Five federal regulatory agencies have issued a joint proposed rule to implement certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 regarding private flood insurance, escrow of flood insurance payments and forced-placement of flood insurance. The proposal would affect loans secured by property in a special flood hazard area (SFHA), which is defined as an area within a floodplain having a one percent or greater chance of flooding in any given year. The rash of catastrophic flooding seen in recent years across the country has underscored the need for stronger flood insurance regulations. The Office of the Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance Corp., Farm Credit Administration and the National Credit Union Administration are revising...

GSEs Issue Government Shutdown Guidance. Freddie Mac this week followed Fannie Mae in issuing new, temporary guidelines to servicers and sellers of single-family mortgages as the nation began its second week of the government shutdown. The GSEs have temporarily revised their selling guidelines to permit lenders to verify Social Security and IRS transcripts after the closing but before the delivery date of the loan.“Servicers can offer unemployment forbearance to borrowers that have a financial hardship as a result of the shutdown and must suspend credit reporting for those borrowers,” said Fannie.

Capitalizing on the uncertainty of a government shutdown, private mortgage insurers are stepping up to provide conventional mortgage insurance on any loan with FHA documentation that could not close on time due to delays at the undermanned agency. Private MIs say they are “ready to help with FHA uncertainty,” urging lenders to consider switching to conventional mortgage insurance if they have any government-insured or guaranteed loan that is at risk of not closing due to the shutdown. United Guaranty said...

Esoteric accounting rules, statutory loss reserves requirements and declining loan production have compelled the FHA to take a mandatory draw of approximately $1.7 billion from the Treasury even though it has plenty of cash to cover potential losses. While the agency had significant liquid assets for its forward loan portfolio, it would be required to boost reserves for its Home Equity Conversion Mortgage program to cover all expected future losses for the next 30 years, FHA Commissioner Carol Galante explained in a letter to Senate Banking Committee leaders. The announced draw became ...

The Department of Housing and Urban Development this week proposed its own “qualified mortgage” rule for FHA-insured mortgage loans that builds off the existing QM rule finalized by the Consumer Financial Protection Bureau earlier this year. The proposed rule aligns with the ability-to-repay criteria in the Truth in Lending Act as required by the Dodd-Frank Act. Once the proposal becomes final and takes effect, it would replace the CFPB’s rule for FHA loans. The DFA has set a seven-year timetable for FHA, the VA and the Rural Housing Service to promulgate their own QM rules. HUD’s proposed QM rule would ...

Overall FHA production saw little change in the second quarter of 2013 from the previous quarter, with the fixed-rate, 30-year product, refinances and jumbos weakening somewhat during the period, according to Inside FHA Lending’s analysis of FHA data. FHA endorsements dropped 0.7 percent to $63.2 billion from $63.7 billion on a quarter-to-quarter basis. It is also the second time the numbers have slipped since the fourth quarter, when new endorsements totaled $64.0 billion. During the quarter, the top FHA lenders saw their total production drop by ... [2 charts]

The FHA was still able to endorse single-family mortgage loans during the first week of the partial government shutdown, although no FHA staff were available to underwrite and approve loans. A significant delay in the processing of new FHA insurance applications might have occurred this week because only 64 employees are still at work in HUD’s Office of Housing, which includes the FHA. HUD said it might need more essential employees per day, on an intermittent basis, to perform key activities. The department expects these calls for reinforcement to ...

The Inspector General of the Department of Housing and Urban Development urged HUD to strengthen its oversight of prohibited restrictive covenants (PRC) in FHA-insured mortgages and to stop the illegal practice. It is difficult to gauge just how serious is the problem nationwide because HUD did not specifically look for prohibited restrictive covenants during loan reviews and did not track such violations, said Tanya Schultze, HUD regional inspector general for audit for the Los Angeles region. However, audits by Schultze’s team did uncover six FHA lenders that allowed ...

The Department of Housing and Urban Development’s Mortgagee Review Board has collected $1.9 million from Oct. 1, 2012, through June 30, 2013, from actions taken against FHA lenders. The MRB actions involved 30 lenders, of whom 15 agreed to settle and seven agreed to indemnify HUD for its losses, according to the board’s latest data. The indemnification agreement covered 166 FHA-insured loans, and 11 lenders lost their authority to participate in the FHA single-family mortgage program. Cases heard by the MRB involved infractions, such as failure to implement and maintain a quality control plan and to review early payment default loans, which resulted in ...

The FHA has clarified the meaning of “continuous income” and announced other updates to its loss mitigation home-retention options to help distressed borrowers retain their homes and, thus, reduce the number of claims against the Mutual Mortgage Insurance Fund. FHA lenders are required to implement the updated policies in Mortgagee Letter 2013-32 by Dec. 1, 2013. “Continuous income” is one of the criteria a defaulting borrower must meet in order to qualify for a loan modification. While it generally refers to employment income (e.g., wages, salary or self-employed earnings), it may also include ...