Mortgage Insurance

Browse articles from all of our Newsletters related to Mortgage Insurance.

August 29, 2014 - Inside FHA Lending

Around the Industry

Revised HUD/VA Addendum to the Uniform Residential Loan Application. On July 30, the FHA has posted on its HUDCLIPS website a revised Addendum to the Uniform Residential Loan Application (Form HUD-92900-A/VA Form 26-1802). This form is used for both FHA and VA mortgage originations.The Department of Veterans Affairs has updated its form to clarify what constitutes a valid marriage for the purpose of obtaining VA benefits. Although the changes to the form do not apply to FHA-insured mortgages specifically, lenders should begin using the revised form for new FHA mortgage originations as soon as possible, the FHA recommended. Processing Request for Execution of VA Quitclaim Deeds. The Department of Veterans Affairs has issued guidance (Circular 26-14-19) for handling of requests for execution of quitclaim deeds. A quitclaim deed is a legal document that is used to transfer a person’s rights to real estate to ...


August 29, 2014 - Inside FHA Lending

Views Sought on Draft Appraiser Requirements

The Department of Housing and Urban Development is requesting feedback from stakeholders regarding proposed policy drafts covering appraiser eligibility and oversight, and conducting appraisals, among other things. The documents will be part of the FHA’s Single-Family Housing Policy Handbook, a consolidated and authoritative agency handbook that will make it easier for stakeholders to do business with the FHA. The drafts also cover appraiser requirements for performing an FHA appraisal, including property eligibility requirements for Title II forward and reverse mortgages, as well as forms and data delivery requirements. Comments must be submitted by Sept. 2, 2014. The Single-Family Policy handbook is a multi-phased initiative to develop a single, comprehensive source for FHA single-family housing policy using clear and direct language and an improved organization structure. In fall 2013, the FHA posted its first draft section, Application Though Endorsement for Title II Forward Mortgages. The FHA is finalizing ...


August 29, 2014 - Inside FHA Lending

State Legislatures Pass Reverse Mortgage Bills

Two states have passed legislation placing varying spins on the Department of Housing and Urban Development’s counseling requirements for lenders and borrowers of FHA-insured reverse mortgages. In California, the state Senate unanimously approved AB 1700, which would mandate a seven-day “cooling off” period between the time a borrower receives counseling and when an application is taken. AB 1700 passed the CA Assembly by a vote of 73 to 1. In addition, the bill would require a lender to provide a worksheet guide that addresses certain issues the borrower should consider and discuss with the counselor, such as income and ability to repay as well as taxes and insurance. The counselor and the borrower are both required under the bill to sign the worksheet guide before any reverse mortgage application is taken. No schedule has been set for ...


August 29, 2014 - Inside FHA Lending

FHA Lending to Low FICO Borrowers Increases

FHA lenders have been lending more aggressively to borrowers with FICO scores below 679 than to more affluent borrowers, according to recent research by an independent housing and consulting firm. Using data from the Department of Housing and Urban Development and interviews with mortgage industry executives, researchers at John Burns Real Estate Consulting found that homebuyers with less-than-stellar credit are finding it easier to buy a home below the FHA loan limit. In contrast, the study also found that automated underwriting prevents many highly qualified borrowers from obtaining a home loan because their “income situation does not fit squarely in the credit box.” This segment includes affluent retirees, self-employed, or commissioned salespeople. “In the aftermath of the housing crisis, the reality is that we are lending aggressively to the poor and conservatively to the rich,” said Lisa Marquis Jackson, senior vice president at John Burns. The study’s findings challenge ...


August 29, 2014 - Inside FHA Lending

FHA Volume Drops in First Half of 2014

FHA loan volume continued to decline in the first half of 2014 despite continuing improvement in the quality of new originations and a high demand for purchase mortgage loans, according to Inside FHA Lending’s analysis of agency data. Overall, FHA production for the first six months of the year, excluding reverse mortgages, totaled $61.1 billion. While originations were up 16.0 percent in the second quarter, it was down a hefty 51.8 percent on a year-over-year basis. Purchase loans accounted for $47.3 billion of new FHA-insured loans made over the six-month period while an estimated $58.4 billion of loans had fixed interest rates. For FY 2014, volume was down 19.0 percent. “In FY 2013, approximately 702,000 FHA-insured loans were originated and this year we’re running at 560,000 loans, which is roughly 20 percent of last fiscal year’s total,” said an FHA analyst. “In the first quarter, approximately ... [1 chart]


August 18, 2014 - Inside the CFPB

CFPB is Pressing Banks to Disclose Campus Marketing Agreements

CFPB Student Loan Ombudsman Rohit Chopra is raising the headline risk for banks that fail to be transparent about the campus financial product marketing agreements they have with colleges and universities. In a recent blog post alerting colleges and students about “secret banking contracts,” Chopra indicated the bureau has been mailing out letters to such educational institutions “to make sure they know that their bank partner has not yet committed to transparency when it comes to student financial products” because the financial institution has not yet posted its marketing agreement with the school on its website. Last year, the CFPB launched an inquiry into financial products marketed to college and university students to determine whether the market is working for...


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

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

Galante Departing FHA Amid Gripes About Premiums; IG Says HUD Missed Opportunities on Indemnifications

FHA Commissioner Carol Galante is slated to depart the agency in a few weeks, leaving in her wake a healthier Mutual Mortgage Insurance Fund, but her withdrawal comes amid gripes from some lenders that agency premiums are too high, hurting the first-time homebuyer market. Several industry officials give Galante high marks for not caving to industry pressure on reducing FHA premiums, and for trying to build bridges to originators at a time when the Inspector General of the Department of Housing and Urban Development and Justice Department continue to target lenders for their “legacy” production. One consultant who represents FHA lenders said...


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

FHFA Extends GSE Guaranty Fee Input Deadline Until Sept. 8

Less than a week before its deadline, the Federal Housing Finance Agency announced last week that it is extending the comment period for guaranty fees charged by Fannie Mae and Freddie Mac. In June, the FHFA issued a call for public comment on how the GSEs should calculate g-fees and whether the Finance Agency should proceed with a 10 basis point g-fee hike announced last year. In one of his first acts as FHFA Director in January, Mel Watt ordered the g-fee hike postponed pending further study.


August 7, 2014 - Inside Mortgage Finance

NYDFS Alleges that Nonbank Servicers Use Affiliates To Side-Step Force-Placed Insurance Protections

The New York Department of Financial Services said it has concerns that certain nonbank servicers are using complex arrangements with affiliates to side-step borrower protections in force-placed insurance. Superintendent of Financial Services Benjamin Lawsky detailed what he called a “troubling” scheme between Ocwen Financial and a “related party,” Altisource Portfolio Solutions. “This complex arrangement appears designed to funnel as much as $65 million in fees annually from already-distressed homeowners to Altisource for minimal work,” Lawsky said in a letter this week to Timothy Hayes, Ocwen’s general counsel. According to the NYDFS, Ocwen recently implemented...


August 4, 2014 - Inside the CFPB

MBA Wants to Extend SAFE Act Loan Officer Testing to Banks

The Mortgage Bankers Association, in a bit of a surprise move, is pressing the CFPB, the Conference of State Bank Supervisors and members of Congress for changes to the Secure and Fair Enforcement of Licensing Act and other regulations that would provide uniform testing standards for all mortgage loan officers. The development is somewhat unexpected in that the trade group is calling for regulators and lawmakers to increase the compliance load for its members. Under the SAFE Act, there are two regimes for loan officers. Loan officers who work for nonbank lenders have to be licensed. That includes testing, pre-licensing and continuing education requirements, as well as extensive criminal and financial background reviews by state regulators. Additionally, they also must ...


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

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 ...


July 25, 2014 - Inside The GSEs

FHFA’s Proposed Mortgage Insurance Rules Tilt Market

New mortgage insurance eligibility rules proposed earlier this month by the Federal Housing Finance Agency appear likely to cause some MIs to tweak their corporate structures and/or to raise additional capital, note industry observers. In its draft Private Mortgage Insurer Eligibility Requirements, the FHFA directed Fannie Mae and Freddie Mac to revise, expand and align their risk management requirements for mortgage insurance counterparties.The updated financial requirements incorporate a new, risk-based framework that ensures that approved insurers have a sufficient level of liquid assets from which to pay claims.


July 24, 2014 - Inside Mortgage Finance

Most Lenders Rode Surge in Mortgage Production In 2Q14, But Pace Was Well Below Recent Past

A healthy housing recovery boosted mortgage origination volume during the second quarter of 2014, but production remains at relatively sluggish levels, according to a new market analysis and ranking by Inside Mortgage Finance. Single-family mortgage originations totaled an estimated $295 billion during the second quarter, up 25.5 percent from the first three months of the year. The first quarter of 2014 was the worst production environment for the mortgage industry since the end of 2000, even falling below the mark set at the depth of the financial crises in the fourth quarter of 2008. In fact, the most recent April-to-June cycle brought...[Includes three data charts]


July 21, 2014 - Inside the CFPB

Worth Noting/Looking Ahead/Vendor Update

Bureau Moves to Ensure Equal Treatment for Same-Sex Marrieds. The CFPB is synchronizing its internal policies with the U.S. Supreme Court decision in United States v. Windsor, striking down as unconstitutional Section 3 of the Defense of Marriage Act, which holds that the word ‘marriage’ means only a legal union between one man and one woman. According to a staff memorandum from CFPB Director Richard Cordray, the CFPB will regard a person who is married under the laws of any jurisdiction to be married nationwide for purposes of the federal statutes and regulations under the bureau’s jurisdiction regardless of the person’s place of residency. However, consistent with other federal regulatory agencies, the bureau will not regard persons who are joined ...


July 18, 2014 - Inside FHA Lending

Around the Industry

Senate Confirms Julian Castro as Next HUD Secretary. The Senate has confirmed Julian Castro as the 16th secretary of housing and urban development by a vote of 71 to 26. He replaces Secretary Shaun Donovan, whose nomination for director of the Office of Management and Budget was also approved 75-22 by the Senate on July 10. Before his nomination, Castro served three terms as mayor of San Antonio, TX, during which he focused on revitalizing the city through numerous housing and economic development initiatives. Housing advocates who have worked with Castro said, as a municipal leader, he knows what is needed to rebuild local economies under enormous financial constraints, which he can work to his advantage as HUD’s new head. In addition, Castro has the capacity and temperament to work with a Republican Congress, they said. The Securities Industry and Financial Markets Association said it looked forward to working with ...


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

Borrower OK Required to Voluntarily End Federal MI

New FHA guidance regarding voluntary termination of FHA mortgage insurance does not affect separate guidance requiring borrowers to continue payment of their annual insurance premium regardless of the loan’s amortization terms. The FHA made the clarification in relation to Mortgagee Letter 2014-13, which requires written consents by the lender and the borrower in all voluntary terminations of FHA mortgage insurance. The requirement becomes effective on Oct. 1st this year. Specifically, the guidance requires FHA lenders to document that they have obtained the borrower’s informed consent to terminate FHA insurance on the mortgage. The change ensures that the lender would incur no liability and that the borrower understands the terms of the voluntary termination. Under current rules, the FHA may terminate mortgage insurance at the request of the borrower and the lender. The lender may cancel the insurance endorsement upon notification by the FHA commissioner that the insurance contract is terminated.


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 ...


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