Issuance of jumbo MBS and ABS has grown since 2010, but pending Federal Reserve actions regarding interest rates could stop the trend this year, according to industry analysts. The Fed is expected by many to increase interest rates for the first time in years, perhaps as soon as the end of the second quarter of 2015. Standard & Poor’s warned last week that interest rate hikes could threaten the still-rebounding structured finance market. “The Fed’s normalization of monetary policy could create...
If issuers were to include agency-eligible mortgages with slightly less than pristine underwriting standards in new non-agency mortgage-backed securities, the deals could receive ratings with credit enhancement levels similar to the levels on recent jumbo MBS, according to the results of an exercise released this week by the Treasury Department. Treasury asked six rating services to assign ratings to hypothetical non-agency MBS comprised of $19.75 billion of mortgages ...
One year after the Consumer Financial Protection Bureau’s standards for qualified mortgages took effect, lenders remain cautious about originating non-QMs. “Even though DBRS has seen a few lenders implementing non-QM programs that allow for back-end debt-to-income ratios as high as 50 percent and FICO scores as low as 600, DBRS expects that larger lenders, who are still recovering from the massive fines they had to pay for making subprime loans, will ...
A larger share of small portfolio lenders would qualify for exemptions from standards for qualified mortgages under a proposal issued last week by the Consumer Financial Protection Bureau. Among other issues, the CFPB proposed expanding the definition of “small creditor” from the current limit of 500 first-lien mortgages originated in a year to 2,000 mortgages. The new definition would exclude loans held in portfolio by the lender and its affiliates ...
Federal housing regulators once again sought authority from Congress to impose an administrative fee on lenders to support information technology improvements and administrative functions at the FHA – a bid Congress rejected last year. As part of President Obama’s FY 2016 budget, the Department of Housing and Urban Development is proposing to charge lenders up to $30 million in fees to cover FHA salaries and expenses and information technology upgrades. The IT component will focus on strengthening FHA’s risk-management efforts through expanded quality-control reviews, enhanced tools and other risk-management initiatives. Separately, the president requests an appropriation of $174 million in administrative costs to enable the FHA to implement a risk management and program-support process – both critical for FHA’s oversight of ...
Many industry executives are not impressed with the FHA’s 50 basis point premium reduction, suggesting that the new pricing would not have that big an impact on the mortgage market, according to a new survey by the Collingwood Group. Conducted from Jan. 12 to 21, 2015, the monthly survey said 47 percent thought that President Obama’s estimate of the number of borrowers benefiting from the cut – 250,000 – is too high. Approximately 34 percent said the estimate was “on the mark” and 19 percent said it was too low. In addition, 25 percent of respondents thought the premium reduction was more motivated by politics than a desire to implement a major change in the market. Those respondents who said “too high” also noted that FHA underwriting remains tough and that price differences are not large enough to steer borrowers to FHA. Respondents, however, agreed that ...
Reverse mortgage lenders now have the option to delay calling a Home Equity Conversion Mortgage due and payable where there is an eligible non-borrowing spouse and a case number assigned prior to Aug. 4, 2014. A delay would postpone foreclosure triggered by the death of the HECM borrower or the last surviving borrower and allow the qualified, non-borrowing spouse to stay in the house for a certain period until the HECM is resolved. Under revised FHA guidance, reverse mortgage lenders are allowed to assign eligible HECMs to the Department of Housing and Urban Development upon the death of the borrower. They have the option of foreclosing in accordance with the contract as endorsed or choose the “mortgagee optional election assignment (MOE).” MOE means the optional assignment selected by a lender for a HECM loan with an assigned FHA case number prior to ...
The Mortgage Bankers Association notched a win for small, independent issuers after the Financial Accounting Standards Board agreed with the group’s position on the accounting of seriously delinquent loans in Ginnie Mae pools. At issue is whether companies that service pools with loans that are 90 days or more delinquent should put those loans on their balance sheet even if they have no intention of buying the loans out of the pool. According to the MBA, a Big Four accounting firm issued controversial guidance which would have been burdensome for small mortgage-backed securities issuers that have limited funding and no incentive or history of buying defective loans out of pools. After months of exchanges, FASB staff finally agreed with the MBA’s view that the decision process involves two steps. First, a loan must be 90 days or more delinquent and trigger ...
Overall, 2014 was not a good year for FHA originations as tight underwriting and high loan costs narrowed the band of borrowers able to qualify for an FHA-insured residential loan, according to an Inside FHA Lending analysis of agency data. FHA total endorsements dropped to $35.2 billion, an 8.1 percent drop in the fourth quarter from the previous quarter, with fixed-rate and adjustable-rate mortgages declining by 7.9 percent and 12.7 percent, respectively. FHA purchase originations suffered a decline of 11.3 percent. There was one bright spot: FHA refinances rose a meager 2.2 percent while the percentage of conventional loans that refinanced into FHA saw a more substantial lift of 13.0 percent quarter to quarter. FHA baseline lending (below $417,000) saw volume drop 8.4 percent in the fourth quarter. FHA jumbo loan amounts up to the statutory high-cost loan limit and ... [ 2 charts ]
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