In the fourth quarter of 2013, Redwood Trust launched its program to acquire mortgages to be sold to the government-sponsored enterprises. The real estate investment trust’s GSE conduit activity is now poised to overtake the jumbo activity that Redwood has been known for in recent years. Redwood acquired $1.09 billion in residential mortgages in the first quarter of 2014, with jumbos accounting for 72.6 percent of the activity. Officials said the real estate investment trust’s goal is to ...
While originating loans that do not meet qualified-mortgage standards does pose litigation risk, many of the lenders willing to offer the loans to prime borrowers have established underwriting standards that minimize the risks while participating in a sector with less competition than the agency market. Mitch Hochberg, general counsel at Ethos Lending and a partner at Fenway Summer, estimated that non-QMs would account for at least 12.5 percent of originations in 2014, assuming a ...
The Department of Veterans Affairs has issued an interim final rule establishing that almost all VA loans that meet current agency underwriting standards will be “safe harbor” qualified mortgages. Certain VA streamlined refinancing will be “rebuttable presumption” QMs instead. Specifically, under the VA rule, safe harbor QMs include all purchase-money mortgage loans and refinances other than certain Interest Rate Reduction Refinance Loans (IRRRLs) guaranteed by the VA. Such a designation would help assure veterans they can still obtain mortgage loans on favorable terms while easing lenders’ fear of liability if they originate VA loans as well as investors’ concern about putting their money in VA loans, the agency said. In addition, the interim final rule confers QM safe harbor status to all VA direct loans, Native American direct loans and vendee loans. The VA QM rule complies with ...
The Department of Veterans Affairs will soon begin looking closely at whether lenders are complying with the agency’s requirement for a quality control plan. Participants at a recent VA lender conference in Houston said officials warned of impending audits of lenders’ quality control regimes as the agency tightens its oversight. All lenders authorized to process VA loans automatically are required to maintain a QC plan and execute it in the course of making VA loans. Lenders were advised to familiarize themselves with VA’s QC plan requirements and be ready when VA scrutinizes the process in future lender-monitoring audits, participants said. This initiative is consistent with VA auditing an increasing percentage of loans to refine its ...
The Department of Housing and Urban Development will soon seek comment on a proposal to extend equal protection to reverse mortgage borrowers and their non-borrowing spouses from displacement due to eviction or foreclosure. The proposed rule would codify the changes to existing Home Equity Conversion Mortgage regulations and make other alternative revisions as appropriate, according to HUD. The FHA expects to publish a notice of proposed rulemaking soon. Currently, the National Housing Act provides for a “safeguard to prevent displacement of the homeowner.” The provision defers repayment of the HECM until the homeowner’s death, the sale of the home, or the occurrence of other events specified in the regulations. Such events include the homeowner’s failure to reside in the property or failure to pay the required taxes and insurance. Without this provision, a reverse mortgage is ...
Issuance of mortgage bonds with a Ginnie Mae guarantee fell during the first three months of 2013 as higher FHA costs and all-cash home sales appeared to drive the decline, according to Inside FHA Lending’s analysis of agency data. Ginnie Mae issuers closed the first quarter with MBS issuances totaling $58.2 billion, down 19.0 percent from the fourth quarter of 2013. The drop was steeper on a year-over-year basis, 41.3 percent, data showed. FHA accounted for $30.6 billion of government-backed mortgage securities issued during the period, while VA and Rural Housing Development (Department of Agriculture) accounted for $19.1 billion and $4.1 billion, respectively. Top Ginnie Mae issuer Wells Fargo closed out the first quarter with $12.5 billion, down 28.1 percent from the previous quarter and off 59.9 percent from the same period a year ago. Wells’ volume accounted for ... [1 chart]
A coalition of industry trade associations is urging the FHA to harmonize its regulatory treatment of transfer fee covenants with the Federal Housing Finance Agency. In a joint letter, the group said the FHFA’s final rule on transfer fee covenants “establishes a clear, national standard to protect homeowners from equity-stripping private transfer fees while preserving the preeminence of state and local governments over land-sue standards.” The letter was sent in response to reports that FHA may issue a proposed rule on transfer fee covenants that will apply to FHA-insured mortgages. A private transfer fee covenant is attached to real property by the owner or another private party – frequently the property developer – and provides for a fee to be paid to specified third party every time the property is resold. The fee typically is a percentage of the property’s sales price and ...
A nonprofit organization that assists a government agency in providing secondary financing through FHA does not need approval by the Department of Housing and Urban Development or placement on the agency’s roster of approved nonprofits that meet certain requirements. According to Mortgagee Letter 2014-08, to qualify for the exclusion, the nonprofit’s functions must be limited to the government entity’s secondary financing program as well as to the note and deed of trust, which name the government agency as the mortgagee. Currently, HUD requires nonprofits to be HUD-approved and listed on the agency’s roster of nonprofit organizations before engaging in secondary financing for closing costs, prepaids and downpayment assistance on behalf of the government entity. In a mortgagee letter last year, HUD acknowledged that some government entities could not legally or operationally ensure that they are “making” second mortgages. As a result, the agency allowed ...
A revised-areas map that meets the new definition of “rural area” for U.S. Department of Agriculture housing programs is now available to USDA lenders and borrowers seeking affordable rural-home financing. The map was posted on the USDA Income and Property Eligibility Site on May 6 and users may access it by selecting “single family housing” under the Property Eligibility menu. More details about the changes will be available soon in frequently asked questions guidance, the agency said. The new definition of rural area is contained in the Agricultural Act of 2014 (Farm Bill), which was enacted on Feb. 7 and made changes to federal rural development programs. Among other things, the bill redefined rural areas as those with populations up to 35,000 that are “rural in character” for eligibility in the USDA housing programs. The previous population requirement was less than 20,000 people. The area must be ...
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