Although appraisals are mostly in line with contract prices, VA and FHA appraisals more often miss the contract price than appraisals for conventional home loans, according to real estate agents’ responses to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. The difference gets no clearer than in California where many FHA and VA appraisals are coming in under the contract price. In contrast, appraisals for conventional mortgage loans are coming in as much as 10 percent higher, said a real estate agent in the Golden State. “FHA and VA appraisals are more conservative than conventional,” respondents observed. There are a number of reasons for FHA and VA appraisals coming in lower than conventionals, industry participants say. Although the appraisal process is the same for both government and conventional mortgage programs, FHA and VA appraisal rules require much closer scrutiny of the property to determine whether certain repairs must be made before it can be sold. In addition, no two appraisers are alike. Some appraisers will not give value to upgrades, such as granite countertops or hardwood floors, while others do.

For years, banks have had a losing record in FHA cases involving False Claims Act allegations. Hence, a federal appeals court’s decision to uphold dismissal of a $2.3 billion lawsuit against a major bank is a rarity. In U.S., ex rel. Advocates for Basic Legal Equality (ABLE) v. U.S. Bank, the U.S. Court of Appeals for the Sixth Circuit affirmed the dismissal of an FCA lawsuit against U.S. Bank because the conduct alleged by the qui tam relator had been previously disclosed publicly in a consent order with federal banking regulators. The court held that ABLE’s claims were barred because the conduct that allegedly violated the FCA had already been disclosed when the plaintiff filed suit in 2013. The Department of Justice declined to intervene. The relator suit alleged that U.S. Bank had a practice of initiating foreclosure on FHA-insured mortgages without complying with the ...

Despite efforts by the Department of Housing and Urban Development to prevent or mitigate fraud, waste and abuse in FHA loan programs, concerns remain about HUD’s resolve to take the necessary actions going forward to protect the FHA insurance fund. Testifying recently during a House appropriations hearing, HUD Inspector General David Montoya said HUD is often hesitant to take strong enforcement actions against lenders. Montoya blames HUD’s tentativeness in carrying out competing mandates of continuing FHA’s role in restoring the housing market and ensuring availability of mortgage credit, and continuing lender participation in the FHA program. For example, he said FHA has been slow in starting claims reviews. “The OIG has repeatedly noted in past audits and other types of lender underwriting reviews HUD’s financial exposure when paying claims on ...

Ginnie Mae securitization of jumbo mortgage loans with a VA guaranty rose significantly in 2015 despite a volume drop-off in the fourth quarter, according to Inside FHA/VA Lending’s analysis of agency data. Year-over-year results saw an almost 60 percent increase in Ginnie Mae mortgage securitization backed by VA jumbo loans. This was slightly dampened by 17.1 percent drop in VA MBS production in the fourth quarter from the previous quarter. All top-five VA jumbo securitizers – Wells Fargo, Freedom Mortgage Corp., PennyMac Corp., U.S. Bank, and Quicken Loans – reported significant drops quarter-over-quarter and year-over-year. Wells Fargo delivered a total of $5.0 billion in VA jumbo loans into Ginnie pools, making it the leading jumbo securitizer in that segment. This accounted for 17.7 percent of the market. Freedom Mortgage ended the year with $2.1 billion in ... [ Charts ]

Endorsements of reverse mortgages for FHA insurance increased nearly 15 percent in 2015 from the previous year, thanks to a strong first half, according to a new analysis by Inside FHA/VA Lending. Home Equity Conversion Mortgage lenders closed 2015 with an estimated $16.0 billion despite a weak second half in which lenders struggled with the delayed effects of a new policy change. Issued in April 2015, the policy calls for a financial assessment of a HECM borrower’s “willingness and ability” to meet his or her financial obligations and to comply with the program’s requirements. In addition, the policy requires lenders to determine whether an allocation of HECM proceeds should be required for payment of property charges. Nonpayment of property taxes and insurance when they are due is the leading cause of borrower default. Lenders felt the impact of the financial-assessment ... [ Charts ]

CORRECTION: An update to a story in the March 11 issue of Inside Nonconforming Markets with the headline “Banks’ First-Lien Holdings Increase in 2015” is available at http://www.insidemortgagefinance.com. The story and accompanying ranking were revised because the ranking initially showed numbers from the second quarter of 2015 for the fourth quarter of 2014. Five Oaks Investment said it recently determined ... [Includes five briefs]

A proposal this week for how to reform the government-sponsored enterprises included a provision that would allow for an adjustment of the agency share of mortgage financing via loan limits. The loan limit proposal would differ from current practices where the Federal Housing Finance Agency makes increases to the conforming loan limit based on home price trends. The proposal, “A More Promising Road to GSE Reform,” was authored by Jim Parrott, Lewis Ranieri ...

Bank and thrift holdings of home-equity loans declined by less than 1.0 percent in the fourth quarter of 2015 compared with the previous quarter, according to a new ranking from the Inside Mortgage Finance Bank Mortgage Database. Banks and thrifts held $944.33 billion in home-equity lines of credit, unused HELOC commitments and closed-end second liens in portfolio as of the end of the fourth quarter of 2015, down 0.8 percent from the third quarter ... [Includes one data chart]

Originations of non-qualified mortgages remain suppressed and industry participants are divided on prospects for volume going forward. “We thought there would be significant non-QM activity by now,” said Chris Haspel, a director at Promontory Financial Group. He was speaking at the recent ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. Haspel was a senior adviser for residential mortgage servicing and ...

Issuance in the jumbo mortgage-backed securities market has nearly stopped in the first quarter of 2016, but not all issuers are ready to abandon the sector. “The securitization market has been slow to re-open but there’s a lot of optionality to that business to the extent that the banks’ lust for mortgages on their balance sheets changes in different interest rate environments,” said William Roth, CIO of Two Harbors Investment. “The ability for us to grow that business dramatically is there ...