The Department of Housing and Urban Development is seeking comment on a policy change that would reduce the FHA’s credit-score threshold from 620 to 580 to allow more manually underwritten borrowers to use compensating factors that would help them qualify for an FHA-insured mortgage loan. The change would strengthen manual underwriting and reduce FHA’s underwriting losses, resulting in more revenue per loan for FHA, HUD said. “The FHA can control costs through risk management practices,” the agency explained in a notice of rulemaking. “The lower costs are a gain to FHA.”

The Department of Housing and Urban Development this month expects to issue a final rule that would eliminate the process of requesting alternative FHA maximum loan limits due to improved access to, and availability of, home sales data. With the availability of comprehensive national databases of home sales transactions and continuing data-collection efforts, the regulations governing requests for alternative maximum mortgage limits have become outdated and unnecessary, the agency said.

The Department of Housing and Urban Development warned of tougher enforcement against servicers who do not make full use of HUD’s loss mitigation tools, as it announced the implementation of a newly revised tiered servicer ranking system. The new system, Tiered Ranking System II, features a new scoring mechanism that would help HUD determine which lenders get higher reimbursement rates on claim expenses based on their servicing performance.

FHA and VA loans backing Ginnie Mae pools in 2013 showed an average mid-range FICO score of 693, lower debt-to-income ratio and an average loan size of $187,268, confirming strict underwriting in both government programs, according to an Inside FHA Lending analysis of Ginnie Mae loan-level disclosures. Issuers securitized $370.4 billion of mortgages with first payment date in 2013 through November. Loan characteristics exclude loans with no information reported.

The Department of Housing and Urban Development has delayed the implementation of a new requirement to assess the financial condition of borrowers seeking a Home Equity Conversion Mortgage loan, which was to take effect on Jan. 13. HUD’s decision to delay responds to an industry concern that the initial effective date does not give lenders sufficient time to customize appropriate software, hire and train new underwriters and complete other critical implementation tasks. It would take at least three months to do all these things, lenders said.

Analysts forecast uncertainty for the agency MBS market going into 2014 as the policy landscape reshapes itself and investors cautiously adapt to the shape of things to come. Look for 2014 to be a “year of transition” amid a slowly rising range of U.S. Treasury yields, a slowly recovering economy, and a Federal Reserve that transitions away from quantitative easing toward forward guidance, according to RBS analysts. RBS noted...

Fannie, Freddie Suspend Holiday Evictions. In what has become an annual tradition, Fannie Mae and Freddie Mac each announced last week that all foreclosure-related evictions of single-family and two-to-four unit properties are suspended until after the New Year.“At this time of year, we want to bring some relief to families who confronted financial difficulties and went through foreclosure,” said Chris Bowden, Freddie’s senior vice president of REO. The GSEs are also encouraging struggling homeowners to contact their servicers for help to avoid foreclosure. “We encourage any homeowner who is having difficulty making their mortgage payment to reach out for help right away,” added Fannie Chief Operating Officer Terry Edwards.

Revised loan-level price adjustments recently announced by Fannie Mae and Freddie Mac that will make mortgages more expensive for a wide breadth of borrowers are not sitting well with different factions of the industry, including mortgage insurance firms that could lose some of their hard-fought market share gains. Industry trade groups are already turning to their friends in Congress, hoping that certain key members of the House and Senate financial service committees might have a talk with Rep. Mel Watt, the North Carolina Democrat who’s waiting to be sworn in as the new director of the Federal Housing Finance Agency. The government-sponsored enterprises announced...[Includes one data chart]

The U.S. Treasury’s new Federal Insurance Office released a long-awaited report last week that calls for the federal oversight of mortgage insurers, an industry now overseen directly by state insurance regulators and indirectly by Fannie Mae, Freddie Mac and the Federal Housing Finance Agency. “Federal standards and oversight for mortgage insurers should be developed and implemented,” said the report. The private mortgage insurance sector is interconnected...

After ending fiscal year 2012 at a negative $16.3 billion, the FHA’s mutual mortgage insurance fund is close to being in the black, according to an independent actuarial report released late last week. The FHA noted that it has shifted its focus from shoring up the MMIF to reducing lenders’ underwriting overlays and targeting poorly performing servicers. The net worth of the MMIF at the end of fiscal year 2013 was negative $1.3 billion, according to the report, due to pricing and policy changes by the Department of Housing and Urban Development along with improvements to the economy. The capital reserve ratio for the MMIF also improved from negative 1.44 percent at the end of fiscal 2012 to negative 0.11 percent at the end of fiscal 2013. HUD Secretary Shaun Donovan noted...