Issuers, investors and even regulators agree that underwriting standards for non-agency mortgage-backed securities will have to loosen for the sector to grow. “We have to start moving down the credit spectrum,” said Sharif Mahdavian, a director and analytical manager of residential MBS at Standard & Poor’s. Speaking at the American Securitization Forum’s ASF 2013 conference last week in Las Vegas, he said non-agency originations could easily move from “shocking prime” to ...

The owners of Citadel Servicing are moving closer to raising capital in the range of $100 million to $200 million, but as Inside Nonconforming Markets went to press this week, they weren’t taking telephone calls about the transaction. The privately held Citadel is based in Orange County, CA. Its CEO is Dan Perl, a former thrift executive who has worked in nonprime but exited the business before the market crashed. Although Perl has declined interviews, at least two sources close to the company ...

A deeply divided House Financial Services Committee took on FHA solvency this week as critics and defenders clashed over the agency’s practices, financial health and future role in the nation’s housing market. The distinctly partisan tone of the hearing quickly raised doubt as to whether the Republican majority and their Democratic opponents can come to some compromise to strengthen the FHA and reduce its risk to taxpayers. Committee Chairman Jeb Hensarling, R-TX, echoed complaints by Republican colleagues that the FHA is ...

An announced 10 basis-point hike in the FHA mortgage insurance premium (MIP) may bolster the health of the FHA Mutual Mortgage Insurance Fund and speed up shrinkage of FHA market share, but it will also make FHA-insured loans costlier for borrowers. The increase is the latest in a series of premium hikes imposed by the Department of Housing and Urban Development in the past three years to strengthen the MMI Fund’s capital reserves, which lately have fallen to a negative position. Simultaneously, HUD announced other measures to ... [1 chart]

The FHA this week has proposed to set a 95 percent maximum loan-to-value ratio for FHA-insured loans over $625,500, effectively raising the minimum downpayment for jumbo loans from 3.5 percent to 5 percent. In a Feb. 6 Federal Register notice, the FHA said the proposed change is aimed at improving the health of the Mutual Mortgage Insurance Fund, whose statutory capital reserve ratio has fallen to a precarious level, raising the specter of a taxpayer bailout. Despite steps taken since 2009 to strengthen the MMIF, actuarial reviews of the fund have projected rising levels ...

Although unhappy about the demise of the popular, fixed-rate, standard Home Equity Conversion Mortgage, loan officers are not worried about any long-term adverse effect on their FHA businesses. In fact, members of the National Reverse Mortgage Lenders Association, support the FHA’s decision, which is a part of a broad effort to strengthen and better manage the risk of the agency’s Mutual Mortgage Insurance Fund. They said they have other HECM products to offer in lieu of the standard HECM loan. Beginning April 1, borrowers who choose a fixed interest rate will be limited to ...

FHA-approved lenders that engage in aggressive marketing to borrowers with a history of foreclosure, particularly advertisements about the ease of obtaining an FHA-insured mortgage after foreclosure, could face potential sanctions and severe penalties, the FHA warned. In a letter to lenders, FHA Commissioner Carol Galante said there has been a proliferation of web-based and print ads conveying the message that almost any borrower can get a new FHA loan three years after ...

Responding to industry concerns over the impact of the new loan officer compensation final rule on reverse mortgages, the Consumer Financial Protection Bureau has clarified the phrase “amount of credit extended” for closed-end Home Equity Conversion Mortgage loans. For closed-end reverse mortgages, a loan originator’s compensation may be based on either (a) the maximum proceeds available to the consumer under the loan; (b) the maximum claim amount (if the loan is subject to the Department of Housing and Urban Development’s HECM rules); or (c) the appraised value of the property, as determined by ...

A federal appeals court has rebuffed the bid by American International Group’s mortgage insurance unit to overturn a lower court’s order to pay more than $45 million to SunTrust Banks for insured losses related to mortgage defaults. The Fourth Circuit Court of Appeals last week upheld a Virginia federal judge’s ruling that AIG’s United Guaranty breached an insurance agreement by refusing to pay claims on 1,305 defaulted “combo” loans – which is a first-lien loan with a smaller, second-lien “piggyback” loan. At issue were mortgage defaults that SunTrust claimed should have been covered under a ...

Genworth Financial Inc.’s U.S. mortgage insurance segment continued to be a burden to its parent despite reporting a narrower operating loss of $34 million in the fourth quarter of 2012, compared to losses of $38 million in the prior quarter and $96 million in the prior year. Nonetheless, the reduced amount of losses during the period was good news to company executives who reported net income of $166 million, or 34 cents a share, during the period from $142 million, or 29 cents, a year earlier. Operating profit was $167 million, or 34 cents a share, up from ...