Private mortgage insurers took a bigger share of the primary MI market last year, although the VA program rebounded in the fourth quarter, a new Inside Mortgage Finance analysis reveals.
The U.S. Department of Agriculture provided $19.3 billion in rural housing loan guarantees under its largest single-family housing program in FY 2017, according to the USDA Rural Housing Service. Last year’s total guarantees were $2.92 billion more than in fiscal 2016. Approximately 137,071 USDA loans were securitized in 2017. According to RHS, in October 2017, the loan guarantee upfront fee fell from 2.75 percent plus a monthly 0.5 percent fee to 1.0 percent plus an annual fee of 0.35 percent. The fee drop helped reverse a decline in obligations from the previous year, RHS noted. The average income for a Section 502 single-family guaranteed loan borrower was $59,191 in fiscal 2017, up from $57,962 in the prior fiscal year. For the lower-income Section 502 Direct program, USDA provided approximately $1.0 billion in housing loan guarantees, about $41.7 million higher than the ...
FHA delinquencies rose sharply in Puerto Rico following the devastation brought by hurricanes Maria and Irma last year. At the end of 2017, 28.8 percent of FHA mortgages on the island were at some stage of delinquency, including 15.8 percent that have fallen 90 days behind on their mortgage payments. Deutsche Bank Securities analysts believe the spike in delinquency rates overall is “a short-term phenomenon.” They noted that FHA, Fannie Mae and Freddie Mac have declared temporary moratoria on evictions and foreclosures in Puerto Rico and other hurricane-ravaged regions. Issuer exposures in devastated areas remain unclear and Ginnie Mae has not updated its MBS hurricane exposure data since October last year. In the initial disclosure, the agency reported 9.7 percent (1,066,028 loans) of its total MBS portfolio were impacted by Harvey, Irma and Maria. The affected loans’ unpaid principal ...
Several private mortgage insurers have announced they will no longer insure mortgage loans with a debt-to-income ratio exceeding 45 percent when combined with weaker credit profiles.
The severe hurricanes that tormented a handful of markets during late summer of 2017 continued to push FHA default rates higher in the fourth quarter, a new Inside FHA/VA Lending analysis reveals. The number of FHA loans paying on time fell from 92.8 percent at the end of September to 91.9 percent at the end of the fourth quarter. Most of the deterioration took place in the more severe default categories. The number of FHA loans 90 days past due more than doubled during the three-month period, climbing to a hefty 0.92 percent of outstanding loans. And the number of FHA loans more than three-payments late increased by 39.7 percent, reaching 1.01 percent of the total outstanding. Three jurisdictions that bore the brunt of hurricanes Harvey, Irma and Maria – Texas, Florida and Puerto Rico – saw huge increases in FHA defaults. Puerto Rico saw a devastating impact in rising ... [Charts]
The Department of Justice has had a busy month in terms of False Claims Act enforcement.Eagle Home Mortgage, a subsidiary of Lennar, is under government investigation for its FHA underwriting and quality-control processes – code words for a potential FCA lawsuit. Lennar, a nationwide builder of new homes, disclosed the probe in its annual Securities and Exchange Commission filing. The company said the Department of Justice has subpoenaed its mortgage subsidiary for documents relating to FHA-insured loans originated and sold in previous years. There were no other details. Lennar said Eagle has provided the DOJ with information related to the loans and is cooperating with investigators. “The DOJ has to date not asserted any claim for damages or penalties,” the Miami-based homebuilder said. Meanwhile, in federal district court in Detroit last week, government prosecutors argued with Quicken Loans’ attorney, Jeffrey Morganroth, over a motion to narrow the loan sample the ...
The rising number of conventional purchase loans with debt-to-income ratios exceeding 45 percent combined with low credit scores has prompted two private mortgage insurers to take drastic action. Mortgage Guaranty Insurance Corp. and National MI have announced they will insure loans with DTIs exceeding 45 percent only when their credit score is 700 or greater. Mark Zimmerman, MGIC’s senior vice president for investor relations, said origination of such loans took off last summer when Fannie Mae eased guidelines on loans with 45 percent and above DTI. Fannie updated Desktop Underwriter by removing offsetting and compensating factors and started accepting the loans automatically instead of by referral. Freddie Mac does not accept such loans. Zimmerman said MGIC’s new guideline applies to loans with an agency automated underwriting system response. The company’s non-agency ...
Recoveries from FCA Settlements Involving FHA Loans Down Dramatically in 2017. The Department of Justice reported collecting more than $543 million in False Claims Act settlements and judgments to resolve housing and mortgage fraud complaints in FY 2017, down from $1.6 billion in FY 2016. The largest settlement of a False Claims Act case was $296 million, which involved an FHA lender and the DOJ. In September 2017, a unanimous jury in Houston, TX, found that Allied Home Mortgage Capital Corp. and Allied Home Mortgage Corp. violated the FCA and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 by falsely certifying that thousands of high-risk, poor-quality loans were eligible for FHA insurance. The companies were also accused of originating FHA loans from more than 100 “shadow” branch offices without authorization from the ...
Fannie Mae and Freddie Mac issued new GSE rescission relief principles to mortgage insurers this week that are designed to align better with the current representation-and-warranty framework.Early last year, the Federal Housing Finance Agency suggested that private MIs work on aligning their buyback and rescission guidelines with the mortgage giants. The new principles will add clarity, incorporate new features and allow for more rescission relief without increasing risk to the GSEs’ most significant counterparties, according to the announcement by the Federal Housing Finance Agency. This year, the mortgage insurers will revise their master policies to reflect the new principles and obtain the required approvals...
2018 might not turn out to be a record-breaking production year for FHA and VA, but it could become significant in terms of enforcement and housing finance reform, according to industry stakeholders. Ed Pinto, codirector of the American Enterprise Institute’s International Center on Housing Risk, expects a slight increase in FHA’s and VA’s mortgage unit production and stronger dollar volumes due to rising house prices. Pinto believes loose purchase lending, particularly by FHA, and declining housing inventory are driving housing prices. This in turn results in FHA/VA cash-out refinancing at very high loan-to-value ratios, which helps feed the general economy but makes FHA lending riskier, he said. “We see a stronger demand for housing amid constrained housing supply,” said Pinto. “We’re seeing this vicious cycle of purchase transactions becoming more risky, cash-out transactions increasing in ...