Originations of nonconforming mortgages will likely be constrained by the weight of Fannie Mae and Freddie Mac as Congress takes three years or longer to enact reform legislation that will likely be implemented over a long-term transition plan, according to industry experts. The baby steps that have been taken this year – a GOP reform bill approved by the House Financial Services Committee and a bipartisan approach in the Senate – provide some momentum for resolving the five-year conservatorship of the two ...

Financial industry trade groups want all Title II forward mortgage loans that meet FHA requirements to be treated as “safe harbor” qualified mortgage loans instead of being lumped in either of two QM buckets as proposed by the Department of Housing and Urban Development. Commenting on HUD’s proposed definition of a “qualified mortgage,” the industry groups – Mortgage Bankers Association, Consumer Bankers Association, Consumer Mortgage Coalition, American Bankers Association, and the Independent Community Bankers of America – urged HUD to ...

Proposed options for adjusting FHA products, market presence and powers could have a direct effect on the availability of credit for borrowers and on the FHA’s ability to respond to changing market conditions, according to a new study by the Government Accountability Office. In certain instances, the recommended changes would entail tradeoffs – a downside for every upside. Industry participants, researchers and the FHA have suggested these options to improve FHA’s long-term viability or for shrinking the agency’s footprint in the mortgage market. The GAO undertook the study to determine ...

Establishing a higher, mandatory capital reserve requirement for the FHA under the Protecting American Taxpayers and Homeowners Act, or PATH Act, would help reduce discretionary spending over 10 years, according to the Congressional Budget Office. According to CBO estimates, implementing the legislation would result in a net decrease in discretionary spending of $41.2 billion over the 2014-2023 period. This assumes future appropriations laws are enacted to implement the act’s provisions. The potential reduction in government spending would stem from ...

The Department of Housing and Urban Development may not be raising FHA mortgage insurance premiums for a while for fear that further aggressive pricing could shut out traditional and first-time homebuyers. In testimony before the House Financial Services Committee this week, FHA Commissioner Carol Galante warned that, with interest rates rising, the FHA may have reached a “tipping point” with its mortgage insurance premiums and that it may be time to pull back and ponder the next move. “As we continue to seek a balance between strengthening the [Mutual Mortgage Insurance Fund] and ensuring access to credit, we must ...

There is real opportunity for both private mortgage lenders and the FHA to take the initiative in housing reform and not wait for Congress to do the job, according to FHA Commissioner Carol Galante. Discussing housing finance reform at this week’s Mortgage Bankers Association’s annual convention in Washington, DC, Galante said reform is absolutely essential and that the system of privatized gains and socialized losses should be eliminated. Reform must start “now,” she said. The challenge for FHA and the mortgage industry is to ...

It’s a done deal that the Federal Housing Finance Agency will make “across the board” reductions in Fannie Mae and Freddie Mac loan limits that will take effect in May 2014, but factions in the housing and mortgage industries are already drafting contingency plans if the cuts are too deep. “I would say if they are significantly – 5 to 10 percent – reduced, then you will see new legislation,” said one industry lobbyist who’s been tracking the issue for well over a year. In other words, if the national loan limit falls...

The future of the mortgage market is assuming a much more prominent position in policy discussions among Congressional lawmakers, particularly in the Senate. But while there is real reason to expect progress on a legislative solution to Fannie Mae, Freddie Mac and a privately funded secondary market this year, Capitol Hill insiders warn that the endgame should be measured in years, not months. Speaking at the Mortgage Bankers Association’s annual convention in Washington this week, former House Financial Services Committee Senior Counsel Michael Borden and former Senate Banking, Housing and Urban Affairs Committee Staff Director Dwight Fettig agreed it’s a virtual certainty that a final reform bill will not materialize during the 113th Congress. “I think we’re...

Efforts to redefine the FHA’s mission under the pretense of eliminating taxpayer risk would be counterproductive to the goal of housing finance reform, warned FHA Commissioner Carol Galante. In recent remarks to a housing reform forum in Washington, DC, Galante said that while housing reform is necessary, restricting the FHA’s ability to perform its dual mission in response to perceived risk is not the way to go. This type of over-correction would damage access to affordable credit, she cautioned. Apparently referring to pending House Republican reform proposals for the government-sponsored enterprises and the FHA, Galante said...

In a sign that Senate leaders are continuing their work on comprehensive housing finance reform, representatives of the mortgage lending industry were given an opportunity this week to opine on the exact features such a package should have, and they took full advantage of it. Gary Thomas, president of the National Association of Realtors, speaking before the Senate Banking, Housing and Urban Affairs Committee, offered a baker’s dozen of specific proposals for elements of a future finance system, including an “efficient and adequately regulated secondary market,” which he said is essential to providing affordable mortgages to consumers. Also, the government-sponsored enterprise system “with private profits and taxpayer loss” must be replaced...