The Department of Housing and Urban Development warned that an extraordinarily high percentage of loans in claim status can trigger a lender monitoring review to ensure the lender’s capacity to meet indemnification requirements. A high loan defect rate may be one of several factors used to target FHA lenders for a special review to determine the amount of risk a lender might pose to the safety and soundness of the FHA’s single-family mortgage insurance program, according to Justin Burch, director of the Quality Assurance Division at FHA during a webinar hosted this week by Inside Mortgage Finance. “If you are a lender that is...

The mortgage banking industry will support reasonable efforts to protect the FHA Mutual Mortgage Insurance Fund as long as the changes don’t expose FHA lenders to onerous liability risk and treble damage claims, which could force them to limit or curtail their FHA lending, said the Mortgage Bankers Association. MBA President and CEO Dave Stevens said appropriate protections for the FHA are clearly needed, but they should not go so far as to shut down or restrict access to affordable credit and sustainable homeownership, particularly for first-time homebuyers. He said the industry is most concerned with FHA proposals to seek authority from Congress to extend indemnification requirements to all direct endorsement (DE) lenders and for an amendment to eliminate the “knew or should have known” standard with regard to fraud or misrepresentation. Both proposals are...

Federal Reserve Chairman Ben Bernanke late last week reiterated his view that tight underwriting standards set by lenders are hindering a broader recovery of the housing market. Lenders, meanwhile, cite concerns with repurchases and regulatory uncertainty. Bernanke noted that low home prices and historically low interest rates have not prompted the “powerful housing recovery” that has typically occurred in the past after housing problems. “Unfortunately, while some tightening of the terms of mortgage credit was certainly an appropriate response to the earlier excesses, the pendulum appears to have swung too far, restraining the pace of recovery in the housing sector,” he said. More than half of the lenders that responded to the Fed’s senior loan officer opinion survey earlier this year said...

The first-time homebuyer share of home-purchase activity and the FHA share of home-purchase financing have each fallen significantly since peaking in 2010, according to results from the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. The trends appear to be tied to lender underwriting requirements and the cost of FHA loans. In May 2010, first-time homebuyers accounted for 45.8 percent of home purchases, based on the three-month moving average. In October 2012, the share fell to 34.7 percent. Similarly, the FHA share of home-purchase financing fell during that time from 36.7 percent to 26.3 percent. “Financing of first-time homebuyers with low downpayments threatens...

The recent actuarial report that showed the FHA’s insurance fund is underwater to the tune of $16.3 billion ought to sound an alarm for policymakers to refocus the agency on its original public mission, some leading policy experts say, and perhaps even motivate them to resolve Fannie Mae and Freddie Mac while they’re at it. “I think FHA’s financial condition is extremely precarious – much worse than FHA and HUD are making it out to be,” said long-time critic Edward Pinto, a resident fellow at the American Enterprise Institute, a conservative think tank in Washington, DC, and a former official at Fannie Mae. As he sees it, today’s very low interest rate environment means the economic value of FHA’s forward mortgage fund really is a far worse at a negative $31 billion. “And when you throw in the negative on the reverse [mortgage] program, you get close to $35 billion.” Compounding the problem is...

Lenders face increased regulation under policy changes designed to bring the FHA Mutual Mortgage Insurance Fund back to positive within the fiscal year and reduce the likelihood of a Treasury bailout to shore up the FHA’s claims-paying ability. The Department of Housing and Urban Development late last week announced a hike in FHA premiums and other changes designed to restore the FHA’s insurance fund, which had a negative 1.44 percent capital ratio at the end of September 2012, according to a new actuarial review. Department of Housing and Urban Development Secretary Shaun Donovan blamed...

Servicers are on their way to completing required loss mitigation as part of the national servicing settlement well before the 2015 deadline, according to a report this week from Joseph Smith, monitor of the settlement. State attorneys general and federal regulators that helped reach the settlement said they are largely satisfied with servicers’ initial efforts. “With servicers on track to fulfill much of their consumer relief commitments in the first year of this agreement, homeowners are finally beginning to see the light at the end of the tunnel,” said Shaun Donovan, secretary of the Department of Housing and Urban Development. The settlement requires...

The Department of Housing and Urban Development will raise the annual insurance premium on new FHA originations, reverse the agency’s current policy on mortgage insurance premium cancellation and institute other policy changes to improve the health of the FHA insurance fund. The new measures aim to offset significant losses from FHA’s legacy loans, which have caused significant stress to the agency’s Mutual Mortgage Insurance Fund. Results of a new FHA actuarial audit showed that the stress has plunged the MMI Fund into a deep hole, revealing negative capital of $16.3 billion (negative $13.5 billion excluding Home Equity Conversion Mortgages) on a $1.13 trillion FHA portfolio. The capital reserve ratio fell ...

Mortgage lenders will be facing tougher enforcement if Congress decides to act on a series of proposals to hold lenders accountable for noncompliance with FHA policies and regulations. In the wake of an adverse actuarial report regarding the health of the FHA’s Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante announced that the agency will seek new powers to recoup losses from lenders that originate bad FHA loans. The proposals are designed to provide the FHA with greater flexibility to revise policies and procedures to avoid unnecessary losses before they occur. They will also improve the agency’s ...

Ocwen Financial’s agreement in October to purchase reverse mortgage lender Genworth Financial Home Equity Access was the latest in an effort by special servicers to diversify their portfolios with reverse mortgages. Nationstar Mortgage burst onto the scene at the beginning of the year to become the largest reverse mortgage servicer and Walter Investment Management recently purchased Reverse Mortgage Solutions. Servicing reverse mortgages is much different than dealing with the ...