As Congress works on legislation aimed at reforming the roles of the government-sponsored enterprises, provisions regarding practices in the non-agency mortgage-backed security market should be included in the legislation, according to the Securities Industry and Financial Markets Association. Kevin Chavers, a managing director at BlackRock, testified on behalf of SIFMA at a hearing this week by the House Financial Services Subcommittee on Housing and Insurance ...

Underwriting standards for the mortgages included in prime non-agency mortgage-backed securities in the third quarter were largely unchanged from the types of loans seen in the market the past year, according to a new analysis by Inside Nonconforming Markets. The average credit score on prime non-agency MBS issued in the third quarter was 770.3, down from 772.3 the previous quarter but up from 766.4 in the third quarter of 2016. Average debt-to-income ... [Includes one data chart]

Investors in jumbo mortgage-backed securities face relatively low exposure to potential losses related to fires in California, according to an analysis by Moody’s Investors Service. The rating service said 2.9 percent of the outstanding mortgages in post-crisis jumbo MBS rated by Moody’s are in counties affected by the recent fires. And while some borrowers may suffer losses because of insufficient insurance coverage, Moody’s said hazard insurance and servicers’ ... [Includes two briefs]

FHA and VA loan performance deteriorated during the third quarter of 2017, a period when the Ginnie Mae servicing market continued to expand. Ginnie had a record $1.749 trillion of single-family mortgage-backed securities outstanding at the nine-month mark in 2017, according to a new ranking and analysis by Inside FHA/VA Lending. That was up 2.2 percent from mid-year and 8.5 percent higher than September 2016. Ginnie servicing has been the fastest-growing part of the market for the past few years. That’s largely because Fannie Mae and Freddie Mac typically see more refinance business, which tends to churn the supply of servicing outstanding more than grow it. The VA side of the government-insured market again was the fastest-growing component, as the dollar volume of VA loans in Ginnie pools rose 3.7 percent during the third quarter. That was more than double the growth rate in the ... [Charts]

The FHA lost ground to private mortgage insurers in the purchase-mortgage market during the third quarter of 2017, according to an analysis by Inside Mortgage Finance.The government-sponsored enterprises securitized $64.59 billion of purchase mortgages with private MI in the third quarter, up 28.5 percent from the prior quarter. This far greater than the 9.5 percent increase in FHA purchase loans delivered into Ginnie Mae mortgage-backed securities during the same period. Although the FHA program remained a favorite among first-time homebuyers, private mortgage insurers saw a substantial gain in the segment. In the third quarter, first-time homebuyers comprised 74.1 percent of FHA purchase loans, but the dollar volume of such loans pooled in Ginnie MBS rose just 9.1 percent, data showed. On the other hand, Fannie Mae and Freddie Mac saw their insured first-timer ...

The Department of Housing and Urban Development will review its current lender-certification process and defect taxonomy to address industry concerns about costly penalties and settlements arising out of False Claims Act lawsuits. In remarks at the Mortgage Bankers Association’s annual convention in Denver this week, HUD Secretary Ben Carson said the review would benefit greatly from feedback by lenders and other stakeholders in response to President Trump’s directive to all federal agencies to eliminate burdensome and duplicative regulations. Carson said HUD’s immediate concern is bringing back lenders that have exited the FHA single-family program or limited participation because of the undue risks they face from FCA enforcement. Lenders need clarity in what HUD expects from them in terms of lending and reduced exposure to outsized liability from immaterial errors, the ...

Brian Montgomery, President Trump’s nominee for assistant secretary for housing and FHA commissioner, reiterated his commitment to fight fraud and misrepresentation in FHA lending but wondered whether the Department of Justice had gone too far in using the False Claims Act as an enforcement tool against lenders. Testifying during his confirmation hearing before the Senate Committee on Banking, Housing and Urban Affairs, Montgomery expressed concern whether the DOJ and the Department of Housing and Urban Development had been adversarial towards lenders in their efforts to stem taxpayer losses and protect the FHA insurance fund. In prepared testimony, the nominee said the government must do better in providing clarity to encourage lenders to make FHA-insured loans and entice those that have exited for fear of exposure and liability to return to the ...

A Ginnie Mae/VA anti-churning task force is looking at a number of options to solve the rapid prepayment problem, which could include extending the seasoning requirement for all refinanced loans and prohibiting access to custom pools. A Ginnie representative declined to provide further details, adding that the task force is not ready to announce changes yet. “But we will take additional action soon, which we can do through program changes like we did last year,” he said. Ginnie issued guidance last year to curb aggressive refinancing of VA loans that underlie Ginnie mortgage-backed securities. The rapid refis have resulted in rapid prepayments to the detriment of investors with no clear benefits to VA borrowers. The guidance required six consecutive monthly payments before delivering a streamlined refi loan into a standard Ginnie MBS. The measure succeeded in stopping the ...

Overall denial rates for nonconventional loan applications (FHA, VA and Rural Housing Service) fell slightly in 2016 to 13.4 percent from 13.9 percent in 2015, Home Mortgage Disclosure Act data showed. In the nonconventional refinancing segment, denial rates rose to 32.9 percent last year from 30.3 percent in the previous year. Approximately 23.9 percent of FHA loan applicants were denied last year while VA turned down 20.0 percent of borrowers who sought a VA loan. An estimated 14.3 percent of FHA purchase-loan applicants were turned down. VA denied 11.4 percent of its purchase-mortgage applicants although its total purchase-loan applications are far fewer compared to FHA. According to the Federal Reserve’s overview of the 2016 HMDA data, as in past years, blacks, Hispanics and “other minority” borrowers had notably higher denial rates overall compared to white borrowers. Denial rates for ...

A new “fixer-upper” affordable housing program developed by a real estate broker for the Land Bank of Kansas City, MO, may not only help lower-income borrowers purchase a home but prove to be a profitable niche for FHA 203(k) lenders. The KC Land Bank initiative extends affordable mortgage loans to homebuyers looking to purchase and rehabilitate abandoned vacant homes in 21 neighborhoods in Kansas City. The vacant residential properties are acquired through a tax foreclosure auction and the aim is to sell them to borrowers in the same neighborhood where the property is located. Financing for the purchase and rehabilitation of a Land Bank home is mostly through the FHA 203(k) program, according to Ted Ihde, a licensed real-estate broker who developed the program and markets the homes through neighborhood housing groups. The program addresses an urban problem that ...