The mortgage banking industry is urging Congress to reject the FHA’s call to eliminate the existing “knew or should have known” standard in the National Housing Act in connection with an agency proposal to extend indemnification authority to all direct-endorsement lenders. Both proposals are part of legislative and administrative measures sought by the FHA to strengthen its capability to manage risk and protect its Mutual Mortgage Insurance Fund. A recent independent actuarial review of the fund found that in FY 2012 the economic value of the FHA’s single-family portfolio had dropped to negative $13.5 billion (excluding Home Equity Conversion Mortgage loans) and that ...

The Department of Housing and Urban Development this week clarified that mortgages using cash investment funds provided under a government housing assistance program to meet the FHA’s 3.5 percent downpayment requirement are eligible for FHA insurance. HUD issued the interpretive rule to clarify the confusion caused by a provision in the National Housing Act that prohibits certain sources of a homebuyer’s funds for the required minimum FHA downpayment on a home loan. Because of this provision, cash investment funds provided by federal, state and local homeownership assistance programs to first-time and lower-income homebuyers may be deemed ...

The FHA has extended a temporary waiver of its regulation that prohibits property flipping in the single-family mortgage insurance program to encourage more investors to participate in agency efforts to ease its burgeoning inventory of real estate-owned properties. First issued in January 2010, the regulatory waiver is now effective through Dec. 31, 2014, after two previous adjustments since issuance. Prior to the waiver, a mortgage was not eligible for FHA insurance if the purchaser sold the property within 90 days of its acquisition and is ...

FHA endorsements jumped 18.8 percent in October from the previous month and by more than half from a year ago, with mortgagees accounting for 80 percent of production, according to Inside FHA Lending’s analysis of FHA data. FHA originations, excluding Home Equity Conversion Mortgage loans, totaled $22.8 billion in October, up from $19.2 billion in September and 56.4 percent more than a year ago. Fixed-rate forward mortgages accounted for nearly all FHA loans produced during the month, with purchase mortgages having a slight edge in the mix over refinances. Top-ranked Wells Fargo outdid other lenders in October with ...

Thanks to the Federal Reserve’s aggressive support for the agency mortgage market and continuing strength in the refinance program for underwater Fannie Mae and Freddie Mac borrowers, mortgage refi activity has accounted for 73.1 percent of 2012’s surging production volume. But home-purchase lending started to regain some market share during the third quarter of 2012, according to a new Inside Mortgage Finance ranking and analysis. An estimated $143 billion of home-purchase mortgages were originated during the third quarter, up 10.9 percent from the previous three-month period. By comparison, refinance production was up just 2.8 percent from the second quarter. The purchase-mortgage sector still has...[Includes three data charts]

Department of Housing and Urban Development Secretary Shaun Donovan said this week HUD is considering additional steps to improve the financial health of the FHA single-family program, including raising FICO score requirements and supporting legislation that would take the FHA loan limits back to pre-crisis levels. The HUD secretary found himself in the hot seat before the Senate Committee on Banking, Housing and Urban Development, explaining the results of a recent actuarial audit that placed the FHA’s Mutual Mortgage Insurance Fund capital reserve ratio below zero at negative 1.44 percent, representing a negative economic value of $16.3 billion. Sen. Richard Shelby, R-AL, ranking minority member of the committee, raised...

The Home Affordable Refinance Program surged to a record 286,044 loans during the third quarter of 2012, but volume began to slow in September, according to an Inside MBS & ABS analysis of new data released by the Federal Housing Finance Agency this week. HARP business was up 17.8 percent from the second quarter to the third, based on loan count, but overall refinance activity at Fannie Mae and Freddie Mac was up 21.8 percent for the same period. The program for underwater Fannie and Freddie borrowers saw a huge increase in volume at the start of the year as lenders implemented a series of changes in the program. Activity surged again in the second quarter when loan-to-value limitations were largely taken out of the equation. But HARP volume fell off...[Includes one data chart]

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...