Here’s what the current state of mortgage banking boils down to: Can the industry survive on $1 trillion to $1.2 trillion in production a year through 2015?

Servicing problems are being addressed “quickly and effectively” by the servicers subject to the $25 billion national servicing settlement, save for Walter Investment Management’s Green Tree Servicing, according to Joseph Smith, the settlement’s monitor. In a report released last week, Smith said Green Tree failed eight metrics tested in the second half of 2013, while Bank of America, Citi, JPMorgan Chase, Ocwen and Wells Fargo passed all of their settlement tests ...

More than two out of three non-agency loan modifications started under the Home Affordable Modification Program eligible for principal reduction have received principal reduction in recent years, according to the Treasury Department. Principal reduction for non-agency mortgages under HAMP is not required, but loan owners receive incentives for allowing principal reduction. HAMP servicers handling non-agency mortgages are required to evaluate ... [Includes one data chart]

Nonprime lender Citadel Loan Servicing increased its maximum loan size this week to $1.5 million from $1.0 million. Dan Perl, Citadel’s CEO, said the lender is on track to close $14 million in originations in May and $15 million in June. He added that Citadel is close to entering the non-agency mortgage-backed security market. Walter Investment Management revived Ditech Mortgage and the lender will offer jumbos, among other products ... [Includes four briefs]

Mortgage industry stakeholders are wary of a new FHA proposal to offer mortgage insurance premium reductions to borrowers who agree to complete housing counseling before and after they obtain an FHA-insured mortgage loan. The FHA is seeking comment on a proposed four-year, two-phase housing counseling pilot, “HAWK for New Homebuyers.” HAWK is an acronym for Homeowners Armed With Knowledge, and includes several initiatives aimed at broadening the use of counseling in FHA origination and servicing. HAWK is a component of the “Blueprint for Access,” which FHA announced on May 13 as part of the agency’s efforts to expand access to credit for underserved borrowers. The HAWK pilot would provide FHA pricing incentives to first-time homebuyers who participate in ...

Total FHA originations dropped significantly in the first quarter of 2014 as borrower access to credit remained a big problem for the agency, according to Inside FHA Lending’s analysis of agency data. FHA lenders ended the first quarter with a combined $28.3 billion in new originations, down 21.0 percent from the fourth quarter of 2013. Production also fell a whopping 55.6 percent from the same period a year ago. Purchase transactions comprised the bulk of new FHA loans but, so far, the much-anticipated boom in new purchase lending has yet to materialize. The high cost of FHA loans, due mainly to higher mortgage insurance premiums and a requirement to maintain mortgage insurance for the life of the loan, has made it difficult for borrowers to obtain an FHA-insured loan. Lender overlays also have restricted access to FHA credit. The FHA has raised premiums five times since 2009 to ... [1 chart]

Last week, the Republican-controlled House Financial Services Financial Institutions and Consumer Credit Subcommittee considered nearly a dozen pieces of legislation to rein in the CFPB, provide lenders with some regulatory relief, and bring greater transparency and accountability to the agency. Most Democrats on the committee and some consumer advocate groups were either skeptical or outright opposed to the measures, fearing each of the bills would weaken or eviscerate the agency – or result in “death by a thousand paper cuts,” as Rep. Carol Maloney, D-NY, put it. Meanwhile, Republicans and lender groups supported the collection of bills brought before the subcommittee as corrections to a flawed Dodd-Frank Wall Street Reform and Consumer Protection Act that need to be enacted before bad...

The Department of Veterans Affairs said there may be a need for further clarification of its newly issued qualified mortgage (QM) rule to allay lender fear of potential liability if they originate VA streamlined refinances, also known as Interest Rate Reduction Refinance Loans (IRRRL), with a rebuttable presumption. Industry sources say VA lenders remain apprehensive despite assurances by agency officials that little has changed in the VA lending process as a result of the agency’s interim final rule. VA issued its QM document on May 9 in compliance with the Dodd-Frank Act, defining the types of VA loans that are “qualified mortgages” for purposes of the new ability-to-repay (ATR) provisions of the Truth in Lending Act. The Act also imposed similar requirements upon the FHA and the Department of Agriculture for the loans they insure or guarantee. The agency said it issued the rule on ...

In a pre-emptive strike against Republican critics on Capitol Hill, the CFPB announced last week that it was scrapping its performance-management system that produced some disparate-impact blowback, and was instituting a plan to compensate agency staff estimated to cost upwards of $5 million. The new report digs deeper than the bureau’s 2013 internal report that was released after allegations of discrimination and allegation at the bureau came to light back in March. “[W]e have determined that there were broad-based disparities in the way performance ratings were assigned across our employee base in both 2012 and 2013,” CFPB Director Richard Cordray said in an email to bureau staff. “These differences indicate a systemic disadvantage to various categories of employees that persisted...

The slowdown in VA activity in the last quarter of 2013 spilled over into the first quarter of this year as lenders reported a 13.0 percent decline in loan production during the period, according to an Inside FHA Lending analysis of agency data. The downward trend in volume began at the end of the first quarter last year although VA still considered 2013 a record year for VA originations. VA lenders reported $19.5 billion in total production for the quarter, down from $22.4 billion in the previous quarter. Production, likewise, dropped 47.9 percent this year compared to the same period last year. Despite the slowdown, lenders remain optimistic about the VA market. “We have spent a lot of time understanding the perils of lending to veterans and learning to deal with the losses, and we are all in with VA lending,” said one lender. “When you do VA loans you talk about having ... [1 chart]