The Federal Home Loan Bank system is one of three potential hosts for a proposed new refinance program unveiled this week by a Senate Democrat aimed at rescuing underwater homeowners without direct federal assistance. Oregon Sen. Jeff Merkley’s proposal – spelled out in a white paper titled “The 4% Mortgage: Rebuilding American Homeownership” – would create a temporary government-backed trust to purchase eligible mortgages issued by private lenders. The RAH Trust would be funded by the federal government’s sale of bonds to investors. The plan would allow underwater borrowers who are current on their mortgages to refinance at a lower interest rate.

California, Arizona, Nevada and Florida – the so-called Sand States that have seen the most severe declines in house prices – were at the head of the line as Fannie Mae and Freddie Mac removed loan-to-value limits under the Home Affordable Refinance Program earlier this year. Refinance mortgages with loan-to-value ratios exceeding 125 percent accounted for just 2.5 percent of HARP business in the first quarter, as the government-sponsored enterprises just got started buying such loans for cash. A securitization option for these loans only became available in June. But 13.1 percent of HARP loans in Nevada were...[Includes one data chart]

Originations of FHA mortgages increased by 15.7 percent in the second quarter of 2012 compared with the previous quarter, according to an Inside FHA Lending analysis. The increase was driven by purchase mortgages and FHA-to-FHA refinances. Some $57.82 billion forward single-family mortgages were originated in the second quarter of 2012, the strongest quarter of FHA originations since the fourth quarter of 2010. Originations through two quarters in 2012 were also up 7.7 percent compared with the first half of 2011 ... [Includes two charts]

The recently reduced premiums for the FHA Streamline Refinance program have resulted in an influx of refi applications, according to officials with the Department of Housing and Urban Development. In the first 30 days after the premiums were reduced, monthly refi applications were on pace to be about eight times typical levels.“Where FHA normally processes about 17,000 applications per month, we’ve already seen more than 75,000 applications in less than three weeks,” HUD Secretary Shaun Donovan said ...

A number of lender trade groups suggested last week that federal regulators should establish standards for “qualified mortgages” for government loans that are separate from rules to be issued by the Consumer Financial Protection Bureau. The ability-to-repay rules were required by the Dodd-Frank Act. The FHA, VA, Department of Agriculture and Rural Housing Service can establish their own QM requirements in consultation with the CFPB. Before last week, there had been little discussion about separate QM standards for ...

The Consumer Financial Protection Bureau re-opened the comment period on rules for “qualified mortgages” in June after receiving data from the Federal Housing Finance Agency that showed the relation between delinquencies and borrowers’ debt-to-income ratios. The CFPB asked for similar data on FHA loans. The FHA provided the CFPB with such data last week for fiscal years 2004 through 2008, excluding Home Equity Conversion Mortgages and mortgages with seller-funded downpayment assistance. During that period, 63.3 percent of ...

The Department of Housing and Urban Development this week announced a major expansion of bulk sales of distressed FHA loans. Some 9,000 loans are up for auction on Sept. 12, nearly double the amount HUD initially expected to offer and four times the amount of loans sold through the Distressed Asset Stabilization Program since 2010. In April, HUD completed an auction of 279 FHA mortgages with an unpaid principal balance of $59.0 million. If the loans for sale in September have a similar average balance ...

The Department of Agriculture issued a final rule last week to implement a new annual fee for the Rural Housing Service Section 502 Single Family Housing Guaranteed Loan Program. The fee applies to all RHS Section 502 loans with a conditional commitment dated on or after Oct. 1, 2011. The fee for fiscal year 2012 is 0.3 percent and the USDA noted that the fee for subsequent years is subject to change, with a fee of up to 0.5 percent allowed. The fee – along with the up-front guarantee fee already charged by the USDA ...

The VA’s use of residual income to qualify borrowers for mortgages should be incorporated in the ability-to-repay rules for qualified mortgages, according to some industry participants. Lender trade groups and consumer advocates each suggested the standards last week in comments submitted to the Consumer Financial Protection Bureau. In June, the CFPB sought comments on the relation between debt-to-income ratios and borrower performance. “Residual income standards supersede DTI in the VA’s underwriting decision tree ...

Ten previously optional fields on the FHA’s TOTAL Scorecard will be required with the release of TOTAL Scorecard Version 3.0. Some pending applications will be “grandfathered” under the previous TOTAL Scorecard requirements for 90 days. The new required fields are: borrower paid closing costs, current housing expenses, gift letter amount, gift letter source, required investment, total closing costs, total fixed payment, seller concessions, downpayment and condominium indicator. The new version of the scorecard ...