Issues related to mortgage servicing, including the rising costs to service mortgages today, should be included in talk of housing-finance reform, according to a new paper by the Urban Institute. Since the housing downturn, mortgage servicing costs have risen dramatically, which has reduced access to credit and forced some depository institutions to leave the market. The UI said that the foreclosure crisis in 2007 upended the pre-crisis servicing model. And despite its importance, the report said, mortgage servicing is frequently overlooked in major policy conversations. “That is a mistake. The servicing industry has changed dramatically since the 2008 mortgage default and foreclosure crisis and subsequent Great Recession,” said the paper.

Borrowers in rural communities would suffer if the resolution of the limbo status of Fannie Mae and Freddie Mac winds up creating more headwinds for community-based banking institutions.The Brookings Institute published a new report by the Center for Responsible Lending explaining how housing-finance reform proposals will profoundly affect lending in rural communities. The report said the GSE financing meets a critical need in rural areas, home to almost a quarter of the population and17.5 percent of mortgage loans in the U.S. In 2016, 30.3 percent of all loans originated in rural areas were sold to Fannie and Freddie, the CRL said.

Although the stars might be aligned for legislative reform of Fannie Mae and Freddie Mac this year, new developments late this week illuminate the difficulty of the task at hand.

The recently enacted Tax Cuts and Jobs Act was pitched as a simplification of the tax code. And while the bill could ultimately reduce some tax-related complexities, lenders are facing sweeping changes this year.

The House Financial Services Committee this week was advancing more than a dozen and a half regulatory relief measures as Inside Mortgage Finance was going to press, including some mortgage-related legislation that would expand the qualified-mortgage box for smaller entities and exempt many institutions from the rules and regulations issued by the Consumer Financial Protection Bureau.

Bipartisan legislation was introduced last week in the U.S. Senate to protect veterans and service members from predatory serial refinancing by requiring lenders to show the transaction actually bene-fits the borrower.

As the dust settles from tax reform legislation passed at hyper speed at the end of 2017, industry analysts project that demand for jumbo purchase mortgages will take a hit. The Tax Cuts and Jobs Act reduced the amount of new debt eligible for the mortgage interest deduction. For purchase mortgages taken out on Dec. 15, 2017, and beyond, only $750,000 of debt will be eligible for the interest deduction. Previously, the limit was $1.0 million. Additionally, deductions from federal taxes for ...

Senate lawmakers this week introduced bipartisan legislation to protect veterans and servicemembers from predatory refinancing schemes. Introduced by Sens. Tom Tillis, R-NC, and Elizabeth Warren, D-MA, the bill would require lenders offering streamline or cash-out refinancing to demonstrate a material benefit to veterans with a VA loan. The Protecting Veterans from Predatory Lending Act reflects measures Jeffrey London, director of VA’s Loan Guaranty Service, talked about when he testified during a hearing on loan churning before the House Veterans Affairs Subcommittee on Economic Opportunity (See next story.) Prior to submitting a refi loan for a VA guarantee, a lender would be required to certify that all fees associated with the transaction would be recouped by the veteran through lower monthly payments within 36 months. Such fees would include closing costs and any expenses other than ...

2018 might not turn out to be a record-breaking production year for FHA and VA, but it could become significant in terms of enforcement and housing finance reform, according to industry stakeholders. Ed Pinto, codirector of the American Enterprise Institute’s International Center on Housing Risk, expects a slight increase in FHA’s and VA’s mortgage unit production and stronger dollar volumes due to rising house prices. Pinto believes loose purchase lending, particularly by FHA, and declining housing inventory are driving housing prices. This in turn results in FHA/VA cash-out refinancing at very high loan-to-value ratios, which helps feed the general economy but makes FHA lending riskier, he said. “We see a stronger demand for housing amid constrained housing supply,” said Pinto. “We’re seeing this vicious cycle of purchase transactions becoming more risky, cash-out transactions increasing in ...

A former FHA commissioner’s proposal to restructure FHA as part of broader housing-finance reform has received mixed responses from industry stakeholders and the Department of Housing and Urban Development. While participants in a recent panel discussion hosted by the Urban Institute praised the proposal, they admitted to still being unsure about FHA’s role in a revamped world of Fannie Mae and Freddie Mac, and a single mortgage-backed security. The recommendation for a reconstituted FHA is part of a paper presented for debate at the Urban Institute this week by Carol Galante, faculty director of the Terner Center for Housing Innovation at the University of California Berkeley, and former head of FHA during the second Obama administration. Under Galante’s proposal, all of FHA’s mortgage insurance programs would remain with the agency while rental assistance and other ...