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 ...
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 ...
Ginnie Mae will provide a one-month grace period to April 30, 2014, for issuers to complete the submission of their master agreement to the Master Agreement Management System (MAMS) within the agency’s enterprise portal. The deadline for submission is March 31, 2014. The master agreements must first be accepted by the MAMS before an issuer may request or receive a “Transfer of Issuer Responsibility.” Failure to comply with this requirement could adversely affect the issuer’s ability to obtain commitment authority and to issue new pools or receive pool transfers. Although many issuers have resubmitted their master agreements, some found it difficult to complete the process within the required timeframe, according to Ginnie Mae. Providing a one-month grace period would help issuers to complete their resubmission. Issuers that still experience ...
The FHA has extended the filing deadline for lender recertification to June 9, 2014, to match the agency’s timeline for switching to the Lender Electronic Assessment Portal (LEAP). LEAP is a new system that will serve as a one-stop shop for all lender approval and recertifications. It replaces the current “Lender Approval” and “Cash Flow” web pages in FHA Connection as well as the current system lenders use to submit financial information as part of recertification. LEAP is scheduled to be fully operation this month, although consolidation of Title I and II lender identification numbers has already taken place on March 31. Last year, the FHA issued guidance extending the filing deadline for all lenders with a December 2013 fiscal year end. Although the guidance recommended that lenders be prepared to complete their recertification no later than May 31, it also stated that ...
Currently, MSRs can only account for 10 percent of Tier I capital, but MBA thinks it should be raised to at least 25 percent for banks, and 50 percent for thrifts and savings and loans.
Did the FHFA late last summer/early fall raise concerns regarding a certain nonbank servicer’s capital in regard to a huge portfolio of mortgage servicing rights that it had bought earlier in the year from a megabank?
Early indicators suggest that mortgage originations slumped by about 23 percent in the first quarter of 2014, a harbinger of tough times to come for companies that are running on fumes. According to a new Inside Mortgage Finance analysis of loan-level data in Fannie Mae and Freddie Mac first-quarter securitizations, primary market originations for the first three months of the year totaled about $235 billion. Unless the pace picks up, 2014 could fail to reach $1 trillion for the first time since 1998. Lender surveys, which are the major factor in Inside Mortgage Finance originations estimates, are underway. Weak origination volume is...
Standard & Poor’s announced late last week that it placed 96 ratings from 20 servicer-advance ABS on watch for a potential downgrade and the rating service plans changes to its rating criteria for servicer-advance ABS. Industry analysts suggest that the actions could disrupt the market for servicer-advance ABS, as S&P has been the dominant rating service in the sector. S&P said downgrades on servicer-advance ABS are possible because the analysis that accompanied ratings on certain deals didn’t consider subordinated interest amounts as part of the ratable promise. “The CreditWatch placements reflect...
At the end of February, Ocwen Financial issued a $123.6 million security backed by mortgage-servicing rights on agency mortgages, the first of its kind. The security was attractive to investors as well as to nonbanks, with more transactions expected, according to the Urban Institute’s Housing Finance Policy Council. The transaction has a 14-year debt obligation and was secured by Ocwen-owned MSRs on mortgages with an unpaid principal balance of approximately $11.8 billion. Investors in Ocwen Asset Servicing Income Series 2014-1 receive a monthly payment of 21 basis points of the unpaid principal balance of the reference pool in the form of an interest-only strip, along with certain other payments. In a new analysis, the HFPC’s Laurie Goodman and Pamela Lee said...
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