With mortgage production costs exceptionally high, a number of lenders are outsourcing certain functions. Christopher George, president and CEO of CMG Financial, said the lender moved some operations offshore via outsourcing. “There are some areas where we can do business substantially cheaper and not compromise quality,” he said this week at the California Mortgage Bankers Association’s secondary market conference. George said two years ago, CMG had 161 ...

The Department of Housing and Urban Development has issued an interpretive rule to clear up some of the confusion created by the recently approved Dodd-Frank reform act regarding the eligibility of certain VA refinance loans to serve as Ginnie Mae collateral. Although interpretive rules are exempted from public comment under the Administrative Procedures Act, HUD is seeking public input on its interpretation of the loan-seasoning provision of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which President Trump signed into law on May 24, 2018. Among other things, the statute prohibits Ginnie from guaranteeing payment on a security backed by a mortgage that does not meet its seasoning requirements. The protective measure was designed to deter lenders from encouraging veterans to refinance their loans often and repeatedly. Loan churning led to faster prepayment speeds on the ...

The mortgage industry this week continued to look for ways to resolve the VA streamline refi loan mess, which arose from the implementation of statutory seasoning requirements under the Dodd-Frank reform act, even as Ginnie Mae pointed to Congress to come up with a solution. At issue is approximately $500 million worth of “orphaned” VA Interest Rate Reduction Refinance Loans that are now ineligible for Ginnie Mae securitization. The Mortgage Bankers Association is asking Congress for a legislative fix but is also looking for other forms of relief. Pete Mills, MBA’s senior vice president of residential policy and member management, is trying to drum up investor interest in the orphan loans, which, for now, appear destined for the secondary “scratch and dent” market. More buyers could potentially generate higher bids for the loans and lower losses for nonbanks that could not deliver them ...

Ginnie Mae’s efforts to clamp down on rapid refinance schemes and realign prepayment speeds with the conventional mortgage-backed securities market appear to be paying off. Securities analysts say the crackdown on issuers suspected of loan churning combined with increasing primary mortgage interest rates have reduced the prepayment-speed gap between conventional and Ginnie-backed collateral. Ginnie/Fannie Mae price swaps have improved greatly since Ginnie issued warnings to nine issuers in February to address churning in its MBS program and faster prepayments on loans backed by VA, said Kevin Cavin, head of mortgage strategy at Stifel Nicolaus & Co. Ginnie required the issuers to submit a plan to bring prepayment speeds in line with market peers. They were warned that failure to comply would result in temporary debarment from the agency’s multi-issuer pools and ...

A provision involving community banks and qualified mortgages in recently enacted regulatory relief legislation could prompt community banks and nonbanks to loosen underwriting standards for non-agency mortgages, according to Moody’s Investors Service. Banks with less than $10.0 billion in assets can receive QM treatment for certain loans that would otherwise be non-QMs if the banks hold the mortgages in portfolio acording to the Economic Growth, Regulatory Relief and ...

The spring homebuying season fueled a relatively modest increase in production of Ginnie Mae single-family mortgage-backed securities during the second quarter of 2018, according to a new Inside FHA/VA Lending ranking and analysis. Lenders issued $98.66 billion of Ginnie MBS backed by forward mortgages during the April-May cycle. That was up 6.6 percent from the first three months of the year, but 2018 continued to lag behind the pace set in 2017 by 10.7 percent. Given current trends, annual Ginnie MBS issuance in 2018 could fall short of the $400 billion mark for the first time since 2014. The flow of FHA and VA purchase mortgages was up a solid 23.7 percent from the first to the second quarter, bringing the total for the first half of the year to $121.01 billion. However, that was down 4.7 percent from the same period in 2017. Ginnie securitized $75.02 billion of FHA purchase loans in the ... [Charts]

Holdings of first-lien residential mortgages by banks and thrifts increased in the first quarter of 2018, according to a new ranking and analysis by Inside Nonconforming Markets. Banks and thrifts held $2.025 trillion of first-lien home loans as of the end of the first quarter, up 0.5 percent from December 2017 and up 4.8 percent from March of last year. Trends varied somewhat among the 10 largest holders of first liens, with some posting large gains on an ... [Includes one data chart]

Originations of adjustable-rate mortgages declined in the first quarter of 2018 from the previous period, according to a new ranking and analysis by Inside Nonconforming Markets. ARM production slowed even with a rise in interest rates, and the products don’t appear to be popular with borrowers seeking purchase mortgages. An estimated $44.0 billion of ARMs were originated in the first three months of the year, down 20.0 percent from the fourth ... [Includes one data chart]

The credit risk profile of incoming FHA business has shifted significantly since the beginning of last year, according to a new Inside FHA/VA Lending analysis of Ginnie Mae mortgage-backed securities data. The biggest development has been the growth of loans with high debt-to-income ratios. There has also been a significant increase in the share of refinance loans that are cash-out transactions. FHA officials are well aware of these developments, having publicly mentioned them in testimony on Capitol Hill and at industry conferences. Officials have also raised concerns about FHA loans with downpayment assistance, although the MBS data don’t seem to indicate that there has been much change on that score. Among FHA loans endorsed in April and May, only 41.9 percent were at or below the benchmark DTI test for qualified mortgages, which is 43 percent. Through 2015 and 2016, well over half of new ... [Chart]

The issues behind the Department of Housing and Urban Development’s draft FHA condominium rules are “too complex” but lenders may expect a final rule in September, said HUD Secretary Ben Carson. Carson’s announcement of a release date for the long-anticipated condominium rules eases the mounting pressure on the secretary and the department to finalize the draft rules. On June 18, 54 senators and 120 members of the House signed a letter urging Carson to implement the changes in H.R. 3700, the Housing Opportunity Through Modernization Act, which would ease FHA requirements for financing condo purchases and refinancings. The bill was signed into law on July 29, 2016, and HUD published a proposed condo rule two months later. “We have been pushing it,” Carson said during a House committee oversight hearing this week. “It is a complex issue because when you are talking ...