Deficient file documentation is the leading cause of initial “unacceptable” ratings in the FHA’s most recent post-endorsement technical review (PETR) of targeted single-family FHA loans. Published in the March 2014 issue of Lender Insight, review results showed that 50 percent of the 5,504 FHA loans selected for review in the fourth quarter of 2013 had missing or flawed documentation. Of that percentage, 65 percent of loans were rated “unacceptable.” Loans are selected for post-endorsement review based on a risk-targeting methodology and do not reflect the overall FHA portfolio. An “unacceptable” rating indicates that the loan endorsement file had a material defect at the time the loan was endorsed for FHA insurance. Such ratings are upgraded subsequently if the lender provides mitigating documentation. Unacceptable ratings are due to errors or flaws in ...

Overall FHA production fell significantly in all 50 states in 2013 apparently due to mortgage insurance premium increases and policy changes that made it difficult for even qualified borrowers to obtain an FHA-insured single-family loan. FHA volume by state dropped 27.5 percent in the fourth quarter to $35.8 billion, from $49.4 billion in the previous quarter, with all states showing varying percentages of decline during the period. Year over year, production by state declined by 9.2 percent, data showed. Total FHA originations were $211.3 billion for 2013, with the first quarter ending strongly with $63.7 billion. Production, however, lost steam over the next three quarters. Among the top five FHA states, Virginia suffered the largest quarterly drop, 35.2 percent, in FHA volume. California was the top FHA producer state with $35.2 billion for a ... [2 charts]

Beginning June 1, 2014, securitizations backed by Home Equity Conversion Mortgages may not include HECM loans that provide for future draws at a fixed rate of interest. Specifically, Ginnie Mae warned that the potentially excessive risk associated with such HECM loans might be more than what the agency could handle in the event of an issuer default. The prohibition applies to fixed-rate HECM loans where the borrower has the option to select a payment plan that allows future advances against the principal limit. These loans give rise to the risk that such advances will become uneconomic should interest rates rise from when the loan is originated, according to Ginnie Mae. The impact of negative spreads between a fixed noted rate and future prevailing rates could be ...

Bank of America and James Nutter & Co. have agreed to indemnify the Department of Housing and Urban Development to resolve allegations that they failed to perform due diligence in underwriting Home Equity Conversion Mortgage loans. An audit of the HECM program by the HUD Office of Inspector General found that the financial institutions allowed 33 HECM borrowers to take out more than one loan, a violation of program requirements. The program requires borrowers to reside in the mortgaged residence as their principal residence. In addition, borrowers may not have more than one principal residence at the same time. In BofA’s case, one borrower obtained two HECM loans on properties she owned in Massachusetts and Florida, both of which she identified as her principal residence. The HUD OIG said there was sufficient information to alert BofA and the underwriter that ...

The Mortgage Bankers Association is urging the Department of Housing and Urban Development to provide a transparent process by which interested parties could request a recalculation of the FHA loan limits and present supporting evidence. By statute, maximums for FHA loan limits in high-cost areas were reduced to $625,500 from $729,750 at the beginning of the year for one-unit residential properties, the same maximum loan limit for Fannie Mae and Freddie Mac for similar properties in high-cost areas. The MBA said HUD made further reductions in FHA FY 2014 loan limits in approximately 300 counties and county equivalents across the country, with many experiencing significant reductions. The trade group believes these changes were not required by statute. To the extent that the loan-limit reductions in those areas were discretionary, the MBA strongly urged HUD to moderate its ...

FHA Commissioner Carol Galante quashed any industry hope of seeing mortgage insurance premiums lowered at this time, saying that while the Mutual Mortgage Insurance Fund has shown some improvement, full recovery is still far off. In remarks during the Mortgage Bankers Association’s National Advocacy Conference this week, Galante also defended a provision in the president’s FY 2015 budget proposal seeking statutory authority for the FHA to collect an administrative fee from lenders to help fund quality control improvements. Both issues are high up on the MBA’s lobbying priorities as members gathered in Washington, DC, this week to meet with lawmakers and their staff to discuss FHA and other key industry concerns. Galante said the Department of Housing and Urban Development is currently focused on strengthening the MMI Fund and expanding access to credit for all qualified borrowers. The FHA raised pricing five times from ...

CORRECTION: A March 14, 2014, story in Inside Nonconforming Markets with the headline “Credit Suisse Taps New Penn for Another Jumbo MBS” stated that according to Standard & Poor’s, due-diligence firms found that New Penn Financial allowed exceptions to its underwriting guidelines for some mortgages included in CSMC Trust 2014-SAF1. In fact, the underwriting exceptions were allowed by Credit Suisse on mortgages from lenders not identified by S&P ... [Includes three briefs]

A number of real estate investment trusts and other nonbanks plan to invest in nonprime assets other than vintage non-agency mortgage-backed securities as part of an effort to take credit risk as opposed to interest rate risk. The plans include investments in credit-sensitive loans, seller financing for lenders that work with nonprime borrowers and, potentially, even direct nonprime lending. A year ago, Two Harbors Investment saw an opportunity in what it calls credit-sensitive loans ...

Undisclosed third parties rejected a small portion of Ocwen Financial’s planned acquisition of mortgage servicing rights from OneWest Bank, according to a report this week from Fitch Ratings. The lack of approval on Ocwen’s MSR purchase was just the latest hurdle faced by nonbank servicers with plans to grow. Last year, Ocwen announced it planned to acquire a significant portion of MSRs from IndyMac Mortgage Services, a division of OneWest. Fitch said the acquisition ...

Ethos Lending was looking for an investment from Fenway Summer and ended up merging with Fenway Summer’s mortgage unit. The combined operation plans to start originating agency mortgages in the second quarter of this year and offer prime non-qualified mortgages via the wholesale channel by the end of 2014. Raj Date, the founder of Fenway Summer and the former deputy director of the Consumer Financial Protection Bureau, will serve as chairman of ...