Excessive risk-based pricing, high private mortgage insurance premiums and lender credit overlays are locking out low-income borrowers and families of color from the conventional mortgage market, pushing them towards FHA as their only option, concludes a new study from the Center for Responsible Lending.

The Department of Veterans Affairs home-loan guaranty program continued to account for most of the growth in the Ginnie Mae servicing business during the first quarter of 2018, a new Inside FHA/VA Lending analysis reveals. Total Ginnie mortgage-backed securities outstanding rose to $1.940 trillion as of the end of March, including multifamily MBS and securities backed by FHA reverse mortgages. Some $1.795 trillion of that amount was traditional single-family mortgages, a 1.1 percent increase from the end of last year. The forward-mortgage Ginnie market grew by 7.3 percent over the past 12 months. The amount of VA loans in Ginnie pools was up 13.1 percent from March 2017, nearing the $600.0 billion mark. By comparison, the FHA segment of the Ginnie market was up 4.7 percent from a year ago, hitting $1.085 trillion. Loan performance generally improved in both the ... [Charts]

FHA-insured loans accounted for a modest chunk of mortgage-related consumer complaints submitted to the Consumer Financial Protection Bureau last year. According to the CFPB’s annual report on consumer disputes, the bureau received approximately 37,300 mortgage complaints in 2017, 13 percent of which were related to FHA mortgages. Loans with a VA guaranty and FHA-insured reverse mortgages accounted for 4 percent and 2 percent of the complaints, respectively. Conventional home mortgages had the biggest share of mortgage complaints – 48 percent – followed by “other type of mortgage” at 28 percent. Six percent of mortgage complaints were about home-equity loans or home-equity lines of credit. For mortgage complaints, 41 percent involved making payments (such as those involving servicing, escrow accounts and posting of payments), while 37 percent were related to borrowers’ ....

Legislation was introduced this week in the House Financial Services Committee that would strengthen oversight of FHA mortgage servicers to ensure their compliance with the agency’s loss-mitigation requirements. The FHA Foreclosure Prevention Act of 2018 (H.R. 5555) would require the Department of Housing and Urban Development to conduct servicer oversight, including sampling, compliance reviews, and direct information collection from borrowers whose files were sampled. “A decade after the devastating foreclosure crisis, we continue to see significant problems with the servicing of FHA loans that unnecessarily put homeowners at risk of foreclosure,” said Rep. Maxine Waters, D-CA, ranking member on the committee and sponsor of the bill. Waters said her bill would ensure that FHA servicers help families experiencing financial hardships avoid foreclosure so that they can ...

Issuance of new single-family Ginnie Mae mortgage-backed securities fell sharply in the first quarter of 2018, according to a new Inside FHA/VA Lending ranking and analysis. The agency issued $92.58 billion in MBS backed by forward mortgages during the first three months of 2018. That was down 14.8 percent from the previous three-month period and represented the lowest quarterly total since early 2015. The 1Q figure is based on truncated loan amounts reported in Ginnie’s loan-level MBS disclosures. Reports with unrounded single-family loan amounts show a total of $95.75 billion in first-quarter MBS issuance, including FHA reverse mortgages. The loan-level data reveal that production fell 6.9 percent from February to March, when just $28.21 billion of Ginnie single-family securities were issued. That was the lowest monthly volume since February 2015. Both the FHA and VA programs saw significant ... [Charts]

Ginnie Mae this week meted penalties to two of the nine issuers that received warnings from the agency for excessive refinancings of VA mortgages. Bloomberg reported that Ginnie barred NewDay Financial’s and Nations Lending’s from the more lucrative multi-issuer mortgage-backed securities pools, forcing them to issue custom pools. The restrictions became effective immediately. The agency’s action could reduce mortgage interest rates by 50 basis points for FHA and VA loans, which would benefit first-time homebuyers, said Jaret Seiberg, an analyst with Cowen Washington Research Group. On the other hand, the issuers Ginnie limited to issuing custom pools will end up making loans with higher rates, the analyst noted. Ginnie’s action is part of a joint effort with the Department of Veterans Affairs to crack down on loan churning and faster prepayments of VA loans pooled in Ginnie securities. Loan churning ...

Ginnie Mae’s anti-churning efforts have narrowed the spread between Ginnie and Fannie Mae mortgage-backed securities, prompting executives to say things are almost back to normal. In an interview with Inside FHA/VA Lending this week, Michael Bright, executive vice president and chief operating officer at Ginnie Mae, said the market and investors have responded positively to the agency’s efforts to resolve the churning and prepayment problems. “The Ginnie spread has fallen almost half a point and our securities have become more liquid,” he said. “We want to make sure we’re giving investors CPRs (constant prepayment rates) that they can model.” Bright said he cares less about the overall level of prepayment speeds. What he truly cares about is ensuring that when an investor purchases a Ginnie security, the prepay speed is correlated to changes in the interest rates and not the ...

FHA streamline refinancing fell significantly in 2017 from the previous year, according to an Inside FHA/VA Lending analysis of agency data. Lenders closed 2017 with $37.4 billion of FHA streamline refi loans, buoyed by a 12.2 percent increase in origination in the fourth quarter. However, business was down a whopping 34.5 percent year-over-year. The segment ended the first quarter strongly with, $13.05 billion, but faltered over the next nine months. Streamline refinancing accounted for 15.8 percent of total FHA originations in 2017. Twelve states, led by California, each reported FHA streamline refi originations in excess of $1 billion last year. The Golden State closed the year with $8.05 billion of FHA-to-FHA refis, which accounted for 21 percent of all FHA loans in the state last year. The highest FHA streamline refi-producers after California were, in sequential order, ... [Charts]

Ginnie Mae’s credit-risk sharing concept is generating a lot of excitement among private credit enhancers, according to the company’s acting president. A planned risk-sharing pilot with FHA scheduled for later this year has the industry on its toes, said Michael Bright, executive vice president and chief operating officer of Ginnie Mae, during an interview this week with Inside FHA/VA Lending. “There is a line out the door of private companies willing to provide and take on credit risk and work with us on transactions where private capital would assume some of the risk,” he said. Ginnie is currently looking at ways to facilitate risk sharing between FHA and a private third party that would assume a first-loss position on a Ginnie security backed by FHA loans. Bright brought up the idea during remarks at the Structured Finance Industry Group conference in Las Vegas in February. He has been fielding calls since from ...

FHA insured approximately $1.9 billion of ineligible mortgage loans made to borrowers with delinquent federal debts or who are subject to federal administrative offset for past-due child support payments, according to the Department of Housing and Urban Development’s inspector general. Approximately 9,500 loans were ineligible because the sources used by lenders to identify ineligible borrowers lacked sufficient information to raise red flags. In addition, FHA failed to guide lenders adequately in reviewing child support payments, the IG said. Federal law prohibits loans, loan guarantees or insurance to delinquent federal debtors, including those with delinquent child support subject to administrative offset, until the delinquency is resolved. Auditors drew a statistical sample of 60 loans from 13,927 FHA-insured loans that closed in 2016 and analyzed data on their related borrowers in the ...