Despite efforts by the Department of Housing and Urban Development to prevent or mitigate fraud, waste and abuse in FHA loan programs, concerns remain about HUD’s resolve to take the necessary actions going forward to protect the FHA insurance fund. Testifying recently during a House appropriations hearing, HUD Inspector General David Montoya said HUD is often hesitant to take strong enforcement actions against lenders. Montoya blames HUD’s tentativeness in carrying out competing mandates of continuing FHA’s role in restoring the housing market and ensuring availability of mortgage credit, and continuing lender participation in the FHA program. For example, he said FHA has been slow in starting claims reviews. “The OIG has repeatedly noted in past audits and other types of lender underwriting reviews HUD’s financial exposure when paying claims on ...

Although appraisals are mostly in line with contract prices, VA and FHA appraisals more often miss the contract price than appraisals for conventional home loans, according to real estate agents’ responses to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. The difference gets no clearer than in California where many FHA and VA appraisals are coming in under the contract price. In contrast, appraisals for conventional mortgage loans are coming in as much as 10 percent higher, said a real estate agent in the Golden State. “FHA and VA appraisals are more conservative than conventional,” respondents observed. There are a number of reasons for FHA and VA appraisals coming in lower than conventionals, industry participants say. Although the appraisal process is the same for both government and conventional mortgage programs, FHA and VA appraisal rules require much closer scrutiny of the property to determine whether certain repairs must be made before it can be sold. In addition, no two appraisers are alike. Some appraisers will not give value to upgrades, such as granite countertops or hardwood floors, while others do.

The Mortgage Bankers Association called upon the FHA to update guidance regarding the assumption of FHA-insured loans and, separately, sought additional clarifications on many outstanding policies in the newly revised Single Family Policy Handbook. In a letter to FHA Commissioner Edward Golding, the MBA strongly urged the FHA to revisit and make changes to its loan-assumption policies and procedures, which have gone unchanged since the mid-1980s. With interest rates expected to rise over the next few years, the MBA anticipates the number of FHA loan-assumption requests to increase as well. Stale assumptions would make it virtually impossible for lenders to recover the actual costs incurred while processing them, warned Pete Mills, senior vice president for residential policy. Loan assumption enables a homebuyer to take on the obligations of the ...

The Department of Veterans Affairs has issued additional lender guidance for dealing with the public water contamination problem in Flint, MI. The guidance expands on the agency’s minimum requirements for properties backed by VA loans. The guidance refers to policy in the VA Lender’s Handbook which requires properties to have “a continuing supply of safe and potable water for drinking and other household uses,” before being approved for a VA-backed home loan. In the VA’s view, safe and potable water also refers to water used for bathing, showering and sanitary uses. Properties not in compliance with this requirement will not be eligible for the VA guaranty. Proper mitigation of lead-contaminated water must include a central filtering system that is acceptable to local health authorities and that can provide safe and potable water. Appraisers must comment and adjust for any ...

The Mortgage Bankers Association urged lenders to review the Department of Housing and Urban Development’s new loan-level and lender-level certifications to assess the legal and reputation risks to FHA lending. In a statement, MBA President/CEO David Stevens further urged lenders to analyze whether the new certification language provides sufficient protection from unwarranted false claim enforcement action. The MBA statement came as the Department of Justice, commenting on the new certifications, warned that it will continue to pursue lenders that submit false statements and false claims with the intent to defraud taxpayers. The new loan-level certification language reinforces FHA’s position that lenders should not be penalized for minor mistakes on FHA loans. It requires lenders to certify “to what they know to be true to the best of their knowledge.” Lender-level certification, carved out of the initial loan-level certification, would require lenders to certify they have not ...

The Department of Veterans Affairs FY 2017 budget is seeking $34 million for the VA Loan Electronic Reporting Interface (VALERI) to manage the 2.4 million VA mortgages in portfolio. VALERI connects VA with more than 225,000 approved mortgage servicers and an estimated 320,000 veteran borrowers. Specifically, the system is used to manage and monitor servicer and VA staff activities aimed at providing timely and appropriate loss-mitigation assistance to defaulted borrowers. Without these resources, approximately 90,000 veterans and their families would be in danger of losing their homes each year, the VA said. Furthermore, this could cost the VA $2.8 billion a year in additional expense. In addition, VALERI also supports payment of guaranty and acquisition claims.Meanwhile, starting March 19, VA servicers began using the new version of the bulk upload templates to ...

Increases in demand on the FHA single-family program are having collateral implications for the integrity of Ginnie Mae’s MBS programs, including the potential for more fraud, warned the Department of Housing and Urban Development inspector general. Testifying during a recent Senate budget hearing, HUD Inspector General David Montoya said Ginnie issuer defaults historically have been infrequent, involving small to moderate-size issuers. “However, major unanticipated issuer defaults beginning in 2009 have led...

The government-sponsored enterprises accounted for the bulk of financing for mortgages on condominiums and co-op units in 2015, according to a new Inside Mortgage Trends analysis of loan-level disclosures from Fannie Mae and Freddie Mac, along with data from the FHA. Some $76.01 billion in agency condo/co-op mortgages were funded in 2015, with the GSEs accounting for 96.0 percent of the volume. Purchase mortgages ... [Includes one data chart]

Some observers say the latest rate adjustments by private mortgage insurers will not have a significant impact on FHA business nor would they compel the government agency to alter its mortgage insurance premiums or policy. Others say the pricing change could trigger a race to the bottom as risks of MIP cuts increase materially. Six private MIs have announced adjusted rates over the last couple of months inresponse to new eligibility standards set by ...

The Department of Housing and Urban Development this week unveiled final loan-level and lender-level certifications aimed at easing lender anxiety over potential enforcement actions due to minor errors, but a statement from the Justice Department could put a damper on the new FHA policy. The updated version of FHA’s loan-level certification clarifies that lenders will be held accountable for mistakes that would have prompted a lender to change its decision to approve a loan, not for minor errors. In addition, HUD opened a 30-day comment period for lender-level certification to address stakeholders’ concerns that proposed changes to loan-level certification could weaken the department’s enforcement authority. Lender liability under the federal False Claims Act has been...