JPMorgan Chase chief executive Jaime Dimon this week warned that the investment bank may rethink its FHA business without some type of safe harbor to shield it from potential future liabilities arising from the Financial Institutions Reform, Recovery and Enforcement Act and the False Claims Act. In February this year, JPMorgan agreed to pay $614 million to the federal government to settle allegations that it falsely certified poorly underwritten loans for FHA endorsement, causing massive losses to taxpayers in paid claims. Dimon lashed out at the government during a telephone briefing on the company’s second-quarter 2014 earnings report. He said JPMorgan lost a tremendous amount of money over what the government claimed was fraud but was in fact a “commercial dispute” between FHA and the bank. “We collected $600 million in insurance, the [government] disputed $200 million [alleging] it was fraud ...

If an FHA borrower runs out of options for loss mitigation and home retention, a lender must first consider a pre-foreclosure or short sale, with deed-in-lieu (DIL) of foreclosure as a second option, according to new FHA guidance. Mortgagee Letter 2014-5 states that the lender must first determine whether the borrower facing default or at risk of default qualifies for a pre-foreclosure sale (PFS). The FHA allows pre-foreclosure sales to be processed as either a “standard PFS” or a “streamline PFS.” The former is available only to owner-occupants while the latter is for both owner- and non-owner-occupied single-family properties. In determining standard PFS eligibility, the lender must use a “deficit income test” to determine whether the borrower is experiencing hardship and is able to sustain his or her mortgage. A DIT resulting in a negative amount would likely qualify the borrower for a ...

One deficiency commonly noted in cases heard by the Department of Housing and Urban Development’s Mortgagee Review Board is failure by FHA lenders and servicers to implement and maintain a quality control (QC) plan. FHA’s focus on quality control has increased over the last couple of years as the agency strives to correct underwriting flaws that have contributed to the massive losses and severe depletion of the Mutual Mortgage Insurance Fund. After years of guiding and helping clients comply and cope with FHA regulations, requirements and enforcement actions, the Collingwood Group reports that a common QC-related mistake among FHA lenders is failure to document steps taken to correct deficiencies – or to take any corrective action at all. Tied to this issue is ...

Same-sex couples are entitled to veteran benefits, including home loan guaranty, if their marriage is recognized by the state where they live or where they lived when they filed a claim for benefits – and not where the marriage took place.The VA made the clarification in the wake of guidance the agency issued regarding the benefits and services same-sex married couples are entitled to under current laws and regulation. On June 26, 2013, the U.S. Supreme Court, in United States v. Windsor, struck down Section 3 of the Defense of Marriage Act (DOMA), which governs the definitions of “marriage” and “spouse” for all federal agencies, because it was unconstitutional. The court held that the provision deprives a person of the right to equal liberty, which is protected by the due process clause of the Fifth Amendment. Prior to the SCOTUS opinion, DOMA defined “marriage” as a ...

Ginnie Mae servicing remained flat in the second quarter of 2014, continuing a trend that began in the third quarter of last year as FHA refinancing fell and purchase activity slowed, according to Inside FHA Lending’s analysis of Ginnie Mae data. Servicing volume rose by only 0.7 percent from the first quarter, slightly lower from the 0.9 percent increase reported by Ginnie Mae servicers for the first three months of 2014. On the other hand, volume was up modestly by 5.9 percent year-over-year, data showed. Ginnie Mae servicers ended the second quarter with a total of $1.46 trillion in unpaid principal balance, up from $1.45 trillion in the prior quarter. Four out of the top five Ginnie Mae servicers were banks. Wells Fargo closed out the second quarter with $425.9 billion in servicing volume, a 0.2 percent decrease from the previous quarter but up 2.1 percent from a year ago. Its 29.2 percent market share put it ... [1 chart]

Ginnie Mae would play a greater role in a private-market partnership model envisioned in proposed housing finance reform legislation introduced recently by House Democrats. However, many in the industry doubt whether a Democrat-sponsored reform bill will pass in this Congress. Sponsored by Reps. John Delaney (MD), John Carney (DE) and Jim Himes (CT), the Partnership to Strengthen Homeownership Act would put Ginnie Mae in charge of all single- and multifamily mortgage-backed securities with government backing. Among other things, H.R. 5055 would create a new Ginnie Mae MBS for conventional mortgages backed by the full faith and credit of the federal government with minimum support from the private sector. Under the proposed model, private entities would assume up to 5 percent of the first-loss capital on the MBS. The remaining 95 percent would be shared between ...

"Buying loans from some nonbanks could damage the enterprises' reputations," the FHFA IG says.

So far, the only notable skunk at the second quarter origination party has been JPMorgan Chase which reported a 1 percent decline in fundings compared to the first quarter.

According to an Inside Mortgage Finance analysis of loan-level data on mortgage-backed securities from the GSEs, underwriting standards on mortgages have loosened only slightly over the past year.

The Consumer Financial Protection Bureau late last week said it will take a close look at mortgage brokers acting as mini-correspondents, particularly if they are just trying to get around disclosure requirements and limits on broker compensation. The CFPB is concerned that some mortgage brokers are claiming to be mini-correspondent lenders by establishing warehouse funding lines when they are still essentially just facilitating a transaction between a borrower and a lender. “While some brokers may be setting up such arrangements because they intend to grow into full correspondent lenders, the bureau is concerned...