The interest rate environment is ripe for jumbo borrowers, but industry participants warn that underwriting standards for these loans are at least as stringent as standards for agency loans and much different than five years ago when many jumbo borrowers might have last bought a home or refinanced. “Be prepared to expose everything to examination,” said Bill Reiter, a senior loan officer at PNC Mortgage, speaking at a webinar last week hosted by Realtor Magazine. He noted that income, assets, tax returns and ...

Federal regulators this week proposed requiring a physical inspection of a property’s interior by a qualified appraiser for originations of “higher-risk mortgages,” the latest proxy for subprime loans. The requirement was included in the Dodd-Frank Act and could prompt more than 50,000 new appraisals per year. The Consumer Financial Protection Bureau estimated that full-interior appraisals are conducted as part of current practice in higher-risk mortgage originations on 95.0 percent of purchase-money transactions ...

Ginnie Mae is reportedly considering increasing its minimum net worth requirement in response to an onslaught of requests by smaller banks for new issuer approvals. Quoting agency officials, reports indicate that Ginnie Mae is being swamped with applications from smaller mortgage lenders seeking authority to issue agency-backed mortgage backed securities. With large aggregators like Bank of America, MetLife and Ally Financial opting out of the correspondent and reverse mortgage businesses, many smaller lenders lost access to the Ginnie Mae program. However, many of these lenders are stepping into the breach on their own or with partners to ...

Chase Home Finance knocked Bank of America off its second-place perch and joined top-ranked Wells Fargo as the dominant Ginnie Mae mortgage-backed securities issuers in 2012, according to the Inside Mortgage Finance Database. Together, Wells Fargo and Chase accounted for 53.3 percent of the $100.6 billion Ginnie Mae MBS market in the second quarter of 2012, which grew 24.4 percent from the first quarter and a whopping 42.2 percent from the same period a year ago. Wells led with $42.6 billion and a commanding 42.2 percent piece of the Ginnie Mae MBS market, thanks to ... ( 2 charts)

VA Flunks ‘Plain Writing’ Test. The Department of Veterans Affairs got an “F” for not following the requirements of the Plain Writing Act, which directs federal agencies to take steps to ensure they are communicating clearly with businesses, consumers and stakeholders. The statute went into effect July 2011 and the Center for Plain Language, a nonprofit organization that grades government agencies on their efforts to comply with the Act, evaluated and graded 12 agencies for compliance. The center gave two grades – the first grade represents how well the agency followed the requirements of the act, and the second grade reflects ...

A federal judge in New York last week rejected the motion by a trio of former Fannie Mae executives to dismiss a securities fraud civil lawsuit brought late last year against the top GSE officers by the Securities and Exchange Commission. In December 2011, the SEC filed suit in the U.S. District Court for the Southern District of New York alleging that former Fannie executives made material misrepresentations to the public, investors and the media about the government-sponsored enterprise’s exposure to subprime mortgage loans in 2007 and 2008. The SEC filed an identical parallel civil suit against Freddie Mac the same day. The SEC’s complaint against former Fannie executives Daniel Mudd (CEO), Enrico Dallavecchia (chief risk officer) and Thomas Lund (EVP for single family) alleges...

An interagency proposed rule issued this week would set requirements for appraisals on “higher-risk mortgages” while a separate proposal by the Consumer Financial Protection Bureau would require lenders to provide loan applicants with copies of written appraisals. Both requirements were mandated by the Dodd-Frank Act. “Higher-risk mortgages” are first-lien loans with an annual percentage rate that exceeds the average prime offer rate by 1.5 percentage points or more, jumbo loans with a spread of 2.5 or more and second mortgages with a spread of 3.5 percentage points or more. Any appraisal for such loans would require...

Redwood Trust turned profits on the three non-agency jumbo mortgage-backed securities it issued thus far this year, with “strong investor demand.” Meanwhile, Springleaf Financial is set to issue another subprime MBS backed by seasoned loans. Officials at Redwood said they plan to issue another non-agency jumbo MBS before the end of the third quarter of 2012 and they are optimistic about future non-agency activity. “We are a long way from declaring victory, but we like our steady progress, the way the playing field is ... [Includes one chart]

Revised VA HAMP. The Department of Veterans Affairs has updated the instructions for modifying mortgage loans with a VA guarantee. Changes include clarification concerning occupancy status, an updated reference to another VA guidance on prior approval procedures and extension of the applicability of the said guidance. The changes were announced in Circular 26-10-6. New VA REO Management and Servicing Contractor. The Department of Veterans Affairs has provided details for transferring VA property management (real estate-owned) and portfolio loan servicing contracts for the VA home loan guaranty program from ...

Wells Fargo agreed last week to pay more than $125.0 million and offer $50.0 million in downpayment assistance to settle subprime-related fair lending claims by the Department of Justice and others. The claims center on brokered originations for African-American and Hispanic borrowers. The DOJ alleged that between 2004 and 2009, Wells charged approximately 30,000 African-American and Hispanic wholesale borrowers higher fees and rates than non-Hispanic white borrowers because of their race or national origin ...