FHA-approved lenders that engage in aggressive marketing to borrowers with a history of foreclosure, particularly advertisements about the ease of obtaining an FHA-insured mortgage after foreclosure, could face potential sanctions and severe penalties, the FHA warned. In a letter to lenders, FHA Commissioner Carol Galante said there has been a proliferation of web-based and print ads conveying the message that almost any borrower can get a new FHA loan three years after ...

The FHA will begin monitoring state housing finance agencies (HFAs) to ensure that the cash assistance they provide borrowers for closing costs, downpayment or rehabilitation costs are not coming from illegal sources. FHA Commissioner Carol Galante said there have been concerns about whether some HFA homeownership program funding models are in compliance with the Department of Housing and Urban Development’s current interpretive rule clarifying its prohibition on seller-funded downpayment assistance. Published in the Federal Register, the interpretive rule clarified that ...

A recent revision to the Department of Housing and Urban Development’s Office of the Inspector General Audit Guide has lifted a reporting burden for FHA investing mortgagees who are involved in servicing, according to Phillip Schulman, a top compliance expert and a partner at K&L Gates. Under the revised guide, an investing mortgagee or lender that purchases, sells or holds FHA-insured mortgages but cannot originate or fund FHA loans no longer needs to submit reports on internal controls and compliance, Schulman reported in a client alert. The new rule states that investing mortgagees are now required to ...

Responding to industry concerns over the impact of the new loan officer compensation final rule on reverse mortgages, the Consumer Financial Protection Bureau has clarified the phrase “amount of credit extended” for closed-end Home Equity Conversion Mortgage loans. For closed-end reverse mortgages, a loan originator’s compensation may be based on either (a) the maximum proceeds available to the consumer under the loan; (b) the maximum claim amount (if the loan is subject to the Department of Housing and Urban Development’s HECM rules); or (c) the appraised value of the property, as determined by ...

A federal appeals court has rebuffed the bid by American International Group’s mortgage insurance unit to overturn a lower court’s order to pay more than $45 million to SunTrust Banks for insured losses related to mortgage defaults. The Fourth Circuit Court of Appeals last week upheld a Virginia federal judge’s ruling that AIG’s United Guaranty breached an insurance agreement by refusing to pay claims on 1,305 defaulted “combo” loans – which is a first-lien loan with a smaller, second-lien “piggyback” loan. At issue were mortgage defaults that SunTrust claimed should have been covered under a ...

Genworth Financial Inc.’s U.S. mortgage insurance segment continued to be a burden to its parent despite reporting a narrower operating loss of $34 million in the fourth quarter of 2012, compared to losses of $38 million in the prior quarter and $96 million in the prior year. Nonetheless, the reduced amount of losses during the period was good news to company executives who reported net income of $166 million, or 34 cents a share, during the period from $142 million, or 29 cents, a year earlier. Operating profit was $167 million, or 34 cents a share, up from ...

California and Texas took the honors for top FHA producers among states and other U.S. jurisdictions in 2012, with a combined $59.2 billion in new mortgage loans insured by the FHA. The combined output of the two states represented 25.5 percent of the $232.1 billion in new FHA originations reported by all 50 states, Puerto Rico, Guam, the U.S. Virgin Islands and the District of Columbia for the entire year. Total FHA production by state was up a modest 5.2 percent in the fourth quarter from the previous quarter and a hefty 21.9 percent from the prior year. California, which accounts for 25 percent of the U.S. housing market, reported ...

FHA single-family mortgage production was up 22.3 percent in 2012, but another increase in the mortgage insurance premiums will likely accelerate the program’s three-year decline in market share. The Department of Housing and Urban Development late last week issued formal guidance to raise the annual MIP by another 10 basis points, taking effect for loans processed after April 1. It marks the fifth time HUD has raised FHA premiums in the past three years and raises the annual MIP to as much as 155 bps, for super-jumbo loans exceeding $625,500 with loan-to-value ratios over 95 percent and 30-year terms. That’s actually a relatively small slice of the FHA market: super-jumbo loans (which have...[Includes one data chart]

Lawmakers on Capitol Hill this week mulled over how to strengthen the shaky financial condition of the FHA single-family insurance fund and reduce the risk to taxpayers of another government bailout, while shrinking the agency’s market footprint without disrupting the market’s fragile recovery. Partisan differences were immediately on display, predictably, as Republicans slammed the agency while Democrats defended it. “If the FHA was...

Fannie Mae and Freddie Mac lenders will be allowed to offer certain additional incentives to encourage more borrowers, particularly those underwater, to refinance under the Home Affordable Refinance Program, according to guidance issued by the two government-sponsored enterprises. The GSEs announced last week that lenders will be allowed to offer a “refinancing incentive” to underwater borrowers so they may obtain a lower payment or move to a more stable product or a shorter term. “As a result of lender inquiries, the Federal Housing Finance Agency has led...