As credit standards continue to tighten in the face of soon-to-be-implemented regulations, potential nonprime borrowers will increasingly find themselves marginalized in the mortgage market, according to Lewis Ranieri, the former Salomon Brothers vice chairman who helped pioneer mortgage-backed securities four decades ago. In a new white paper Ranieri co-authored, he makes the case that mortgages with credit scores below 680 are currently considered subprime, while the subprime cutoff before the ...
Lenders are urging federal regulators to conform the definition for qualified residential mortgages with the qualified mortgage standards established by the Consumer Financial Protection Bureau. While regulators suggested that stricter standards for QRMs would prompt securitizations of non-QRMs, lenders warn that such standards would be onerous and likely significantly reduce non-agency mortgage originations and securitization. The Dodd-Frank Act requires federal regulators to establish risk-retention ...
Federal regulators issued guidance last week stating that they don’t anticipate elevated fair lender risk for lenders that choose to offer only mortgages deemed by the Consumer Financial Protection Bureau to be qualified mortgages. The guidance was prompted by concerns from lenders that would rather not originate non-QMs. “The agencies recognize that some creditors might be inclined to originate all or predominantly qualified mortgages, particularly when the ability to repay rule ... [Includes two briefs]
Financial industry trade groups want all Title II forward mortgage loans that meet FHA requirements to be treated as “safe harbor” qualified mortgage loans instead of being lumped in either of two QM buckets as proposed by the Department of Housing and Urban Development. Commenting on HUD’s proposed definition of a “qualified mortgage,” the industry groups – Mortgage Bankers Association, Consumer Bankers Association, Consumer Mortgage Coalition, American Bankers Association, and the Independent Community Bankers of America – urged HUD to ...
Proposed options for adjusting FHA products, market presence and powers could have a direct effect on the availability of credit for borrowers and on the FHA’s ability to respond to changing market conditions, according to a new study by the Government Accountability Office. In certain instances, the recommended changes would entail tradeoffs – a downside for every upside. Industry participants, researchers and the FHA have suggested these options to improve FHA’s long-term viability or for shrinking the agency’s footprint in the mortgage market. The GAO undertook the study to determine ...
Establishing a higher, mandatory capital reserve requirement for the FHA under the Protecting American Taxpayers and Homeowners Act, or PATH Act, would help reduce discretionary spending over 10 years, according to the Congressional Budget Office. According to CBO estimates, implementing the legislation would result in a net decrease in discretionary spending of $41.2 billion over the 2014-2023 period. This assumes future appropriations laws are enacted to implement the act’s provisions. The potential reduction in government spending would stem from ...
The Department of Housing and Urban Development may not be raising FHA mortgage insurance premiums for a while for fear that further aggressive pricing could shut out traditional and first-time homebuyers. In testimony before the House Financial Services Committee this week, FHA Commissioner Carol Galante warned that, with interest rates rising, the FHA may have reached a “tipping point” with its mortgage insurance premiums and that it may be time to pull back and ponder the next move. “As we continue to seek a balance between strengthening the [Mutual Mortgage Insurance Fund] and ensuring access to credit, we must ...
The Department of Housing and Urban Development is seeking comment on a draft of a comprehensive Single Family Housing Policy Handbook, which is designed to eliminate confusion in the way the FHA does business. The draft document consolidates all FHA single-family requirements for applying for Title II forward mortgages into a single, authoritative source for FHA single-family policy. It represents the first part of a multi-phased effort to make single-family documents easier to understand and navigate, according to HUD Secretary Shaun Donovan. “With more than 1,000 mortgagee letters, housing notices, handbooks and other materials – we are taking action,” said Donovan. “We have ...
It’s a done deal that the Federal Housing Finance Agency will make “across the board” reductions in Fannie Mae and Freddie Mac loan limits that will take effect in May 2014, but factions in the housing and mortgage industries are already drafting contingency plans if the cuts are too deep. “I would say if they are significantly – 5 to 10 percent – reduced, then you will see new legislation,” said one industry lobbyist who’s been tracking the issue for well over a year. In other words, if the national loan limit falls...
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