The steadiest source of new FHA and VA loans flowing into Ginnie Mae mortgage-backed securities came from correspondent lending platforms, according to a new Inside FHA/VA Lending analysis. In the fourth quarter, however, correspondent originations declined more than retail and wholesale-broker production. Ginnie last year securitized $115.05 billion of FHA loans that issuers acquired from correspondent lenders. That was down 2.8 percent from 2016, but total FHA loan deliveries dropped 13.9 percent over that period. The correspondent share of the FHA market rose to 48.6 percent last year, a gain of 5.5 percentage points from 2016. FHA loans generated by brokers accounted for 14.8 percent of 2017 activity, up slightly from the previous year. But retail-originated FHA loan volume plummeted 25.5 percent, dropping the channel’s share of the market to 36.6 percent – down from 42.3 percent back in ... [ Chart ]

The Department of Veterans Affairs will require lenders to provide early disclosures to veterans seeking to refinance into a VA Interest Rate Reduction Refinance Loan. The new policy aims to ensure that the VA streamline refi loan they sought would actually lower their monthly mortgage payments and is not just a scam for lenders to charge higher fees. Loan churning, or serial refinancing, is at the root of the VA policy change. Churning refers to multiple refinancing of an unseasoned mortgage loan within a very short time, often within six months of origination. Serial refinancing may add more payments and interest to the new loan, prolonging debt repayment, and can strip equity. It also potentially raises the risk of default by the borrower. In addition, the risk of prepayment could affect pricing of Ginnie Mae securities, which could cause lenders to charge higher rates on VA loans to make up for the ...

Two recent internal policy memos from the Department of Justice suggest that the agency is reevaluating its approach in two key areas of enforcement, which may significantly affect False Claims Act litigation in FHA cases. Issued last month (one was actually leaked), the memos pertain to the dismissal of frivolous whistleblower cases when the government declines to intervene, and the prohibition of DOJ attorneys relying on an entity’s noncompliance with agency guidance as presumptive or conclusive evidence that the entity violated the law. Written by Michael Granston, director of the DOJ’s Commercial Litigation Branch, Fraud Section, the leaked Jan. 10 memo directs federal prosecutors to consider dismissing meritless FCA complaints by whistleblowers when considering whether DOJ should intervene in the ...

A surge in anti-churning efforts by legislators and regulators to address the churning of VA loans has prompted analysts to examine certain policy changes, potential cures and pending legislation designed to protect veterans from predatory serial refinancing schemes. For instance, bipartisan legislation introduced by Sens. Elizabeth Warren, D-MA, and Thom Tillis, R-NC, would establish a minimum 50 basis point incentive for qualified VA refi mortgages, recoupment of refi costs within three years, and a six-month seasoning period before the initial loan could be refinanced into a new VA loan. However, Wells Fargo Securities analysts are concerned that S 2304, Protecting Veterans from Predatory Lending Act of 2018, does not distinguish between rate-term refinancing and cash-out refinancing and may wind up eliminating cash-out refi as an option for cash-strapped veterans. Although some lenders used ...

The U.S. Court of Appeals for the District of Columbia Circuit recently upheld a lower court dismissal of a False Claims Act lawsuit alleging a lender’s violation of the 2012 National Mortgage Settlement and of the Home Affordable Modification Program. In Laurence Schneider, Appellant, v. JP Morgan Chase Bank, N.A., et al., Appellees, the federal government declined to intervene, allowing the qui tam lawsuit to proceed. Schneider, the relator and an owner of a mortgage servicing company that purchased numerous loans from Chase, alleged that the lender falsely claimed compliance with the $25 billion landmark settlement negotiated in 2012 between the federal government, 40 state attorneys general, and a group of large banks, including Chase. The settlement resolved claims against the banks for allegedly improper origination and servicing of conventional, FHA and VA loans that were thought to ...

Complaints by active-duty and retired U.S. military personnel about their mortgages rose in many categories tracked, both on a quarterly basis and on an annual basis, according to a new analysis and ranking by Inside the CFPB. Overall, they are definitely trending up. For instance, complaints by service members about all mortgage products in general rose from 582 incidents in the fourth quarter of 2016 to 739 in the fourth quarter of 2017, but they fell from a total of 741 in the third quarter of last year. The increase was a little more consistent when particular mortgage products were segregated out from the aggregate data. For instance, gripes about conventional mortgages rose from 218 in 4Q16 to 334 [with charts] ...

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 Consumer Financial Protection Bureau last year logged 988 servicemember complaints related to the origination and servicing of VA and FHA mortgages. CFPB data showed VA outscored FHA on the number of complaints, 740 to 248, respectively, in 2017. The top five reasons for servicemember complaints were trouble during the payment process, difficulty in paying the mortgage, loan servicing, applying for a purchase mortgage or refinance, and closing a loan. Other complaints were about loan modification and foreclosure, mortgage brokers, incorrect information, settlement process and costs, underwriting/credit decision, credit-reporting company’s investigation of a consumer problem, and improper use of a credit report. Abusive practices related to loan churning might not be reflected clearly in servicemembers’ complaints in 2017 compared to the previous year, but a deeper dive into the ... [Chart]

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 ...

FHA has issued policy waivers related to recent hurricanes and wildfires, including one for loan-level reviews for early-payment default. The agency announced the move as Black Knight reported another 60,000 mortgages becoming seriously delinquent in December because of hurricane-related fallout and other seasonal and calendar-related factors. The early-payment default waiver applies to FHA mortgages in presidentially declared major disaster areas (PDMDA) ravaged by hurricanes Harvey, Irma and Maria. The hard-hit areas are in Louisiana, Texas, Florida, Georgia, Puerto Rico, South Carolina and the U.S. Virgin Islands, as well parts of California that were scorched by recent wildfires. Due to the string of natural disasters, FHA anticipates an increase in EPDs – loans that become 60-day delinquent within the first six payments – in the affected areas. FHA believes that EPDs on loans closed before ...