Two federal banking regulators have raised concerns about risks associated with nonbanks gaining market share in the mortgage industry. In a report published this week, the Office of the Comptroller of the Currency said banks are loosening mortgage underwriting standards in response to “intense competition” from nonbanks. The OCC cited higher thresholds for back-end debt-to-income ratios, higher acceptable loan-to-value ratios and lower downpayment requirements. The trends were ...

Thanksgiving to early spring is known as “LO recruiting season” in some corners of the industry. And in a softer origination market, that theoretically means mortgage executives can reduce compensation packages for loan originator sales staff. Not necessarily. Yes, originations are on a downward trend, but some entrepreneurial-minded CEOs might argue that in a tough market top-performing loan officers are worth their weight in gold. Included in that camp is Paul Rozo, CEO of ...

Mortgage banking profits eroded during the third quarter of 2018 as the industry continued to wrestle with overcapacity and sluggish origination volume. According to the Mortgage Bankers Association’s latest quarterly performance report, the average mortgage banking operation generated $946,000 in pretax income during the July-September cycle, a 31.6 percent decline from the previous quarter. Third-quarter profits were still somewhat stronger than those earned in late 2017 and early this year ...

Federal regulators last week proposed a significant expansion in the number of non-agency mortgages that will not need a full appraisal. Currently, non-agency mortgages with loan balances of less than $250,000 don’t need an appraisal if originated by a bank. The regulators proposed increasing the threshold to $400,000. Mortgages below the appraisal threshold still require an evaluation, just not a full appraisal. Banking regulators said the proposal is an effort to reduce ...

The vast majority of commercial banks and savings institutions that have mortgage banking operations post positive results from those activities, but overall profitability fell significantly in the third quarter of 2018. A new Inside Mortgage Trends analysis of call-report data reveals the banking industry earned $4.025 billion from mortgage banking during the three-month period ending in September. That was down 14.5 percent from the second quarter, when ... [Includes one data chart]

It’s that time of the year again: Declining originations mixed with seasonality are causing consternation among residential originators, with lay-off notices proliferating at shops both large and small. However, a greater sense of panic is beginning to seep in this time around. Rates are the highest they’ve been in several years and the purchase-money sector is beginning to look long in the tooth. The nation’s largest home lender, Wells Fargo, recently announced plans to chop 900 ...

The FHA’s Mutual Mortgage Insurance Fund is generally healthy but for its Home Equity Conversion Mortgage program, according to the latest FHA audit of the MMIF. In its 2018 report to Congress this week, the Department of Housing and Urban Development had good and bad news regarding the financial condition of the insurance fund. The good news is that the economic value of the MMIF, which backs the FHA’s single-family loan programs, increased to $34.7 billion in fiscal 2018 from $26.7 billion a year ago. Total capital resources rose to $49.2 billion from $40.9 billion during the same period. For the fourth consecutive year, the fund exceeded its statutory capital reserve ratio of 2.00 percent. The ratio rose to 2.76 percent in 2018 from 2.18 percent last year. Premium reductions, had they been in effect, would have reduced the fund’s economic net worth and dropped its capital ratio, industry ...

A memorandum of understanding is in the works at the Department of Housing and Urban Development to clarify the use of the False Claims Act in FHA enforcement. At the same time, the department is considering seeking statutory authority for the Mortgagee Review Board to impose stiffer penalties on lenders for violations that do not require a False Claims Act response. (See following story.) During a public policy luncheon hosted by the Washington-based Women in Housing and Finance this week, HUD Assistant Secretary and FHA Commissioner Brian Montgomery said the draft MOU would provide a “level of fairness” in terms of whether the FCA or some other mechanism would be appropriate. Montgomery did not discuss specifics but said the memo would ensure that HUD has a say in what type of offense would qualify for a false claim. Montgomery gave no timeframe for when the ...

The FHA is recommending a statutory change to strengthen the Mortgagee Review Board’s authority in lender enforcement. The agency discussed the merits of enhancing MRB’s powers in a 2018 audit report on the health of the Mutual Mortgage Insurance Fund. While the goal of a stronger MRB is not new, it has taken on a new urgency in discussions between the Department of Housing and Urban Development and the Department of Justice regarding the use of the False Claims Act in FHA enforcement. The DOJ and HUD have used the statute to pursue lenders that have inflicted millions of dollars in losses on FHA due to misrepresentation, carelessness and generally sloppy underwriting. Lenders, on the other hand, have complained about the agencies’ indiscriminate use of the FCA against even the slightest technical error. The FCA and its treble-damages provisions have squeezed billions of dollars ...

This week, Ginnie Mae issued an all-participants memo dictating new standards for firms seeking to become issuers, including the stipulation that applicants submit to a corporate credit evaluation. Ginnie said the financial exercise will be “similar to those employed by credit rating agencies.” The evaluation will determine whether an applicant is qualified to be an issuer or whether additional criteria should be imposed even if the basic standards are met. Applicants that rely on a subservicer arrangement will be scrutinized even more. The bulletin also notes that, effective immediately, the agency is implementing new notification requirements for MBS issuers engaged in “certain subservicer advance or servicing income agreements, which do not require prior Ginnie Mae approval, but can impact an issuer’s ongoing liquidity position and financial obligations.” While Ginnie currently permits subservicers to advance ...