Deephaven Mortgage’s recent adoption of an automated system to pre-qualify expanded-credit borrowers has prompted some speculation about whether fully automated underwriting systems could be used for originations of non-qualified mortgages. A number of expanded-credit lenders at the ABS East conference suggested that some automated underwriting is possible, but some aspects of the non-QM underwriting process will likely need human intervention. The conference was ...

Non-agency mortgages underwritten with just one monthly bank statement from the borrower might not meet standards set by the ability-to-repay rule, according to Eric Kaplan, director of the housing finance program at the Milken Institute’s Center for Financial Markets. Speaking at the ABS East conference produced by Information Management Network last week in Miami Beach, Kaplan was among the industry participants that raised concerns about how quickly underwriting has loosened ...

 This week the Federal Housing Finance Agency asked for input on Fannie Mae and Freddie Mac’s proposed Duty to Serve Plan modification for 2018-2020. Fannie’s proposal includes modifying actions to reflect revised rural investment targets based on enhanced market insight and experience since re-entering the low-income housing tax credit (LIHTC) equity market. Fannie also proposes making low income housing tax credit equity investments in 20 properties in 2018, 30 properties in 2019 and 30 properties in…

Ginnie Mae issuance of single-family mortgage-backed securities rode a homebuying wave during the third quarter of 2018, according to a new Inside FHA/VA Lending ranking and analysis. Ginnie issuers produced $105.63 billion of new MBS backed by forward mortgages during the July-September cycle, a 7.1 percent increase from the second quarter. That brought year-to-date production to $296.88 billion – down 11.3 percent from the first nine months of 2017. Purchase mortgages provided the boost for the Ginnie market. Some $75.69 billion of FHA and VA purchase mortgages were pooled in Ginnie MBS in the third quarter, a sturdy 13.1 percent increase from the previous period. Purchase loans accounted for 75.1 percent of FHA and VA loans securitized in the third quarter, compared to 64.7 percent for all of last year. Although production of these loans has gone up since the first quarter, year-to-date volume ... [Charts]

The reverse mortgage industry is supporting an FHA move to require a second appraisal for certain Home Equity Conversion Mortgage loans. FHA did not seek public comment on the interim policy change, which subjects all HECM loans, effective Oct. 1, to a collateral risk assessment to ensure the appraisal of the property is not inflated. The new policy has wide support in the reverse mortgage industry. A study conducted by the Department of Housing and Urban Development last year found that 37 percent of appraisals on approximately 134,000 HECMs tested positive for over-valuation. The inflated HECM appraisals were at least 3 percent higher than estimates by FHA’s proprietary automated valuation model, according to FHA Commissioner Brian Montgomery. The same study also found that higher-than-expected losses in the HECM program could be attributed in part to ...

Mortgage servicing delays have caused the Department of Housing and Urban Development to pay a whopping $413 million for unnecessary interest and other expenses. The payment put a major dent on the FHA Mutual Mortgage Insurance Fund and its ability to pay other claims or reduce FHA mortgage-insurance premiums, according to a report from the HUD inspector general. The amount covered interest payments and other costs on 27,634 preforeclosure claims over a five-year period. The costly setback could have been avoided had lenders completed servicing chores on defaulted FHA loans within their prescribed periods, the IG said. Although serviers were to blame, HUD reimbursed them through FHA insurance claims. The IG analyzed 100,077 preforeclosure claims paid from Aug. 1, 2012, through July 31, 2017. Auditors identified 30,061 claims that had ...

The mortgage banking industry is optimistic about Congress enacting legislation that would cure VA orphan loans before the midterm elections. The U.S. Senate still has time to consider H.R. 6737, the Protect Affordable Mortgages for Veterans Act, according to Bill Kilmer, chief lobbyist at the Mortgage Bankers Association. “Most observers think [lawmakers are] going to be around until Oct. 18 or 19, which is when Senate Majority Leader Mitch McConnell said he wants to keep folks around to work on nominations and other measures they need to clear,” Kilmer said. “There is time and, more to the substantive point, the bill passed the House.” H.R. 6737 would provide a technical fix so that certain VA refinance loans would be eligible for pooling in a Ginnie Mae mortgage-backed security. The bill was reported out of committee by a unanimous 49-0 vote, and was approved quickly by the House ...

Use of FHA downpayment assistance from programs run by entities owned by Native American tribes may soon be under agency scrutiny. Industry stakeholders are pointing to a pre-rule notice the Department of Housing and Urban Development published last spring as an opportunity for HUD to clarify the use of downpayment assistance from parties other than those currently allowed to meet FHA’s 3.5 percent downpayment requirement. In an advanced notice of proposed rulemaking in the Federal Register, HUD is seeking comment on the use of downpayment assistance as well as their approved sources, such as tribal providers, state and local housing finance agencies, government agents and non-profit organizations. One downpayment-assistance provider is the Chenoa Fund Loan Program, which is owned and operated by the Utah Cedar Band of Paiutes. The fund provides secondary financing to ...

The Department of Housing and Urban Development’s failure to record indemnifications under a 2015 settlement agreement exposed the FHA insurance fund to potential losses of more than $47.4 million, according to an internal audit report. HUD’s Office of the Inspector General performed the audit to resolve issues related to two settlement agreements entered into by Fifth Third Bank and the Department of Justice. Fifth Third, a direct endorsement lender, had voluntarily disclosed to HUD 1,439 materially defective FHA loans that were originated between 2003 and 2013. HUD paid claims on 519 of those flawed loans, which generated more than $84.9 million in ineligible claims. In addition, FTB agreed to indemnify HUD for all losses for the remaining 920 FHA-insured mortgage loans. In January 2017, the bank voluntarily disclosed an additional 381 materially defective FHA loans. A HUD review of the ...

The federal statute that authorized the Department of Housing and Urban Development to establish the Home Equity Conversion Mortgage program addresses only HUD’s authority to insure reverse mortgages and not the lender’s contractual right to foreclose, the U.S. Court of Appeals for the Eleventh Circuit has ruled. Affirming the district court’s decision in The Estate of Caldwell Jones, Jr., Executrix Vanessa Jones and Leah Grace Jones, Minor v. Live Well Financial Inc., the circuit court determined that the HECM statute did not prevent foreclosure pursuant to a reverse-mortgage contract originated before Aug. 4, 2014, even if the non-borrowing spouse continued to live in the mortgaged property. The question before the court was whether the statute can be read broadly to prevent foreclosure after the borrower’s death and prevent the non-borrowing spouse from being ejected from the ...