SunTrust Mortgage’s recent settlement of a dispute with the federal government and 49 state attorneys general over defective FHA loans and Wells Fargo’s losing bid to quash a similar lawsuit are raising concerns about doing business with the FHA. Industry attorneys say the lesson for lenders in these recent industry debacles is that it is “extraordinarily dangerous” to do FHA loans these days given the outcome of the two cases. It is also getting harder to trust mortgage settlement agreements with the government, they added. “The scariest part in all these is the combination of government forces involved in these claims – state AGs, Department of Justice, Department of Housing and Urban Development and the Consumer Financial Protection Bureau,” said an attorney, who worked on both cases. “When they want to get you, they can get you.” Others believe these developments could have a ...

Two federal agencies have announced separate actions to protect reverse mortgage borrowers and rural home purchasers from deceptive advertising and marketing. This week, the FHA warned lenders participating in the Home Equity Conversion Mortgage program not to use misleading or deceptive language in marketing FHA-insured reverse mortgages to consumers. The FHA said the guidance is intended to protect HECM borrowers from advertising and presentations that appear to limit their options rather than informing them of the full range of available HECM products. Underscoring senior borrowers’ “freedom of choice,” FHA Commissioner Carol Galante said the agency wants lenders to know their marketing and advertising practices are under constant surveillance to prevent customers from being steered to unsuitable reverse mortgage products. Galante noted the ...

Barring any unpleasant news, Julian Castro, President Obama’s nominee for secretary of the Department of Housing and Urban Development, apparently has passed his job interview with the Senate Banking, Housing and Urban Affairs Committee. This week, Castro, a three-term mayor of San Antonio, TX, laid out his priorities as HUD secretary before committee members if he is confirmed for the job. Castro underscored the importance of “partnership and pragmatism” as the key drivers in running a city. As HUD secretary, Castro said he would enhance “cross-agency collaboration” and emphasize the value of “measuring results” by setting precise goals, consulting with the public on major issues, developing a public report card and annual updates – tools he employed in his municipal housing education and affordable housing initiatives in San Antonio. As mayor, Castro worked to ...

The FHA’s Homeowners Armed With Knowledge (HAWK) pilot program is getting strong public support, particularly from first-time homebuyers and housing counselors.Based on comments received by the Department of Housing and Urban Development so far, the HAWK pilot is already taking hold in the public’s mind despite its limited publicity. -Rachel Andreyo, a new college graduate who was turned down recently for a mortgage loan pre-approval, said HAWK not only would educate potential first-time homebuyers about homeownership but also raise their hope of becoming a homeowner before the age of 30. “The knowledge this program would provide could be a game changer for young people and struggling Americans everywhere,” she wrote. Shawanda Walker, a single mother, sees HAWK as an opportunity for her to learn how to negotiate her first home purchase, learn about property taxes and ...

FHA jumbo loan originations fell significantly in the first quarter of 2014 due primarily to higher mortgage insurance premiums and a decrease in the mortgage loan limits, particularly in high-cost areas of the country, according to Inside FHA Lending’s analysis of agency data. FHA lenders reported a meager $2.4 billion in jumbo originations during the first three months of the year, a decrease of 21.2 percent from the previous quarter and down a whopping 55.7 percent from the same period a year ago. Purchase loans accounted for 81.0 percent of new originations while fixed-rate loans comprised 86.8 percent. FHA jumbo loans are those over $417,000 and they comprise a very small slice of the FHA’s overall loan portfolio. Citing FHA data, Brian Chappelle, a mortgage industry consultant, said that of the FHA loans originated in the last 12 months, roughly 11,000 loans were above $500,000, down from ... [ 2 charts]

BNY Mellon will launch a new business later this year that would enable it to purchase, securitize and service reverse mortgages and provide advisory services to lenders that offer such loans. The new business segment, Home Equity Retirement Solutions, is aimed primarily at retirees experiencing significant financial shortfalls. “We view the funds generated by suitable reverse mortgages as an additional fixed-income component of retirement portfolios, an important part of retirement planning that complements other aspects of the plan,” explained Michael Gordon, managing director for BNY Mellon Investment Management. Gordon noted BNY’s long record of accomplishment working with retirees, including managing assets for 401(k) and defined benefit investments. He said reverse mortgages may now be more prudent based on ...

NY Passes Bill to Reduce Number of FHA Loans that Would Fall Under Subprime. The New York Assembly recently passed legislation that would result in fewer FHA loans being classified as “subprime” under state banking law, according to the law firm Ballard Spahr. Already passed by the Senate, the bill would make permanent prior emergency rules issued by the Department of Financial Services, which raised the subprime threshold 75 basis points for those loans subject to the revised FHA mortgage-insurance premium cancellation policy. Although the emergency rules were set to expire on Dec. 31, 2013, the DFS granted an extension to allow the state legislature additional time to find a permanent solution, said Ballard Spahr attorneys. The bill passed with overwhelming bipartisan support and strong industry backing, and is expected to ...

Endorsement of FHA-insured reverse mortgages rose in the first quarter of 2014, although lenders say it may just be trailing figures reflecting the lag time between closing and approval for FHA insurance. Home Equity Conversion Mortgage guarantees totaled $4.0 billion in the first quarter, up 16.4 percent from the end of the fourth quarter in 2013 and up 4.1 percent from the same period last year, according to Inside FHA Lending’s analysis of agency data. Home purchase accounted for 92.7 percent of HECM volume but only 14.5 percent were fixed-rate. Initial principal amount at loan origination totaled $2.4 billion. The 16.4 percent increase was more likely due to the fact that a huge number of reverse mortgages closed in November and December were not insured by FHA until January, said Josh Moran, vice president of wholesale lending at Live Well Financial. Some lenders who delayed reporting to ... [1 chart]

FHA lenders are generally supportive of the agency’s proposal to add a new method for evaluating lender performance but may request certain adjustments to ensure they are not at great risk for enforcement action, according to compliance experts. Lenders believe the proposal for an additional performance metric to supplement the lender compare ratio under the Credit Watch Termination Initiative is a positive step toward providing a more well-rounded analysis of a lender’s performance when the FHA is considering further action. “In and of itself, the proposal is not a panacea, but it is certainly a step in the right direction,” said Brian Chappelle, a mortgage industry consultant. The proposal reflects the FHA’s belief that a number of factors influence a lender’s performance, not just its compare ratio. The compare ratio compares a lender’s rate of early defaults and claims to those for ...

The FHA is reportedly considering reinstating “spot” loans in condominium projects that were not on its approved development list to boost FHA-insured condo lending. Spot loans are currently prohibited, but the FHA is said to be reevaluating the product because of reports of first-time homebuyers having difficulty in obtaining FHA financing for condo unit purchases and seniors seeking reverse mortgages to tap the equity in their units. The National Association of Realtors is trying to break the impasse between the FHA and reluctant board of directors of condo projects that do not have FHA certification to resolve the financing issue. FHA-insured condominium lending has dropped to $884.4 million in the first quarter of 2014, down 70 percent from the $2.98 billion in total originations reported in the first quarter of 2013, according to Inside FHA Lending’s analysis of agency data. Even as the NAR tries to ...