The reverse mortgage lending industry has asked Senate lawmakers to expand the Department of Housing and Urban Development’s authority to strengthen its oversight of the Home Equity Conversion Mortgage program. Testifying before the Senate Committee on Banking, Housing and Urban Affairs recently, Peter Bell, president of the National Reverse Mortgage Lenders Association, said it is crucial for HUD to be able to act swiftly to reduce the risk the program poses to the FHA insurance fund. Bell said HUD needs to implement changes “in a matter of months, not years” and for that to happen, it would need authority from Congress to ...

The FHA’s efforts at underwriting reform and reducing its footprint to give way to private capital are nothing but an illusion of reform, according to the American Enterprise Institute. Raising the annual mortgage insurance premium and the required downpayment for FHA-insured loans greater than $625,500 as well as tightening the underwriting on loans with credit scores of 620 or below would impact only a tiny percentage of FHA business, said Edward Pinto, a resident fellow at AEI. “These changes make great sound bites but clearly this is the illusion of reform,” he said. Both measures are part of FHA’s latest efforts to ...

Congress has expressed interest in an industry proposal for new shared-risk arrangements involving private mortgage insurers and the FHA to cut the government’s exposure to losses and help protect future FHA borrowers from getting into loans they cannot afford. The proposal was presented in separate testimonies during recent House and Senate committee hearings on FHA solvency and the need for reforms to strengthen and protect the Mutual Mortgage Insurance Fund and avoid any potential bailout by taxpayers. In a Senate Banking, Housing and Urban Affairs Committee hearing, Teresa Bryce Bazemore, president of Radian Guaranty, urged...

A federal appeals court last week revived a previously dismissed class-action lawsuit against four financial institutions brought by investors that purchased a $1.32 billion offering of MBS that later turned sour. The U.S. Court of Appeals for the Second Circuit vacated and reversed a lower court’s decision to dismiss the case two years ago against the Royal Bank of Scotland Group, Deutsche Bank AG, Wells Fargo Advisors and NovaStar Mortgage. The New Jersey Carpenters Health Fund was lead plaintiff. In 2007, the New Jersey fund sued...

The mortgage industry remains on guard and is fully prepared to rebuff further attempts by lawmakers to squeeze Fannie Mae and Freddie Mac guaranty fee revenue to fund non-government-sponsored enterprise related pet projects, experts say. Congress’ passage in early 2012 of a payroll tax cut extension bill set a dangerous precedent and emboldened lawmakers to look to the GSEs as a piggy-bank by mandating an increase and using the funds to offset the costs of other programs, according to Robert Zimmer, head of external affairs at the Community Mortgage Lenders of America. “I’m shocked that I’m not hearing anything right now on diverting g-fees to other parts of the federal budget,” said Zimmer. “I think there has been some hardening in town that this is a bad idea but when [Congress is] desperate for money, anything can happen.”

A recent recommendation by the House Financial Services Committee to the FHA to consider charging “additional user fees” to strengthen and protect the Mutual Mortgage Insurance Fund has raised questions in the industry as to what lawmakers meant by user fees. The FHA, apparently, has no authority to do so. In its recently published views and estimates related to the FY 2014 budget, the committee noted that while the FHA has increased its mortgage insurance premiums, lawmakers remain concerned that the agency “has failed to make full use of its existing authorities to protect the health of the fund.” The committee urged...

With the Federal Reserve’s MBS portfolio quietly passing the $1 trillion mark in mid-February for the first time since late 2010, Fed Chairman Ben Bernanke this week continued to toe the party line on the historic level of support the central bank has provided to the MBS and Treasury markets. But there is more skepticism from Republicans on Capitol Hill and some Fed board members, and industry analysts are trying to dope out when the Fed buying spree will wind down. “After quadrupling its balance sheet engaging in unprecedented MBS asset purchases and creating an extended negative real interest rate environment, there is...

Adherents of a global tax proposal that would help countries raise revenue and make the financial sector pay for its fair share of crisis costs are calling on the U.S. for support. But first, the U.S. must overcome its fear of the “financial transaction tax,” or FTT, before this controversial tax option can be adopted globally, according to panelists in a forum hosted this week by the Center for American Progress. The CAP believes the tax is a “smart policy tool” that is both a revenue raiser and a stabilizer of volatile financial markets. The FTT is...

The Department of Justice and the Securities and Exchange Commission are likely to pursue more mortgage-related lawsuits due to pressure from Congress, according to former federal attorneys. “The fact that the attorney general now speaks of financial fraud enforcement as one of the top three priorities of the Department of Justice, just after terrorism and keeping people safe in their communities, trickles down to the lowest levels of the department and elsewhere in terms of the dedication of resources, the coordination, the training, the case referrals,” said Andrew Schilling, a partner at the law firm of BuckleySandler and a former chief of the civil division of the U.S. Attorney’s Office for the Southern District of New York. The latest pressure came...

Moody’s Investors Service and Fitch Ratings have downgraded the senior unsecured and issuer default ratings of The McGraw-Hill Companies, parent of Standard & Poor’s, to below A-level ratings with a negative outlook. The downgrades are largely due to the Department of Justice’s recent lawsuit regarding ratings of collateralized-debt obligations and rating models for non-agency MBS. “The Baa2 rating balances the company’s history of prevailing in its legal defenses against the potentially substantial negative credit effects that could result from adverse litigation or settlement outcomes,” Moody’s said after downgrading McGraw-Hill’s senior unsecured rating from A3 late last week. “In addition, the management focus and direct costs involved in defending litigation may be a persistent drag on the company’s operations over the intermediate term.” Moody’s said...