Profits and Losses

Browse articles from all of our Newsletters related to Profits and Losses.

October 21, 2016 - Inside FHA/VA Lending

VA Spells Out Requirements for Obtaining Key Eligibility Doc

One of the key documents VA lenders require veteran borrowers to submit is the certificate of eligibility (COE). A VA loan application will not move forward without a COE, a requirement for any active-duty servicemember or veteran seeking to take advantage of the VA’s home-loan guaranty program. The COE verifies to the lender a loan applicant’s eligibility for a VA loan. The evidence a lender might require depends on the nature of the applicant’s eligibility. Veterans and current or former National Guardsmen or reservists who have been called to active duty must submit DD Form 214. The form would show the character of service and the reason for separation from the service. Active-duty servicemembers must submit a current statement of service signed by a superior, the unit commander or the adjutant, higher headquarters or the personnel office. The statement must contain the ...

October 21, 2016 - Inside FHA/VA Lending

HUD-IG Bares Additional Penalties, Settlements, Actions Against Firms

The Department of Housing and Urban Development inspector general, over the last several weeks, has reported a series of final civil actions that resulted in an enforcement action or monetary settlement between an FHA lender and the federal government. On Oct. 6, the IG announced the results of an audit of TXL Mortgage Corp., a direct endorsement lender, in Houston. The audit found TXL in violation of HUD requirements and that it had no acceptable quality-control plan in place. Specifically, 16 of the 20 sample loans the IG reviewed did not comply with HUD standards. Of the 16 loans, eight had significant underwriting defects and failed to qualify for FHA mortgage insurance. Two loans qualified but were over-insured, according to the report. As a result, TXL exposed HUD to more than $713,000 in unnecessary insurance risk and caused the department to incur more than ...

October 21, 2016 - Inside FHA/VA Lending

HUD Urges IG to Reconsider Cost of Delayed Conveyance, Foreclosure

The Department of Housing and Urban Development called on its inspector general to reassess estimated financial losses to the FHA insurance fund, which an IG audit attributed to lengthy delays of servicer foreclosures and property conveyances. A recent audit report by the HUD inspector general alleges that HUD paid approximately $2.23 billion in claims for an estimated 239,000 properties that missed foreclosure and conveyance deadlines. According to the IG report, HUD paid an estimated $141.9 million for servicers’ claims for “unreasonable and unnecessary” debenture interest on the distressed loans, as well as $2.09 billion in servicer claims for holding the properties past their foreclosure and conveyance deadlines. While it was necessary for servicers to pay for property-preservation costs, HUD should not have paid for holding costs, the ...

October 21, 2016 - Inside FHA/VA Lending

Nonbanks Took Over GNMA Servicing Market in 3Q16

Nonbanks crossed a threshold in the third quarter of 2016, posting a hefty 6.3 percent increase in their combined Ginnie Mae servicing portfolio, according to a new Inside FHA/VA Lending analysis. Nonbanks serviced $826.6 billion of Ginnie single-family mortgage-backed securities as of the end of September. That represented 51.3 percent of the total Ginnie market. The nonbank servicing total includes a small amount of Ginnie servicing held by state housing finance agencies, roughly 1.0 percent of the entire market. But it doesn’t include the significant amount of Ginnie servicing that nonbanks do as subservicers for both depository and nonbank clients. Interestingly, the biggest gain for nonbanks in percentage terms came in servicing VA loans, which rose 8.1 percent from the second quarter to $252.1 billion, or 51.0 percent of the market. The VA sector is one business from ... [4 charts ]

October 20, 2016 - Inside Mortgage Finance

Early Read Suggests Mortgage Originations Up About 10 Percent From Second Quarter to Third

Based on mortgage production figures reported by the five largest banks with substantial involvement in the residential home loan market, third-quarter originations likely rose about 10 percent from the previous period. Five bank mortgage lenders – Wells Fargo, JPMorgan Chase, Bank of America, U.S. Bank and Citigroup – reported a combined $135.5 billion in home loan production during the third quarter. That was up a respectable 9.0 percent from the second quarter. But during the second quarter, their combined production jumped 30.0 percent from the first three months of the year. However, the five major banks have...[Includes one data table]

October 14, 2016 - Inside Mortgage Trends

Mortgage Pricing Should Focus on Consumer Value

Bank pricing strategies are more about responding to new product regulations, fee income and capital and liquidity standards rather than to their consumers’ view of value, according to a new Deloitte report on retail-bank pricing. The report, which attempts to make the case for value-based pricing, contends that bank pricing tactics focus primarily on costs and risks rather than on how consumers perceive and receive value. It’s...

October 14, 2016 - Inside Mortgage Trends

A Good News/Bad News October for PHH

PHH Corp. this week scored a key legal victory in its battle with the Consumer Financial Protection Bureau over captive reinsurance and the Real Estate Settlement Procedures Act. But despite this good news, there are still clouds over the nonbank. The “worst” of the recent spate of bad news for the company surrounds the early October disclosure that Merrill Lynch is breaking all ties to PHH when it comes to private-label originations and servicing. The effective date for the end of the contract is...

October 14, 2016 - Inside MBS & ABS

A ‘Revolving Door’ in the Executive Suite of Clayton Holdings Has Its Clients Scratching Their Heads

Executive departures continue to plague due diligence provider Clayton Holdings and now there’s talk that its parent company, Radian Group, is contemplating taking a goodwill charge on a subsidiary it paid $305 million for two years ago. The latest top-level officials to leave the unit include Capital Markets Senior Managing Director Brian Wornow and Mark Hughes, executive vice president in charge of sales and marketing. Sources close to Wornow contend...

October 13, 2016 - Inside Mortgage Finance

As Banks Lose Residential Market Share, Some Ask Whether They Pay Their Loan Officers Too Little?

Not only are commercial banks continuing to lose residential production market share, but it appears they are paying their retail loan officers less than nonbanks – a lot less. According to more than a dozen interviews conducted with executives and LOs at originating firms with different charters, some nonbanks are allowing for compensation plans that pay the originator upwards of 200 basis points. At banks, the best LO comp plan is 100 bps, Inside Mortgage Finance found. One bank mortgage manager, who spoke under the condition his name not be used, said...

October 7, 2016 - Inside FHA/VA Lending

VA Adopts Final Rule Increasing Agency Fines for Loan Fraud

The Department of Veterans Affairs adopted without change its interim final rule increasing the maximum amount of civil fines it can assess on lenders and other offenders for violations of agency loan-guaranty rules and regulations. Under the interim final rule VA issued for comment back in June, maximum civil monetary penalties would increase from $10,000 to $21,563 for false loan-guaranty certifications. Civil fines for fraudulent claims or statements in any VA program would increase from $5,500 to $10,781. The VA published the interim final rule on June 22, 2016, to implement the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 and to improve the effectiveness of civil fines and maintain their deterrent effect. The new penalty amounts became ...

October 7, 2016 - Inside FHA/VA Lending

VA Supports Adoption of Energy-Saving Standards for VA Properties

The Department of Veterans Affairs is urging VA lenders, borrowers and other participants in its loan guaranty program to adopt recommended standards, equipment and activities to reduce water and energy usage and to ease the impact of natural disasters. The VA has recommended wind-hazard standards, resilient building and retrofitting standards, a water- and energy-saving program, and property-and-energy conservation strategies to help VA borrowers protect their homes against storms, flooding, earthquakes and other calamities. VA made clear it allows, but does not require, any of the recommended standards, strategies or equipment. The programs are strictly voluntary, it said. The agency noted the increasing incidence of extreme weather events, earthquakes and flooding, which makes planning and building in the most resilient and economically feasible ways all the ...

October 7, 2016 - Inside FHA/VA Lending

Initial Material Defect Rate Rises For the First Time in Nine Quarters

The initial material defect rate of FHA loans has increased to 50 percent in the third quarter of 2016 from the previous quarter, according to the latest FHA Lender Insight report on quality control. A good portion of the defective mortgage loans, however, has been mitigated during the post-endorsement technical review process, the report indicated. In the second quarter, the initial material defect rate had been flat, averaging 47.4 percent over the last eight quarters. The latest report show the top five mitigated findings, which reflect the number of initially unacceptable ratings and the number of findings mitigated for loans between April and June, 2016. Some 6,312 FHA loans comprised the sample, and they consisted of purchase loans (71.0 percent), streamline refinance (13.5 percent), rate and term refis (9.0 percent), and Home Equity Conversion Mortgages (6.7 percent). In addition, ...

October 7, 2016 - Inside FHA/VA Lending

HUD Urged to Maintain Current FHA HECM Assignment Option

Industry groups are urging the Department of Housing and Urban Development to reconsider a supplemental proposal to require mortgagees to assign a Home Equity Conversion Mortgage loan to the FHA once the loan balance reaches 98 percent of the maximum claim amount (MCA). The Mortgage Bankers Association and the National Reverse Mortgage Lenders Association said there are more disadvantages than benefits to the proposal. The supplemental proposal is an offshoot from a previous HUD proposed rule to codify significant changes made to the HECM program by the Housing and Economic Recovery Act of 2008, the Reverse Mortgage Stabilization Act of 2013 and all other revisions in between. Both groups recommended that HUD maintain its current assignment election options rather than adopt the proposed rule. Currently, mortgagees have an option, before the ...

October 7, 2016 - Inside FHA/VA Lending

Return of FHA Spot Approval is a Shot in the Arm for Condo Market

Lenders are optimistic about a proposed rule that would reinstate FHA spot financing in unapproved condominium projects, saying this could be the spark that would jump-start the slow condo market.The proposed rules would clarify and modify certain FHA rules to kick-start condominium lending activity, and allow some flexibility in existing approval standards. Key proposals include the reinstatement of spot approvals in unapproved condominium developments and extending the effective recertification period for condo approvals to three years, rather than the current two-year requirement. Prior to 2009, spot approval allowed a buyer to use FHA financing to purchase a unit in an unapproved condo project, but the HUD approval process was expensive and time consuming. Consequently, few lenders were able to take advantage of the spot-approval program. The Department of ...

October 7, 2016 - Inside FHA/VA Lending

IG Audit Finds GNMA Left Hundreds Of Uninsured Loans in MBS Pools

Requiring an undercapitalized issuer to repurchase uninsured performing mortgages out of a mortgage-backed securities pool could increase risk to the federal government, warned Ginnie Mae. Responding to an adverse audit report from the Department of Housing and Urban Development’s Office of the Inspector General, Ginnie said that while it generally accepts the IG’s recommendations, forcing an undercapitalized issuer to buy out performing loans and either hold them in portfolio or sell them at a substantial loss would put the government at greater risk. “This is something we need to be alert to in certain cases,” the agency said. According to the report, Ginnie improperly allowed more than $49 million of single-family mortgages with terminated insurance to remain in its MBS pools for more than one year without obtaining FHA coverage. The IG warned Ginnie could be on the ...

October 7, 2016 - Inside FHA/VA Lending

Ginnie Mae Crushed Single Family MBS Issuance Records in 3Q16

Ginnie Mae rode a surging purchase-mortgage market and heavy refinance activity to new production records during the third quarter of 2016. The agency issued a whopping $145.14 billion of single-family mortgage-backed securities during the third quarter, according to an Inside FHA/VA Lending analysis of MBS disclosures. That figure is based on pool-level disclosures that reveal exact principal balance amounts and it includes securities backed by FHA home-equity conversion mortgages. The data in the table below are based on truncated loan-level disclosures and do not include HECM activity. New Ginnie MBS issuance in the third quarter was up 15.7 percent from the previous quarter. Ginnie MBS production set three consecutive monthly records during the third quarter, culminating in a huge $52.46 billion month in September. Purchase-mortgage activity was the key driver, but the ... [ 4 charts ]

September 30, 2016 - Inside Mortgage Trends

Lenders Need Credible Way to Evaluate LOS ROI

With loan production costs leaping over the last decade while productivity has been gutted, mortgage lenders are desperate to find a credible, reliable way to measure the effectiveness of their loan origination systems. “From 2005 to 2015, lenders’ costs per loan doubled, but productivity was basically cut in half,” said Stratmor Senior Partner Len Tichy, head of the firm’s information technology and operations advisory services. The numbers reflecting fulfillment costs are downright ...

September 23, 2016 - Inside FHA/VA Lending

PACE Guidance Not Reassuring, Too Many Uncertainties, Pitfalls

New FHA guidance for dealing with mortgages with a Property Assessed Clean Energy (PACE) obligation went into effect last week but uncertainty lingers and its full impact remains to be seen, according to an industry attorney. The Department of Housing and Urban Development has issued guidance specifically allowing properties encumbered by a PACE lien to be eligible for FHA mortgage financing for both purchase and refinance loans. The department of Veterans Affairs has issued similar guidance. According to Erika Sonstroem, an attorney with the law firm Bradley Arant Boult Cummings, the PACE industry is touting the guidance in its pitches to lenders as posing no risk to mortgage investors. PACE is a program that lends money to homeowners for home-energy savings projects. It is treated much like a tax lien on a property and is included in the ...

September 23, 2016 - Inside FHA/VA Lending

VA Issues Clarifying Guidance for Manufactured, Mobile Properties

VA Home Loan Guaranty has issued clarification regarding title requirements for manufactured or mobile homes conveyed to the Department of Veterans Affairs. Effective immediately, VA is requiring proof of noteholders’ compliance with the agency’s requirements for guaranteed mobile-home financing. Foreclosure title packages that do not include the required documents will be rejected, the agency warned. Under federal law, a manufactured home must be permanently affixed and classified as real property in the state where it is located. VA will not guarantee financing if the property does not meet the criteria. To ensure that a guaranty claim is fully payable and that the holder has the option to convey the manufactured home to VA, servicers must ensure that home loans with a VA guarantee meet federal requirements. Under the clarified VA guidelines, servicers may submit the ...

September 23, 2016 - Inside FHA/VA Lending

VA Shares Pointers to Help Avoid Delays in Processing COE Requests

The Department of Veterans Affairs has made recommendations to VA lenders and borrowers calling in with questions and problems at VA regional centers to avoid long wait times and have their concerns resolved as quickly as possible. In a recent memo to lenders, the VA Loan Guaranty Service is reporting that many of its regional loan centers (RLC) are being swamped with calls due to record increases in VA originations in recent months. While this suggests that more veterans are using their housing loan benefit than ever before, the large volume of calls to VA has caused long hold times for callers and delayed processing of borrower certificates of eligibility (COE). To cut down on the waiting time, the VA urged lenders and borrowers to consider several things before making the call. First, do not call to check on the status of a COE request if there is no urgent need, like an ...

September 23, 2016 - Inside FHA/VA Lending

HUD Poised to Collect Huge FCA Settlement Funds from Lenders

The Department of Housing and Urban Development is set to receive more than $140 million in settlements with three individual lenders in connection with defective loans they originated with FHA insurance. Freedom Mortgage Corp., M&T Bank, and Land Home Financial Services all reached separate agreements this year with the Department of Justice on behalf of the HUD Inspector General to resolve the allegations. On April 15, Freedom agreed to pay $113 million, in response to charges that “it engaged in certain conduct in connection with its origination, underwriting, property appraisal and quality of certain single-family mortgages insured by FHA.” The disputed forward loans were insured by FHA between Jan. 1, 2006, and Dec. 31, 2011, which resulted in claims submitted to HUD on or before June 15, 2015. HUD incurred substantial losses when it paid claims on the ...

September 23, 2016 - Inside FHA/VA Lending

Liquidity, Net Worth Issues Persist But Nothing Ginnie Can’t Manage

Ginnie Mae continues to wrestle with issuers lacking liquidity and net worth although the number of such cases has gone down significantly, thanks to tight oversight, according to the agency’s top counterparty risk officer. Briefing participants at this year’s Ginnie Mae summit in Washington, DC, Zack Skochko, director of counterparty risk, reported that some issuers are still struggling to comply with Ginnie Mae’s liquidity and net worth requirements.A number of small issuers failed their liquidity and net worth audits this year by not maintaining the minimum $1 million cash or 10 basis points of outstanding Ginnie securities required to participate in the agency’s mortgage-backed securities program. Ginnie Mae also requires issuers to meet a minimum net worth of $2.5 million plus 35 bps of the issuer’s total effective single-family obligations The requirements were designed to ensure that the ...

September 23, 2016 - Inside FHA/VA Lending

Streamline Refi Segment Causing Problems for VA, Ginnie Investors

The Department of Veterans Affairs is working on a change to its existing streamline refinancing policy to address a problem that is giving VA and Ginnie Mae the fits. Under the VA’s qualified-mortgage rule, a VA borrower must wait six months and show six months’ worth of mortgage payments before they can refinance into an IRRRL (Interest Rate Reduction Refinance Loan) and take advantage of the lower rate. However, it seems not all VA lenders are adhering to the rule and that a good number are refinancing veterans into IRRRLs even before the mandatory seasoning period ends for fear interest rates might rise and the borrower might not benefit from the lower rate. “I’ve redone the numbers in 20 different directions on how much a borrower would save if they had to wait two more months and the rate went up a quarter of a point because they lost those two months ...

September 22, 2016 - Inside Mortgage Finance

Booming MBS Issuance and Uptick in Interest Rates May Mean Stellar 3Q Earnings for Fannie and Freddie

Thanks to booming originations the past few months – which should translate into higher guaranty fee income – Fannie Mae and Freddie Mac are likely to post their strongest profits of the year in the third quarter, according to interviews conducted by Inside Mortgage Finance this week. But it’s not just higher loan production that should allow profits to soar – it’s the fact that the yield on the 10-year Treasury now stands at 1.69 percent, 21 basis points higher than June 30. The 10-year rate is...

September 16, 2016 - Inside Mortgage Trends

Production Profits Rose in 2Q16, But Rate Volatility Hammered Servicing

With rising origination volume and solid gain-on-sale margins, the business of originating and selling home loans generated substantially more earnings during the second quarter of 2016, according to a new Inside Mortgage Trends analysis of earnings reports. But the servicing side of the business had trouble generating positive income after taking into account gyrations in mortgage servicing rights valuations and the hedges lenders place on these assets ... [Includes one data chart]


After the November elections, how long will it take for a new Congress and White House to pass GSE reform legislation?

I’m confident a bill will be passed the first year.


2 to 3 years. GSE reform is complicated.


Sadly it won’t happen in a Clinton or Trump first term.


Not in my lifetime.


Housing Pulse