The Republican leadership of the House Financial Services Committee this week unveiled a comprehensive housing finance reform bill, including a series of proposals to “right size” the FHA, redefine its mission and reestablish it as a stand-alone agency. At the same time, Senate Banking Committee Chairman Tim Johnson, D-SD, and Ranking Member Mike Crapo, R-ID, announced they have reached a bipartisan agreement on legislation that would ensure the solvency of the FHA. Both lawmakers expect to introduce a bill next week. The House FHA reform measures were introduced in tandem with reform proposals for ...

The FHA has proposed measures to strengthen its oversight of FHA lenders and each measure could potentially increase lenders’ liability and compliance risk, compliance experts warned. Published for comment in the July 9 Federal Register, the proposals are part of a new enforcement regime that the FHA is considering to monitor and sanction lenders. They cover statistical sampling, origination quality standards, annual reviews, compare ratios, and indemnification and other remedies for loan defects. The proposed enforcement measures, however, raise a ...

The New York State Department of Financial Services has directed FHA lenders to refrain from applying the FHA’s higher mortgage insurance premiums in calculating a loan’s annual percentage rate and fully indexed rates for 60 days to prevent loans from becoming “high cost” or subprime. At the same time, the department issued guidance to conventional lenders on how to interpret existing provisions in state banking law regarding subprime loans. Statutory changes were made in 2009 to prevent some loans from becoming “subprime,” as defined by state law. Spikes in mortgage interest rates in the past few weeks plus ...

A post-endorsement review of FHA loans during the first quarter of 2013 has revealed a high percentage of materially defective loans.The defects apparently went undetected during the underwriting process and were uncovered only during a loan-level review that the FHA routinely conducts to ensure that newly originated, higher-risk loans comply with agency requirements. The Department of Housing and Urban Development’s Office of Lender Activities and Program Compliance reported that 44 percent of 6,251 single-family mortgage loans that were reviewed in the first ...

The Department of Housing and Urban Development is adopting the mortgage banking industry’s data standards format for the FHA’s TOTAL Mortgage Scorecard, which HUD uses to evaluate the credit risk of FHA loans that are submitted through an automated underwriting system. The standards were developed by the Mortgage Industry Standard Maintenance Organization (MISMO), a nonprofit subsidiary of the Mortgage Bankers Association. MISMO is an open data standards group that promotes consistency among mortgage transaction participants to reduce loan processing costs, increase transparency, and ultimately ...

Private mortgage insurers may be gaining momentum as the mortgage market steers toward a greater focus on purchase-mortgage lending, according to a new Inside Mortgage Finance analysis of Fannie Mae and Freddie Mac data. The two government-sponsored enterprises securitized a total of $56.11 billion of home loans that included private MI coverage during the second quarter of 2013. That was up 12.1 percent from the first three months of the year, compared to a 5.1 percent decline in total GSE business over that period. Private MI activity is...[Includes one data chart]

An FHA proposal for new legislative authority to transfer servicing has raised concerns among industry participants, particularly in the Ginnie Mae market. Authorizing the FHA to shift mortgage-servicing rights from one servicer to another could have a ripple effect on Ginnie Mae servicing rights and also adversely impact state mortgage servicing and origination licenses, some say. The bottom line is that Congress should consider FHA’s request for new statutory authority with great care, said Larry Platt, a compliance attorney and a partner at the Washington law firm K&L Gates. “We would hope that ...

The FHA’s tiered system for assessing servicers’ use of loss mitigation tools should serve more as a red flag for increased supervision rather than as a basis for terminating servicing rights, said the Mortgage Bankers Association. Commenting on the FHA’s proposed enhancements to its servicer scorecard, the MBA acknowledged the agency’s responsibility to monitor and hold servicers accountable for poor performance. But while tiered ranking is a good enforcement tool, it can be misapplied, the group indicated. Any ranking system is a good first ...

FHA endorsements saw very little improvement in May as mortgage interest rates began to climb, according to Inside FHA Lending’s analysis of FHA data. Total FHA originations rose only 2.4 percent in May to $22.0 billion from $21.5 billion the previous month, and 8.9 percent on a year-over-year basis. Volume was split down the middle between purchase and refinancings, with rates rising from 3.35 percent during the first week of May to 3.81 percent at the end of May. Retail accounted for 81 percent of FHA endorsements, which were mostly 30-year, fixed-rate mortgages. The average interest rate for FHA-insured, 30-year FRMs was ... [1 chart]

Reverse mortgage lenders, consumer groups and certain advocates for the elderly are urging Congress to enact legislation passed recently by the House of Representatives granting the FHA additional authority to govern its reverse mortgage program. Testifying before the Senate Banking Subcommittee on Housing, Transportation and Community Development, the groups said the most productive action Congress can take is to pass H.R. 2167 to allow HUD to make expeditious changes to the Home Equity Conversion Mortgage program through mortgagee letters. The bill, which the House approved on June 12, would ...