Two recent internal policy memos from the Department of Justice suggest that the agency is reevaluating its approach in two key areas of enforcement, which may significantly affect False Claims Act litigation in FHA cases. Issued last month (one was actually leaked), the memos pertain to the dismissal of frivolous whistleblower cases when the government declines to intervene, and the prohibition of DOJ attorneys relying on an entity’s noncompliance with agency guidance as presumptive or conclusive evidence that the entity violated the law. Written by Michael Granston, director of the DOJ’s Commercial Litigation Branch, Fraud Section, the leaked Jan. 10 memo directs federal prosecutors to consider dismissing meritless FCA complaints by whistleblowers when considering whether DOJ should intervene in the ...

At yearend, 28.8 percent of FHA mortgages in Puerto Rico were in some stage of delinquency, including 15.8 percent that were 90 days or more past due. These ultra-high late-payment readings – courtesy of hurricanes Maria and Irma – have caught the attention of both Ginnie Mae and the FHA. …

Complaints by active-duty and retired U.S. military personnel about their mortgages rose in many categories tracked, both on a quarterly basis and on an annual basis, according to a new analysis and ranking by Inside the CFPB. Overall, they are definitely trending up. For instance, complaints by service members about all mortgage products in general rose from 582 incidents in the fourth quarter of 2016 to 739 in the fourth quarter of 2017, but they fell from a total of 741 in the third quarter of last year. The increase was a little more consistent when particular mortgage products were segregated out from the aggregate data. For instance, gripes about conventional mortgages rose from 218 in 4Q16 to 334 [with charts] ...

The severe hurricanes that tormented a handful of markets during late summer of 2017 continued to push FHA default rates higher in the fourth quarter, a new Inside FHA/VA Lending analysis reveals. The number of FHA loans paying on time fell from 92.8 percent at the end of September to 91.9 percent at the end of the fourth quarter. Most of the deterioration took place in the more severe default categories. The number of FHA loans 90 days past due more than doubled during the three-month period, climbing to a hefty 0.92 percent of outstanding loans. And the number of FHA loans more than three-payments late increased by 39.7 percent, reaching 1.01 percent of the total outstanding. Three jurisdictions that bore the brunt of hurricanes Harvey, Irma and Maria – Texas, Florida and Puerto Rico – saw huge increases in FHA defaults. Puerto Rico saw a devastating impact in rising ... [Charts]

The Consumer Financial Protection Bureau last year logged 988 servicemember complaints related to the origination and servicing of VA and FHA mortgages. CFPB data showed VA outscored FHA on the number of complaints, 740 to 248, respectively, in 2017. The top five reasons for servicemember complaints were trouble during the payment process, difficulty in paying the mortgage, loan servicing, applying for a purchase mortgage or refinance, and closing a loan. Other complaints were about loan modification and foreclosure, mortgage brokers, incorrect information, settlement process and costs, underwriting/credit decision, credit-reporting company’s investigation of a consumer problem, and improper use of a credit report. Abusive practices related to loan churning might not be reflected clearly in servicemembers’ complaints in 2017 compared to the previous year, but a deeper dive into the ... [Chart]

Ginnie Mae is expanding its guidelines to clarify the amount of risk it considers acceptable for an issuer’s mortgage servicing rights portfolio and what administrative actions an issuer with excessive portfolio risk could face. The move is part of the agency’s continuous monitoring of issuer activity and MSR portfolios to ensure they are not putting issuers, investors or the program at risk. In its revised MBS Guide, Ginnie provides examples that fall outside of the acceptable risk parameters. Issuers deemed to carry excessive risk will find their participation in the MBS program greatly restricted, the agency warned. In addition, Ginnie may require offenders to recalibrate their high-risk portfolio to more acceptable risk levels, diversify their portfolio, or restrict their participation in Ginnie’s co-issue program, Pool Issues for Immediate Transfer (PIIT) and/or multiple pools. Ginnie is urging issuers to review the ...

The Department of Justice has had a busy month in terms of False Claims Act enforcement.Eagle Home Mortgage, a subsidiary of Lennar, is under government investigation for its FHA underwriting and quality-control processes – code words for a potential FCA lawsuit. Lennar, a nationwide builder of new homes, disclosed the probe in its annual Securities and Exchange Commission filing. The company said the Department of Justice has subpoenaed its mortgage subsidiary for documents relating to FHA-insured loans originated and sold in previous years. There were no other details. Lennar said Eagle has provided the DOJ with information related to the loans and is cooperating with investigators. “The DOJ has to date not asserted any claim for damages or penalties,” the Miami-based homebuilder said. Meanwhile, in federal district court in Detroit last week, government prosecutors argued with Quicken Loans’ attorney, Jeffrey Morganroth, over a motion to narrow the loan sample the ...

FHA has issued policy waivers related to recent hurricanes and wildfires, including one for loan-level reviews for early-payment default. The agency announced the move as Black Knight reported another 60,000 mortgages becoming seriously delinquent in December because of hurricane-related fallout and other seasonal and calendar-related factors. The early-payment default waiver applies to FHA mortgages in presidentially declared major disaster areas (PDMDA) ravaged by hurricanes Harvey, Irma and Maria. The hard-hit areas are in Louisiana, Texas, Florida, Georgia, Puerto Rico, South Carolina and the U.S. Virgin Islands, as well parts of California that were scorched by recent wildfires. Due to the string of natural disasters, FHA anticipates an increase in EPDs – loans that become 60-day delinquent within the first six payments – in the affected areas. FHA believes that EPDs on loans closed before ...

The Senate Committee on Banking, Housing and Urban Affairs has reapproved the nomination of Brian Montgomery to lead the FHA even as Democrats reiterated their concerns about the candidate. The committee favorably reported Montgomery’s nomination previously in November by an 18-5 vote. The Senate, however, was unable to confirm the nominee for the post before the end of the legislative year. In order to be considered again for the post, Senate procedures required Montgomery to resubmit his financials and again wait for a full Senate vote. Five Democrat senators on the committee – Ranking Member Sherrod Brown (OH), Elizabeth Warren (MA), Jack Reed (RI), Catherine Cortez Masto (NV), and Brian Schatz (HI) – objected to the Montgomery nomination because they perceived him as “too close” to the mortgage industry. Brown expressed concern about Montgomery’s intention to ...

President Trump this week signed a short-term spending bill that would keep the government operating until Feb. 8, 2018. The bill ended a three-day shutdown after the previous spending authority for most of the government expired at midnight on Jan. 19. However, the threat of another shutdown looms. FHA and Ginnie Mae both had contingency plans in place in case the short-lived shutdown dragged on, as it had in 2013. That event lasted for 16 days, at a loss of $1.6 billion a day to the federal government. Under FHA’s emergency plan, the agency would continue to endorse new single-family forward mortgages, but not Home Equity Conversion Mortgages and Title I loans. Ginnie would reduce staffing to essential personnel but continue its secondary market operations. It would continue to remit timely payment of principal and interest to investors, grant commitment authority and support issuance of ...