Last week, new GSE repurchase requirements announced this spring took effect as a potential alternative to repurchase for certain mortgage loans for which the mortgage insurance has been rescinded. Among the requirements are an “MI stand-in,” which Fannie Mae defines as “the full mortgage insurance benefit that would have been payable under the original mortgage insurance policy if the mortgage loan liquidates.” In May, both Fannie and Freddie Mac announced that repurchase requests will no longer be an automatic response in the event that MI is rescinded.

The modest rebound in the housing market during the second quarter of 2014 produced a solid increase in the volume of home loans with private mortgage insurance securitized by Fannie Mae and Freddie Mac. A new Inside Mortgage Finance analysis and ranking reveals that the two government-sponsored enterprises securitized $37.36 billion of single-family mortgages with private MI coverage during the second quarter. That was up 24.7 percent from the first three months of the year, which had produced a dismal $29.95 billion of MI-insured loans in new GSE mortgage-backed securities. By comparison, total GSE business was...[Includes two data charts]

Recently implemented steps by the two government-sponsored enterprises to provide an alternative to repurchase when mortgage insurance is rescinded is a pleasant salve for a minor ailment, but it does nothing to address lenders’ chronic pain of sudden and unexpected buyback demands, according to a mortgage lender. Last week, new GSE repurchase requirements took effect, including the “MI stand-in” option, which Fannie defines as “the full mortgage insurance benefit that would have been payable under the original mortgage insurance policy if the mortgage loan liquidates.” In May, both Fannie and Freddie announced...

The Federal Housing Finance Agency will soon unveil capital rules for private mortgage insurers, introducing a risk-based standard based on loan-to-value ratios and other factors, while requiring parent companies to pledge assets to their MI subsidiaries if necessary, according to officials close to the matter. “Financial strength will be measured by comparing insured risk, on a risk-adjusted basis, against available assets,” said one official commenting under the condition he not be identified. The phrase “available assets” is key because it portends that liquidity must reside at the MI level and not at an affiliate of a parent company. It’s...

Loss mitigation activity continued to decline in the first quarter of 2014, driven by better loan performance. That didn’t stop the Treasury Department from extending the Home Affordable Modification Program and related loss mitigation programs for at least another year, through the end of 2016. A total of 132,783 loan modifications were completed in the first quarter, according to Hope Now, down 3.4 percent from the previous quarter and down 45.7 percent from the first quarter of 2013. On a monthly basis, loan mod activity continued to decline in April. Loan mod activity is...

Look for the Republican-controlled House this month to push additional “tax extender” legislation, including a measure to make permanent a tax break for private mortgage insurance, although the Senate will likely defer any action on tax bills stalled until after the November elections. More than six months after a series of tax incentives, including some mortgage-related measures, expired due to Congressional inaction, partisan sniping and a distinct difference in the legislative approaches of House and Senate tax-writing chairmen has contributed to uncertainty within the industry. House, Ways and Means Committee Chairman Dave Camp, R-MI, has taken...

U.S. Bank became the latest casualty in the government’s offensive against lax underwriting and improper origination of FHA mortgages after the bank to pay $200 million to settle all related charges. The Minneapolis-based bank became the seventh FHA lender since 2012 that has entered into settlement agreements with the Department of Justice and the Department of Housing and Urban Development to resolve alleged violation of the False Claims Act and the Financial Institution Reform, Recovery and Enforcement Act, according to Inside FHA Lending’s analysis of government data. The government lawsuits allege that the banks’ certification of loans as eligible for FHA insurance under the direct endorsement program violated the FCA. The banks’ misconduct allegedly contributed to the legacy losses that crippled the FHA Mutual Mortgage Insurance Fund and placed the ...

It has been barely a month since the FHA deployed its Lender Electronic Assessment Portal (LEAP 3.0), but lenders are already having difficulty executing some functions in the new system. Lenders are complaining about how hard it is to provide access to independent public accountants (IPA) for purposes of recertification functions, as well as difficulties in making changes to existing branches or adding new ones or changing cash flow accounts. Lenders are concerned they may be sanctioned or penalized if they make a mistake, but the FHA seems not inclined to do this because the system is new. “[We] are highly focused on correcting these issues, and hope to have these functions working properly very soon,” the agency promised in a recent note to FHA lenders. The FHA said it is also aware of the complications that some lenders have faced in submitting their annual recertification in LEAP. Many of these problems have been addressed and the deadline for submission of recertification packages has been extended as well, the agency noted.

FHA lenders reported a significant increase in the number of FHA-insured loans originated in April, breaking a downward production spiral that began in the third quarter of last year. Whether this marks a turnaround for the market, however, is uncertain. April closed with $10.3 billion in total FHA originations, up 18.5 percent from March but down 51.7 percent from the same period a year ago. This surge in FHA financing occurred despite the rising costs of obtaining an FHA loans and access-to-credit issues, which have narrowed the gap between FHA and conventional loans with private mortgage insurance. Spring and Fall are the busiest times of year for home sales which might explain the spike, according to real estate agents. FHA fixed-rate mortgages comprised 95 percent of April’s production, with purchase loans accounting for 78 percent of loans originated during the month. FHA lending trends, however, show ... [2 charts]