The mortgage banking industry will support reasonable efforts to protect the FHA Mutual Mortgage Insurance Fund as long as the changes don’t expose FHA lenders to onerous liability risk and treble damage claims, which could force them to limit or curtail their FHA lending, said the Mortgage Bankers Association. MBA President and CEO Dave Stevens said appropriate protections for the FHA are clearly needed, but they should not go so far as to shut down or restrict access to affordable credit and sustainable homeownership, particularly for first-time homebuyers. He said the industry is most concerned with FHA proposals to seek authority from Congress to extend indemnification requirements to all direct endorsement (DE) lenders and for an amendment to eliminate the “knew or should have known” standard with regard to fraud or misrepresentation. Both proposals are...

Lenders face increased regulation under policy changes designed to bring the FHA Mutual Mortgage Insurance Fund back to positive within the fiscal year and reduce the likelihood of a Treasury bailout to shore up the FHA’s claims-paying ability. The Department of Housing and Urban Development late last week announced a hike in FHA premiums and other changes designed to restore the FHA’s insurance fund, which had a negative 1.44 percent capital ratio at the end of September 2012, according to a new actuarial review. Department of Housing and Urban Development Secretary Shaun Donovan blamed...

The Department of Housing and Urban Development will raise the annual insurance premium on new FHA originations, reverse the agency’s current policy on mortgage insurance premium cancellation and institute other policy changes to improve the health of the FHA insurance fund. The new measures aim to offset significant losses from FHA’s legacy loans, which have caused significant stress to the agency’s Mutual Mortgage Insurance Fund. Results of a new FHA actuarial audit showed that the stress has plunged the MMI Fund into a deep hole, revealing negative capital of $16.3 billion (negative $13.5 billion excluding Home Equity Conversion Mortgages) on a $1.13 trillion FHA portfolio. The capital reserve ratio fell ...

Mortgage lenders will be facing tougher enforcement if Congress decides to act on a series of proposals to hold lenders accountable for noncompliance with FHA policies and regulations. In the wake of an adverse actuarial report regarding the health of the FHA’s Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante announced that the agency will seek new powers to recoup losses from lenders that originate bad FHA loans. The proposals are designed to provide the FHA with greater flexibility to revise policies and procedures to avoid unnecessary losses before they occur. They will also improve the agency’s ...

Reactions were mixed in the mortgage industry and on Capitol Hill on the heels of an independent actuarial study that projected a deficit of $16.3 billion in the FHA insurance fund and a negative1.44 percent capital reserve ratio. The FY2012 annual actuarial report to Congress on the condition of the Mutual Mortgage Insurance Fund reignited the debate on whether the FHA’s solvency issues may be resolved without a taxpayer bailout. The capital reserve ratio dropped from 0.24 percent at the end of FY2011, which is already way below the ...

The Department of Housing and Urban Development is taking aggressive actions to mitigate the negative impact of future Home Equity Conversion Mortgage books of business on the FHA Mutual Mortgage Insurance Fund. HUD said changes in borrower use of the HECM program, particularly among younger users, and the modeling changes in the FY2012 actuarial review of the MMI Fund show substantial stress in the HECM program. Besides softening the impact of HECM losses on the fund, the department wants to ensure that consumers are better protected and able to sustain their reverse mortgages. While the MMI Fund’s economic value fell to ... [1 chart]

Some real estate agents are refusing to accept offers from buyers using FHA financing prompting minority rights advocates to question whether racial discrimination is causing the problem or some other factors. While illegal flipping and steering that targeted minority communities appear to have abated, bias against borrowers using FHA financing continues in the real estate market, according to Janis Bowdler, director of the Wealth-Building Policy project of the National Council of La Raza. Bowdler expressed her concern during a recent panel discussion of an FHA Working Paper on the FHA’s role in the housing finance market hosted by the Urban Institute. She said there have been reports of ...

The Department of Housing and Urban Development has announced changes to existing loss mitigation options to reduce the number of claims against the FHA Mutual Mortgage Insurance Fund.The changes will benefit qualified, distressed FHA borrowers, who will be able to qualify for FHA loss mitigation interventions and get more help than what was allowed under previous guidelines. HUD has issued a mortgagee letter to amend existing FHA Home Affordable Modification Program guidelines, the definition of “special forbearance,” and loss mitigation-priority guidelines. Specifically, HUD eliminated the ...

Private mortgage insurers have been making a slow comeback and reclaiming market share, thanks in part to policy changes adopted by the FHA, according to MI industry executives. Executives say MI penetration of the market has grown from 2.8 percent in the first quarter of 2012 to anywhere between 8-10 percent in the third quarter, an increase they attributed in part to gaining market share from FHA. Currently, private MI companies account for approximately one-third of loans with loan-to-value ratios of 80 percent or more, which are also ...

FHA Loan Delinquencies Drop in 3Q. The number of delinquent loans with FHA insurance has dropped 75 basis points to 11.14 percent in the third quarter of 2012 from the previous quarter, according to the Mortgage Bankers Association’s latest delinquency and foreclosure rates survey. Foreclosure starts and the percentage of loans in foreclosure fell after a spike in the second quarter when some larger servicers restarted the foreclosure process after being stalled for more than a year by the “robo-signing” investigations and subsequent negotiations. Both rates, however, remain ...