New FHA Commissioner Brian Montgomery this week revealed that he’s in a “fix it” mode to preserve the government mortgage insurer for “generations to come.” In a wide-ranging interview with Inside FHA/VA Lending and other members of the trade press, Montgomery made it clear his goal is to make sure the Mutual Mortgage Insurance Fund – which backstops agency loans – remains in the black and above its minimum capital reserve ratio of 2.0 percent. During the interview, however, he hardly mentioned the MMIF by name but set parameters on what he would be willing to change at FHA. All his positions seem aimed at preserving and growing the fund’s cash position. First and foremost, there likely will be no cut in FHA premiums this year. Also, don’t count on any risk-sharing arrangements with private mortgage insurance firms. And last, the thought of ending the “life of loan” coverage that ...

Fair housing advocates are outraged over the Department of Justice’s recent repeal of mortgage shopping guides and other regulatory guidance, but an industry attorney says it is no big deal. Bent on eliminating agency regulation by guidance, the DOJ last week rescinded 24 guidance documents issued by a variety of government agencies. Among those revoked were guidance that provided information regarding predatory lending, consumer mortgage shopping and discrimination based on national origin. The DOJ action stems from a November 2017 memorandum issued by Attorney General Jeff Sessions rescinding guidance that either were issued improperly or were inconsistent with current law. It also complies with a presidential directive to all federal agencies in February to implement and enforce regulatory reform, which called for a review of all existing regulations, policies and guidance for possible repeal ...

The Department of Housing and Urban Development has removed the FHA inspector roster to streamline inspection requirements for FHA single-family mortgage insurance. Removal of the list of approved inspectors recognizes the quality of inspections performed by certified inspectors and other qualified individuals, said HUD. HUD originally established the roster to standardize the inspection process for properties with FHA-insured mortgages. Prior to the roster, cities and states developed their own building codes, which had little uniformity or consistency with each other. Currently, the department abides by the International Residential Code (IRC), which is in use in 49 states, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands. The International Code Council, which developed the IRC, also certifies combination inspectors (CIs) and residential ...

The U.S. Department of Agriculture’s Rural Housing Service is seeking comment on a proposed rule that would enable more lenders to make combination construction-to-permanent single-family loans to borrowers. The new combination construction-to-permanent loan, or “single close loan,” allows approved lenders to close a new construction loan and receive a loan-note guarantee before construction begins. The loan expands low- and moderate-income borrowers’ access to affordable rural housing financing in areas with populations up to 35,000. The loan may be used to construct and purchase single-family homes, including manufactured homes and eligible condominiums. The amount covers purchasing a lot, reasonable construction administrative costs, contingency reserves, inspection fees, builder’s risk insurance, landscaping costs, and other authorized items, the ...

Fannie Mae this week released details about a pilot program that explores an alternative to how private mortgage insurance is placed on loans the government-sponsored enterprise acquires.

The credit risk profile of incoming FHA business has shifted significantly since the beginning of last year, according to a new Inside FHA/VA Lending analysis of Ginnie Mae mortgage-backed securities data. The biggest development has been the growth of loans with high debt-to-income ratios. There has also been a significant increase in the share of refinance loans that are cash-out transactions. FHA officials are well aware of these developments, having publicly mentioned them in testimony on Capitol Hill and at industry conferences. Officials have also raised concerns about FHA loans with downpayment assistance, although the MBS data don’t seem to indicate that there has been much change on that score. Among FHA loans endorsed in April and May, only 41.9 percent were at or below the benchmark DTI test for qualified mortgages, which is 43 percent. Through 2015 and 2016, well over half of new ... [Chart]

The issues behind the Department of Housing and Urban Development’s draft FHA condominium rules are “too complex” but lenders may expect a final rule in September, said HUD Secretary Ben Carson. Carson’s announcement of a release date for the long-anticipated condominium rules eases the mounting pressure on the secretary and the department to finalize the draft rules. On June 18, 54 senators and 120 members of the House signed a letter urging Carson to implement the changes in H.R. 3700, the Housing Opportunity Through Modernization Act, which would ease FHA requirements for financing condo purchases and refinancings. The bill was signed into law on July 29, 2016, and HUD published a proposed condo rule two months later. “We have been pushing it,” Carson said during a House committee oversight hearing this week. “It is a complex issue because when you are talking ...

Ginnie Mae will be working with FHA, VA and the U.S. Department of Agriculture to standardize origination policies and requirements for digital mortgages as it moves into the digital age of its secondary market business. Ginnie will coordinate with the agencies while developing technical standards for electronic closings, digital mortgage instruments and electronic vaults. All this work is part of the agency’s three-year strategy, Ginnie Mae 2020, to modernize its mortgage-backed securities program and platform, strengthen its counterparty risk management capability, and explore new ways to lower or eliminate risk from the system. As part of the modernization effort, Ginnie envisions a process that would allow it to accept digital promissory notes and other digitized loan files as eligible collateral for its MBS. It would encompass loan application through securitization. The plan calls for gradual implementation of ...

FHA purchase loan originations, which comprise the bulk of the agency’s business, declined during the first quarter of 2018 as mortgage interest rates continued to rise. Approximately $34.8 billion in FHA-insured purchase mortgages were made during the first three months, down 13.5 percent from the previous quarter. Purchase originations also fell 12.0 percent year-over-year, data showed. Purchase loans accounted for 71.1 percent of all FHA loans made to consumers in the first quarter. Fairway Independent Mortgage Corp. led all lenders with $880.8 million. This week, the benchmark 30-year fixed-rate mortgage rose by 1 basis point to 4.71 percent from last week, according to Bankrate’s weekly survey of large lenders. Four weeks ago, the rate was 4.64 percent. Over the past 52 weeks, the 30-year fixed has averaged 4.31 percent, Bankrate added. This week’s rate is 40 basis points higher than the ... [Charts]

Department of Housing and Urban Development Secretary Ben Carson reiterated concerns raised previously by his deputies regarding certain lending trends that could potentially endanger FHA’s financial health. Testifying during a HUD oversight hearing in the House Financial Services Committee this week, Carson said the department is scrutinizing certain policies that may be causing or contributing to the growth of cash-out transactions, unusually high debt-to-income ratios, serious loan delinquencies and early payment defaults. Carson said maintaining the health of the FHA mortgage insurance fund is critical in maintaining the agency as a source of credit for first time, low- and moderate-income, and minority homebuyers. The share of cash-out among all of FHA’s refinance transactions has increased to 60 percent as of April 2018 from 45 percent a year ago, he said. Also during that ...