The FHA’s widespread reduction in loan limits for 2014 has had a mixed impact on production levels so far this year, according to a new Inside FHA Lending analysis of FHA endorsement data. Through the first four months of 2014, FHA endorsements were down 55.6 percent from the same period last year. But in counties where loan limits were lowered, FHA production was down 57.5 percent from early 2013. In the relatively few counties where loan limits actually increased in 2014, FHA endorsements were also down from a year ago, but by a less severe 47.4 percent. The biggest decline in endorsements has been in refinances, especially FHA-to-FHA refinances. In areas with lowered loan limits, production of these loans has plummeted 87.0 percent, and even areas with raised loan limits saw an 81.1 percent drop in streamlined refis. Purchase-mortgage originations have taken less of a ...

The delinquency rate for residential FHA-insured mortgages fell at the halfway mark of 2014 from the end of the fourth quarter last year, a result of improved overall loan performance, strong credit standards and an improving, albeit slowly, economy, an Inside FHA Lending analysis of agency data suggests. Although the number of FHA lenders included in the analysis has doubled since year-end 2013, delinquency rates in the 30-60 days and 90-day plus buckets appear to be trending downward. As of June 30, FHA delinquencies across the board were down to 13.3 percent from 15.2 percent as of Dec. 30, 2013. The seriously delinquent rate – the percentage of loans that are 90 days or more past due – has dropped to 7.14 percent from 8.08 percent over the same period. The delinquency rate of FHA loans that are at least one payment past due also fell to ... [1 chart]

New mortgage insurance eligibility rules proposed earlier this month by the Federal Housing Finance Agency appear likely to cause some MIs to tweak their corporate structures and/or to raise additional capital, note industry observers. In its draft Private Mortgage Insurer Eligibility Requirements, the FHFA directed Fannie Mae and Freddie Mac to revise, expand and align their risk management requirements for mortgage insurance counterparties.The updated financial requirements incorporate a new, risk-based framework that ensures that approved insurers have a sufficient level of liquid assets from which to pay claims.

A healthy housing recovery boosted mortgage origination volume during the second quarter of 2014, but production remains at relatively sluggish levels, according to a new market analysis and ranking by Inside Mortgage Finance. Single-family mortgage originations totaled an estimated $295 billion during the second quarter, up 25.5 percent from the first three months of the year. The first quarter of 2014 was the worst production environment for the mortgage industry since the end of 2000, even falling below the mark set at the depth of the financial crises in the fourth quarter of 2008. In fact, the most recent April-to-June cycle brought...[Includes three data charts]

Bureau Moves to Ensure Equal Treatment for Same-Sex Marrieds. The CFPB is synchronizing its internal policies with the U.S. Supreme Court decision in United States v. Windsor, striking down as unconstitutional Section 3 of the Defense of Marriage Act, which holds that the word ‘marriage’ means only a legal union between one man and one woman. According to a staff memorandum from CFPB Director Richard Cordray, the CFPB will regard a person who is married under the laws of any jurisdiction to be married nationwide for purposes of the federal statutes and regulations under the bureau’s jurisdiction regardless of the person’s place of residency. However, consistent with other federal regulatory agencies, the bureau will not regard persons who are joined ...

Mortgages with 620-679 credit scores accounted for more than half of FHA’s mortgage insurance business in the first quarter of 2014, up from 42.0 percent a year ago, according to the Department of Housing and Urban Development’s latest quarterly report to Congress on the state of the FHA Mutual Mortgage Insurance Fund. Data showed FHA-insured mortgages in the 620-679 credit score range, a band typically identified with borrowers with slightly tainted credit, comprised 51.1 percent of new endorsements in the first quarter. This was up from 50.1 percent in the fourth quarter of 2013. FHA endorsements in the 620-plus category started trending upward in the first quarter of 2011, while endorsements in the 720-850 credit score range began a slow decline during the same period. The distribution of borrower credit scores continued the migration seen in previous quarters, though at a ...

JPMorgan Chase chief executive Jaime Dimon this week warned that the investment bank may rethink its FHA business without some type of safe harbor to shield it from potential future liabilities arising from the Financial Institutions Reform, Recovery and Enforcement Act and the False Claims Act. In February this year, JPMorgan agreed to pay $614 million to the federal government to settle allegations that it falsely certified poorly underwritten loans for FHA endorsement, causing massive losses to taxpayers in paid claims. Dimon lashed out at the government during a telephone briefing on the company’s second-quarter 2014 earnings report. He said JPMorgan lost a tremendous amount of money over what the government claimed was fraud but was in fact a “commercial dispute” between FHA and the bank. “We collected $600 million in insurance, the [government] disputed $200 million [alleging] it was fraud ...

If an FHA borrower runs out of options for loss mitigation and home retention, a lender must first consider a pre-foreclosure or short sale, with deed-in-lieu (DIL) of foreclosure as a second option, according to new FHA guidance. Mortgagee Letter 2014-5 states that the lender must first determine whether the borrower facing default or at risk of default qualifies for a pre-foreclosure sale (PFS). The FHA allows pre-foreclosure sales to be processed as either a “standard PFS” or a “streamline PFS.” The former is available only to owner-occupants while the latter is for both owner- and non-owner-occupied single-family properties. In determining standard PFS eligibility, the lender must use a “deficit income test” to determine whether the borrower is experiencing hardship and is able to sustain his or her mortgage. A DIT resulting in a negative amount would likely qualify the borrower for a ...

New FHA guidance regarding voluntary termination of FHA mortgage insurance does not affect separate guidance requiring borrowers to continue payment of their annual insurance premium regardless of the loan’s amortization terms. The FHA made the clarification in relation to Mortgagee Letter 2014-13, which requires written consents by the lender and the borrower in all voluntary terminations of FHA mortgage insurance. The requirement becomes effective on Oct. 1st this year. Specifically, the guidance requires FHA lenders to document that they have obtained the borrower’s informed consent to terminate FHA insurance on the mortgage. The change ensures that the lender would incur no liability and that the borrower understands the terms of the voluntary termination. Under current rules, the FHA may terminate mortgage insurance at the request of the borrower and the lender. The lender may cancel the insurance endorsement upon notification by the FHA commissioner that the insurance contract is terminated.

One deficiency commonly noted in cases heard by the Department of Housing and Urban Development’s Mortgagee Review Board is failure by FHA lenders and servicers to implement and maintain a quality control (QC) plan. FHA’s focus on quality control has increased over the last couple of years as the agency strives to correct underwriting flaws that have contributed to the massive losses and severe depletion of the Mutual Mortgage Insurance Fund. After years of guiding and helping clients comply and cope with FHA regulations, requirements and enforcement actions, the Collingwood Group reports that a common QC-related mistake among FHA lenders is failure to document steps taken to correct deficiencies – or to take any corrective action at all. Tied to this issue is ...