Two major banks recently launched their own 3 percent downpayment programs, which stakeholders say could shift volume from FHA to the government-sponsored enterprises. How much volume though remains unclear, analysts say. Last week, Wells Fargo and JPMorgan Chase rolled out their respective low downpayment programs for first-time homebuyers and low-to-moderate-income families, which require only 3 percent down. Neither program involves the FHA, and they appear designed to pick up where Wells and Chase left off when they decided to cut back on their FHA business in order to reduce liability risk. Wells and Chase are among several major banks and nonbanks that have coughed up billions of dollars in settlements with the federal government in the last couple of years to resolve allegations of fraud under the False Claims Act and violations of ...

A dispute over rule interpretation between the Department of Housing and Urban Development and its inspector general regarding the use of gift funds and premium pricing in downpayment assistance has FHA lenders concerned about potential liability and unnecessary legal costs. Last week, HUD Deputy Secretary/FHA Commissioner Edward Golding sought to allay lender concerns by refuting the IG’s position on lender use of downpayment assistance programs sponsored by state housing finance agencies. In a memo to the industry, Golding upheld...

One of the government-sponsored enterprises appears likely to test a form of credit-risk transfer that mortgage bankers have been clamoring for: transactions that allow mortgage sellers to pay lower MBS guarantee fees on loans that have deeper mortgage insurance coverage than is required by the GSE charters. Robert Schaefer, vice president for credit enhancement strategy at Fannie Mae, said there is “a high probability that we will do an MI deal later this year that addresses the pain points” the GSE sees in the deeper MI concept. “We are talking...[Includes one data table]

FHA activity was lackluster in the first three months of 2016 as loan originations fell 7.8 percent from the prior quarter, according to Inside FHA/VA Lending’s analysis of agency data. The weak first-quarter production of $53.5 billion appeared to continue a trend from 2015, which saw the fourth quarter close with $58.1 billion, down significantly from $73.7 billion in the third quarter. In contrast, FHA originations fared better year-over year. Loan production was up 35.6 percent in the first quarter compared to the same period last year. Purchase lending totaled $36.5 billion in the first three months with overall production trending downward during the period. Borrowers in the 640-679 and 680-719 credit score ranges made up the bulk of new endorsements for January and February, the latest FHA data show. It is unlikely that trend will change even if March endorsements were added. Between all ... [ 2 charts ]

There are important details in the recent M&T Bank settlement with the Department of Justice and in this week’s announced filing of a lawsuit against Guild Mortgage that could help lenders avoid a potential false claims lawsuit, according to industry observers. The government’s complaints against the two FHA lenders were brought under the False Claims Act, which penalizes acts that intend to defraud the government and taxpayers. The government has been using this powerful statutory tool in the mortgage arena in its attempt to recover FHA losses arising from fraud and noncompliance with agency requirements. As in previous FCA cases against FHA lenders, both M&T Bank and Guild Mortgage were accused of false certification, lax underwriting, poor quality control, failure to review early payment defaults, and failure to self-report deficient loans and remediate problems in a timely manner. In addition, the ...

The FHA has proposed to codify key improvements to the Home Equity Conversion Mortgage program and add new protections to senior homeowners to ensure they can remain in their homes and enjoy the benefits of an FHA-insured reverse mortgage. The proposed new HECM consumer protections include full disclosure of all HECM loan products and features. Lifetime interest rate increases on HECM adjustable-rate mortgages would be capped at 5 percent, while annual interest-rate increases on HECM ARMs would be limited to 1 percent. Lenders would be required to pay the HECM’s mortgage insurance premiums until the loan is paid in full, foreclosed on, or a deed-in-lieu of foreclosure is executed. In addition, the rule proposes to amend the definition of “expected average mortgage interest rate” to allow lenders, with the agreement of the borrower, to lock-in the rate prior to ...

There is widespread frustration among FHA appraisers regarding the scope of service they are now required to provide under the Department of Housing and Urban Development’s newly revised single-family policy handbook. While the new handbook brought more clarity to FHA’s lending and underwriting policies, certain changes to property-valuation rules appear to have added home inspection to appraisal work – and appraisers and real estate professionals are not pleased. Many of the so-called changes in the handbook already existed, but one change that stood out is the word “must,” said Martin Wagar, a certified broker/appraiser and president of Wagar & Associates. Appraisers are now required to know the basic appliances that come with the home, how to operate them, and to identify and report any deficiency that may affect their “contributory value” to the property, said Wagar at a ...

Trade groups representing lenders, homebuilders and appraisers have asked Congress to hold a hearing this year on the future of appraisal regulation.In a joint letter, five industry groups urged the Senate Committee on Banking, Housing and Urban Affairs to reevaluate oversight of the appraisal industry and the current federal regulatory structure for real estate appraisal.The committee last held an appraisal oversight hearing in 2004. Federal appraisal regulations have been untouched since the enactment of the Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989, the trade groups noted. In addition, the groups asked that both federal and state responsibilities be reassessed to see if they continue to serve consumers and market participants well, as well as promote competition in the marketplace. In addition to federal regulation, states regulate appraisers as well. The groups want to know from Congress whether federal oversight of appraisers is still necessary.

HUD Sends Final Condominium Rule to OMB for Clearance. The Department of Housing and Urban Development has sent a final rule to the Office of Management and Budget that would make it easier for borrowers to obtain FHA financing for certified condominium units. Once issued, the final rule will replace temporary guidance which HUD issued in November last year to ease FHA’s condo approval process. The move is aimed at increasing affordable housing options for first-time and low-income homebuyers. The final rule is expected to reflect measures in the interim guidance, including modification of the requirements for condo project recertification, revised calculation of FHA’s required ownership-occupancy percentage, and expansion of eligible condo-project insurance coverages. IG Scrutinizes HUD Oversight of SFHAs’ Downpayment Assistance Programs. Residential lenders that rely on ...

New primary mortgage-insurance activity was down slightly during the first quarter of 2016, with private MIs seeing the biggest slump in new business, according to a new analysis and ranking by Inside Mortgage Finance. A total of $144.11 billion of home loans were originated with some form of MI coverage during the first three months of this year, a 3.7 percent decline from the fourth quarter of 2015… [Includes four charts]