The mortgage banking industry is backing a legislative proposal that would limit the government’s use of the False Claims Act to pursue hefty damages against FHA lenders. In a recent letter to the bill’s co-sponsors, the Mortgage Bankers Association expressed its strong support for H.R. 5993, the Fixing Housing Access Act of 2018. The MBA noted that originating FHA-insured loans has become very risky in recent years largely due to the civil actions brought by the Department of Justice under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Fifty-four FCA and FIRREA cases against financial institutions have settled for billions of dollars between July 2011 and January 2018, according to data compiled by the Buckley Sandler law firm. Four cases are pending and one civil penalty award was reversed on appeal. Those lenders who were on the ...

Black Knight Financial Services, which currently collects all servicing data for VA, will no longer do the job after March 2019, according to the Department of Veterans Affairs. BKFS will stop providing the service when VA transitions to a new enhanced VALERI system. VA servicers currently use the VA Loan Electronic Reporting Interface system to upload servicing information. VALERI is undergoing a multi-phase restructuring for conversion to a fully automated system spanning loan application, origination and servicing. The enhanced servicing component of VALERI will be ready by late spring next year. As part of the transition, VA will ensure that all servicers are plugged into the new VALERI system before it becomes fully operational. VA’s transition plan covers all methods and procedures for reporting information to VALERI. These include use of a licensed servicing system or a proprietary in-house servicing system that automatically reports data to VALERI, or logging into the VALERI web portal to manually upload and enter data.

Ginnie Mae has added a new metric to make it easier for approved issuers to track the prepayment rates of single-family loans underlying they have delivered into mortgage-backed securities. The new prepayment metric would enhance Ginnie’s Issuer Operational Performance Profile (IOPP) tool, which was launched in 2015 to help issuers measure their performance against the agency’s standards. The new tool is the latest move by Ginnie to ensure the integrity and market predictability of Ginnie MBS. The prepayment tool will be available to lenders beginning June 25. The announcement follows an agency administrative action last week against three VA lenders that were penalized for cherry picking and refinancing unseasoned VA loans not to benefit borrowers but to charge them higher fees. The lenders – Freedom Mortgage, SunWest Mortgage Co. and NewDay USA – were among nine issuers that ...

Now that Housing and Urban Development Secretary Ben Carson has sworn in a new FHA commissioner, reverse mortgage lenders are hoping to see some changes in the Home Equity Conversion Mortgage program. The National Reverse Mortgage Lenders Association is planning to ask FHA Commissioner Brian Montgomery for changes in the HECM program, particularly at the back end, to make it more profitable for lenders. Peter Bell, the group’s chief executive officer, believes there are opportunities to reduce the cost of the HECM program to the FHA fund by having better servicing procedures. “We would like to see certain loss mitigation procedures in the new HECM rules to be made available to all reverse-mortgage loans,” he said. Some of those procedures apply only to loans originated on or after the new rules became effective, such as “cash for keys.” Cash for keys is a cash offer by a lender to a ...

All home loans with a VA guarantee, including Interest Rate Reduction Refinance Loans, require a lender’s certification, according to the Department of Veterans Affairs. In recent guidance, the agency clarified that the lender certification requirement applies to all VA-backed loans, and is not contingent upon the type of VA loan. Jeff London, director of the VA Loan Guaranty Service, said there have been inquiries from lenders and the VA regional loan centers regarding the validity of the lender certification on an IRRRL. The lender certification is required on IRRRLs, whether or not underwriting is required, London clarified. Under VA rules, lenders must certify that the VA loans they originate comply fully with the law and meet VA’s underwriting standards. The IRRRL is a streamlined program that requires very little verification yet allows veterans to refinance at a lower rate based on their ...

Bipartisan legislation was introduced recently in the House to addresse problems arising from the use of the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act in the context of mortgage insurance claims. Co-sponsored by Reps. Josh Gottheimer, D-NJ, and Lee Zeldin, R-NY, the bill would provide certain restrictions and clarifications on false claims and civil actions related to loans with FHA, VA or U.S. Department of Agriculture guarantee. H.R. 5993, the Fixing Access to Credit Act of 2018, has been sent to the House Financial Services Committee and to the House Committee on the Judiciary. A Civil War statute, FCA seeks to deter fraud against the government by providing hefty penalties for violations and establishing a 10-year statute of limitations to file civil claims. Enacted in the wake of the savings and loan debacle in the 1980s, FIRREA outlawed abusive lending and ...

One policy issue that could land on FHA Commissioner Brian Montgomery’s desk soon is whether potential borrowers who were granted temporary status under the Obama-era Deferred Action for Childhood Arrivals are eligible for FHA-insured loans. Mortgage lenders are divided on the issue and may soon ask the newly installed head of the FHA for guidance, said Brian Chappelle, a mortgage industry consultant. President Obama created the DACA program in 2012 to allow undocumented immigrant children to stay temporarily in the U.S. for two years without fear of deportation. They have an opportunity to renew their DACA status towards the end of their second year. To qualify for DACA, the undocumented child must have arrived in the country before they were 16 years old or be younger than 31 on June 15, 2012. They must have lived continuously in the country since June 2007. A person protected under DACA is ...

Reverse mortgage lenders started out strong in the first three month of 2018 with a 19.2 percent increase in Home Equity Conversion Mortgage production from the previous period. HECM endorsements totaled $5.4 billion in the first quarter, with purchase reverse loans accounting for the bulk of originations, 81.9 percent. First quarter production was up 18.5 percent from the same period last year. Meanwhile, HECM mortgage-backed securities issuance totaled $2.97 billion for the quarter, down from $3.25 billion in the prior quarter, Ginnie Mae data showed. The top five HECM originators in sequential order – American Advisors Group, Reverse Mortgage Funding, One Reverse Mortgage, Liberty Home Equity Solutions, and Synergy One Lending – accounted for $1.66 billion, or 30.8 percent, of total production during the first quarter. American Advisors maintained its top ranking with $841.4 million of HECM loans, which ... [Charts]

Issuance of mortgage securities backed by USDA loans dropped during the first three months of 2018. Approximately $4.03 billion of rural housing loans with a USDA guarantee were delivered in Ginnie Mae MBS during the first quarter, down 18.3 percent from the previous quarter. Agency data also showed an 11.7 percent decline in USDA securitization volume from the same period a year ago. Rural housing loans accounted for 1.5 percent of all loans securitized in Fannie Mae, Freddie Mac and Ginnie Mae pools and 2.8 percent of loans with private or government-backed mortgage insurance. Purchase loans comprised the bulk of USDA loans that were delivered into Ginnie MBS pools. PennyMac knocked Freedom Mortgage out of first place with a total of $753.3 million in securitized USDA loans despite a 10.4 percent decline in production. Freedom Mortgage accounted for $523.3 million of USDA loans pooled in ... [Charts]

Brian Montgomery this week was sworn in as FHA commissioner, ready to tackle a number of priorities he promised Congress he would undertake once in office.