Home Loan Servicing Solutions recently completed its first acquisition of Ginnie Mae whole loans through the agency’s early buy-out (EBO) program. The purchase price for the FHA-insured loans was $556.6 million. HLSS acquired the loans from Ocwen with an unpaid principal balance (UPB) of $549.4 million. Ocwen initially acquired the loans through the GNMA EBO program, which allows Ginnie Mae servicers to purchase delinquent loans from applicable loan securitization pools. HLSS financed its purchase by opening a new $600 million mortgage loan facility. It received $472.7 million in proceeds from this facility to help fund its EBO loan purchase from Ocwen. The loans are held as investments in a special purpose entity (SPE). “It is our expectation that since our GNMA EBO loans are insured by the FHA, the cash flows of this SPE will be sufficient to meet all claims of the debt holders,” the company said ...

FHA Commissioner Carol Galante quashed any industry hope of seeing mortgage insurance premiums lowered at this time, saying that while the Mutual Mortgage Insurance Fund has shown some improvement, full recovery is still far off. In remarks during the Mortgage Bankers Association’s National Advocacy Conference this week, Galante also defended a provision in the president’s FY 2015 budget proposal seeking statutory authority for the FHA to collect an administrative fee from lenders to help fund quality control improvements. Both issues are high up on the MBA’s lobbying priorities as members gathered in Washington, DC, this week to meet with lawmakers and their staff to discuss FHA and other key industry concerns. Galante said the Department of Housing and Urban Development is currently focused on strengthening the MMI Fund and expanding access to credit for all qualified borrowers. The FHA raised pricing five times from ...

The Mortgage Bankers Association is urging the Department of Housing and Urban Development to provide a transparent process by which interested parties could request a recalculation of the FHA loan limits and present supporting evidence. By statute, maximums for FHA loan limits in high-cost areas were reduced to $625,500 from $729,750 at the beginning of the year for one-unit residential properties, the same maximum loan limit for Fannie Mae and Freddie Mac for similar properties in high-cost areas. The MBA said HUD made further reductions in FHA FY 2014 loan limits in approximately 300 counties and county equivalents across the country, with many experiencing significant reductions. The trade group believes these changes were not required by statute. To the extent that the loan-limit reductions in those areas were discretionary, the MBA strongly urged HUD to moderate its ...

Bank of America and James Nutter & Co. have agreed to indemnify the Department of Housing and Urban Development to resolve allegations that they failed to perform due diligence in underwriting Home Equity Conversion Mortgage loans. An audit of the HECM program by the HUD Office of Inspector General found that the financial institutions allowed 33 HECM borrowers to take out more than one loan, a violation of program requirements. The program requires borrowers to reside in the mortgaged residence as their principal residence. In addition, borrowers may not have more than one principal residence at the same time. In BofA’s case, one borrower obtained two HECM loans on properties she owned in Massachusetts and Florida, both of which she identified as her principal residence. The HUD OIG said there was sufficient information to alert BofA and the underwriter that ...

Overall FHA production fell significantly in all 50 states in 2013 apparently due to mortgage insurance premium increases and policy changes that made it difficult for even qualified borrowers to obtain an FHA-insured single-family loan. FHA volume by state dropped 27.5 percent in the fourth quarter to $35.8 billion, from $49.4 billion in the previous quarter, with all states showing varying percentages of decline during the period. Year over year, production by state declined by 9.2 percent, data showed. Total FHA originations were $211.3 billion for 2013, with the first quarter ending strongly with $63.7 billion. Production, however, lost steam over the next three quarters. Among the top five FHA states, Virginia suffered the largest quarterly drop, 35.2 percent, in FHA volume. California was the top FHA producer state with $35.2 billion for a ... [2 charts]

Deficient file documentation is the leading cause of initial “unacceptable” ratings in the FHA’s most recent post-endorsement technical review (PETR) of targeted single-family FHA loans. Published in the March 2014 issue of Lender Insight, review results showed that 50 percent of the 5,504 FHA loans selected for review in the fourth quarter of 2013 had missing or flawed documentation. Of that percentage, 65 percent of loans were rated “unacceptable.” Loans are selected for post-endorsement review based on a risk-targeting methodology and do not reflect the overall FHA portfolio. An “unacceptable” rating indicates that the loan endorsement file had a material defect at the time the loan was endorsed for FHA insurance. Such ratings are upgraded subsequently if the lender provides mitigating documentation. Unacceptable ratings are due to errors or flaws in ...

The FHA has extended the filing deadline for lender recertification to June 9, 2014, to match the agency’s timeline for switching to the Lender Electronic Assessment Portal (LEAP). LEAP is a new system that will serve as a one-stop shop for all lender approval and recertifications. It replaces the current “Lender Approval” and “Cash Flow” web pages in FHA Connection as well as the current system lenders use to submit financial information as part of recertification. LEAP is scheduled to be fully operation this month, although consolidation of Title I and II lender identification numbers has already taken place on March 31. Last year, the FHA issued guidance extending the filing deadline for all lenders with a December 2013 fiscal year end. Although the guidance recommended that lenders be prepared to complete their recertification no later than May 31, it also stated that ...

Origination of FHA-insured reverse mortgages fell in the fourth quarter as borrowing costs increased and loan amounts shrank due to tighter agency rules for these loan products, according to Inside FHA Lending’s analysis of agency data. The FHA reported $15.3 billion Home Equity Conversion Morgages originations for 2013, which was up 20.6 percent from $12.7 billion in 2012. Production, however, fell 12.6 percent quarter over quarter as policy changes designed to stabilize the ailing Mutual Mortgage Insurance Fund and help ensure that HECM borrowers can sustain themselves for longer periods of time took effect on Sept. 30. The changes include limiting disbursements at loan closing, or during the initial 12 months after closing, to 60 percent of the initial principal limit. Borrowers who draw more than 60 percent will pay ... [1 chart]

Lenders are cautiously expanding their guidelines on FHA lending by reducing its minimum credit score to below 580 to qualify borrowers. Carrington Mortgage Servicers this week joined a cadre of some 80 FHA lenders that have lowered their minimum FICO scores and eased their overlays to better focus on borrowers, particularly those below the 640 FICO range. The Santa Ana, CA-based lender is doing it not only for its FHA business but also for its VA and USDA loan programs. Carrington lowered its minimum FICO score to 550 for FHA loans, showing more aggressiveness than Wells Fargo, which moved its own FHA FICO floor to 600 from 640 at the beginning of February for purchase mortgages originated through its retail channel. The FHA currently requires a minimum credit score of 580 for most borrowers for 3.5 percent downpayment loans. Borrowers below 580 undergo more stringent manual underwriting and ...

The Department of Housing and Urban Development has published a proposal to eliminate the requirement that an FHA borrower be required to pay interest even after the loan is prepaid. Specifically, the proposed change would prohibit FHA lenders from charging post-payment interest, allowing them instead to charge interest only through the date the mortgage is paid. The proposed rule change is necessary to avoid FHA loans being prohibited under new Consumer Financial Protection Bureau ability-to-repay rules and revised higher-cost loan regulations starting in January 2015. It effectively aligns FHA prepayment rules with the new CFPB rules. Comments on the proposal are due by May 12, 2014. The FHA currently allows lenders to charge interest for the full month if the borrower prepays on a date other than the installment due date. Regardless of whether the loan is FHA or non-FHA, there were complaints among borrowers that ...