Mini-Correspondents for More Scrutiny

The Consumer Financial Protection Bureau late last week said it will take a close look at mortgage brokers acting as mini-correspondents, particularly if they are just trying to get around disclosure requirements and limits on broker compensation. The CFPB is concerned that some mortgage brokers are claiming to be mini-correspondent lenders by establishing warehouse funding lines when they are still essentially just facilitating a transaction between a borrower and a lender. “While some brokers may be setting up such arrangements because they intend to grow into full correspondent lenders, the bureau is concerned...


Poll

Home-equity lending is beginning to show new life. My company (pick one):

Plans to enter this market over the next 12 months.

25%

Is already making home equity loans and hopes to increase the offerings.

45%

Is in the market but don’t expect much growth.

15%

Is not making second liens and has no plans to do so.

15%

Housing Pulse