A former FHA commissioner has recommended raising the agency’s capital reserve ratio to 3 percent, to make FHA stronger and more resilient. Carol Galante, who served two years as FHA commissioner and assistant secretary for housing in the second term of the Obama administration, laid out her proposal along with other recommendations in a paper that she co-authored. Housing-finance reform without a retooled FHA could threaten families’ access to homeownership and increase risk to taxpayers, contrary to the goals of reform, said Galante, currently the faculty director of the Terner Center for Housing Innovation at University of California Berkeley. In her paper, Mission Critical: Retooling FHA to Meet America’s Housing Needs, Galante spelled out the changes necessary to help FHA perform its complementary and countercyclical role in the nation’s housing markets. Galante called for ...

Ginnie Mae called on issuers to ensure that the data they submit are accurate following the discovery of erroneous payment reports. The agency said it has noticed discrepancies in the reporting of the first payment date on loan modifications in violation of Ginnie guidelines. Specifically, the first payment date some issuers reported as part of the loan-delivery data did not match the date submitted for the same mortgage loan as part of issuers’ monthly report of pool and loan data. Ginnie blamed the errors either on loans set up incorrectly for servicing or faulty data issuers had reported to the Department of Housing and Urban Development. Guidance issued by Ginnie on Nov. 14 reminded issuers to report the first scheduled payment date of the re-amortized loan when reporting the first payment date for modified mortgages through either the GinnieNET or the Reporting and Feedback System. The date ...

Mortgage banker David Kittle, a candidate for Ginnie Mae president, has informed the White House and Housing and Urban Development Secretary Ben Carson that he is no longer interested in the position, according to industry sources. Kittle, a founding partner and vice chairman of the Mortgage Collaborative, an industry vendor, could not be reached for comment. Kittle was first approached by the White House nine months ago about the job. A background check on the potential nominee was reportedly underway but he was never officially nominated. The industry veteran began his mortgage-banking career as a loan officer with American Fletcher Mortgage Co. He is a past chairman of the Mortgage Bankers Association, completing his term in October 2009. A Republican, he also once served as president of the Kentucky Mortgage Bankers Association. Kittle’s withdrawal leaves the ...

Congress and the FHA should avoid undertaking policy changes that would further weaken the agency’s ability to cover insurance losses and potentially lead to another taxpayer bailout, according to a recent analysis by The Heritage Foundation. THF analyst John Ligon and Norbert Michel, a research fellow, said FHA policy reforms should ensure that the agency maintains a limited role in the housing finance system. FHA should make way for private capital to enter the market and serve the housing needs of American households, they added. FHA can accomplish such policy goals by lowering its loan limits and adequately pricing insurance for borrower risk, the analysts said. In addition, Congress should ensure that FHA borrowers are required to maintain mortgage insurance over the full life of the loan as required currently by the Department of Housing and Urban Development, said ...

Correspondent-based lending operations are accounting for a growing share of the FHA and VA home loans pooled in Ginnie Mae mortgage-backed securities, according to a new analysis and ranking by Inside FHA/VA Lending. In fact, correspondent originations are the only production channel to see year-over-year growth in FHA and VA business through the first nine months of 2017. Retail and wholesale-broker production is down for both FHA and VA loans. Correspondent programs are most dominant in the FHA market, perhaps reflecting a preference among large producers to have recourse to a primary-market lender if the government later finds defects in how the loan was originated. Correspondents accounted for 48.7 percent of FHA loans pooled in Ginnie MBS during the first nine months of the year, up from 43.1 percent in all of 2016. Volume was up 1.7 percent from the ... [Charts]

A new net tangible benefit test for ensuring that a VA borrower benefits from a refinancing appears to be the obvious solution to the VA’s churning problem, according to analysts at Bank of America Merrill Lynch (BAML). Modeled after the FHA net tangible benefit test, the test seems to be a “foregone conclusion” for VA, analysts said. A Ginnie Mae/VA task force is currently working to resolve the problem, which is causing rapid prepayments in Ginnie mortgage-backed securities and raising serious doubts as to whether aggressive refinancing truly benefits veterans and servicemembers. “There is a critical need to ensure that veteran borrowers are not harmed by repeated refinancings through VA’s Interest Rate Reduction Refinance Loan program,” said Mortgage Bankers Association President/CEO David Stevens during a recent appearance before the House Financial Services Committee. IRRRLs, also referred to ...

FHA and VA loan performance deteriorated during the third quarter of 2017, a period when the Ginnie Mae servicing market continued to expand. Ginnie had a record $1.749 trillion of single-family mortgage-backed securities outstanding at the nine-month mark in 2017, according to a new ranking and analysis by Inside FHA/VA Lending. That was up 2.2 percent from mid-year and 8.5 percent higher than September 2016. Ginnie servicing has been the fastest-growing part of the market for the past few years. That’s largely because Fannie Mae and Freddie Mac typically see more refinance business, which tends to churn the supply of servicing outstanding more than grow it. The VA side of the government-insured market again was the fastest-growing component, as the dollar volume of VA loans in Ginnie pools rose 3.7 percent during the third quarter. That was more than double the growth rate in the ... [Charts]

The FHA lost ground to private mortgage insurers in the purchase-mortgage market during the third quarter of 2017, according to an analysis by Inside Mortgage Finance.The government-sponsored enterprises securitized $64.59 billion of purchase mortgages with private MI in the third quarter, up 28.5 percent from the prior quarter. This far greater than the 9.5 percent increase in FHA purchase loans delivered into Ginnie Mae mortgage-backed securities during the same period. Although the FHA program remained a favorite among first-time homebuyers, private mortgage insurers saw a substantial gain in the segment. In the third quarter, first-time homebuyers comprised 74.1 percent of FHA purchase loans, but the dollar volume of such loans pooled in Ginnie MBS rose just 9.1 percent, data showed. On the other hand, Fannie Mae and Freddie Mac saw their insured first-timer ...

Brian Montgomery, President Trump’s nominee for assistant secretary for housing and FHA commissioner, reiterated his commitment to fight fraud and misrepresentation in FHA lending but wondered whether the Department of Justice had gone too far in using the False Claims Act as an enforcement tool against lenders. Testifying during his confirmation hearing before the Senate Committee on Banking, Housing and Urban Affairs, Montgomery expressed concern whether the DOJ and the Department of Housing and Urban Development had been adversarial towards lenders in their efforts to stem taxpayer losses and protect the FHA insurance fund. In prepared testimony, the nominee said the government must do better in providing clarity to encourage lenders to make FHA-insured loans and entice those that have exited for fear of exposure and liability to return to the ...

A Ginnie Mae/VA anti-churning task force is looking at a number of options to solve the rapid prepayment problem, which could include extending the seasoning requirement for all refinanced loans and prohibiting access to custom pools. A Ginnie representative declined to provide further details, adding that the task force is not ready to announce changes yet. “But we will take additional action soon, which we can do through program changes like we did last year,” he said. Ginnie issued guidance last year to curb aggressive refinancing of VA loans that underlie Ginnie mortgage-backed securities. The rapid refis have resulted in rapid prepayments to the detriment of investors with no clear benefits to VA borrowers. The guidance required six consecutive monthly payments before delivering a streamlined refi loan into a standard Ginnie MBS. The measure succeeded in stopping the ...