Loan modification trends have diverged in recent quarters, with activity in the Home Affordable Modification Program remaining strong while the use of proprietary loan mods dropping significantly. A total of 181,242 loan modifications were completed in the third quarter of 2013, according to Hope Now, a 22.1 percent decline compared with the third quarter of 2012. The decline was driven by proprietary loan mods, with 136,106 completed in the third quarter of 2013, a 26.7 percent reduction from a year ago. Some 45,136 permanent HAMP mods were completed...

Tax forgiveness enacted by Congress in 2007 for mortgage-debt relief is scheduled to expire at the end of this year. In a similar scenario last year, Congress agreed to a one-year extension of the tax break, but analysts are less certain that Congress will pass another extension in the weeks ahead. The Mortgage Forgiveness Debt Relief Act of 2007 exempts borrowers from federal tax obligations for debt forgiven via principal-reduction loan modifications and short sales. Congress has twice extended the deadline for the expiration of the tax break. “Policymakers have expressed...

Two crucial legal events occurred in 2013 that might have signaled the extinction of the narrow window through which deficiency judgments were possible on residential property in California. Attorneys at Nossaman LLP said the recent passage of California Senate Bill 426 and the conforming decision by the California Court of Appeal, Fourth Appellate District, have made clear that the state’s anti-deficiency statutes not only protect home loan borrowers from judgments or collections but also trump any separate lender/borrower agreement regarding the payment of any deficiency following a foreclosure or a short sale. A deficiency judgment is...

Mortgage credit availability, loan quality and lenders’ ability to foreclose on distressed properties remain big issues as lenders try to adjust to a more difficult, more complex regulatory environment, according to industry participants in a symposium hosted last week by the Urban Institute. While private capital is available, potential investors are wary of investing in the new environment of qualified and non-qualified mortgages and on mortgage companies and ventures that have drawn much regulatory scrutiny, panelists said. The average credit scores on a conventional-conforming purchase loan has increased...

JPMorgan Chase announced two separate settlements recently totaling $17.5 billion regarding non-agency mortgage-backed securities issued before the financial crisis. A $13.0 billion settlement was reached with federal and state entities, while a tentative $4.5 billion settlement was reached with non-agency MBS investors. The Department of Justice said the $13.0 billion settlement involving the Residential MBS Working Group established by President Obama was the largest settlement with a single entity ...

Non-agency lenders that plan to originate qualified mortgages suggest that one of their top concerns is meeting the debt-to-income ratio requirements. Only non-agency mortgages will have to have a back-end DTI ratio of 43 percent or below to be classified as qualified mortgages under the Consumer Financial Protection Bureau rule taking effect Jan 10. Average DTI ratios on mortgages in jumbo mortgage-backed securities are well below that limit – 34.0 percent on the latest deal from Redwood Trust ...

Mortgages originated by brokers and correspondents, once a concern for MBS investors, have actually performed better in recent years than retail-originated loans, according to Moody’s Investors Service. The rating service said risks from third-party originations will remain low if lenders continue to put an emphasis on retail-originated mortgages. Default rates on securitized mortgages have decreased significantly in recent years regardless of origination channel. However, Moody’s noted that beginning in 2010, production from third-party originators started performing better than retail mortgages. From 2003 through 2009, third-party originations defaulted...

The Department of Housing and Urban Development has issued guidance clarifying FHA lenders’ obligation to report voluntarily instances of fraud, misrepresentation and any other material findings in connection with the origination, underwriting and servicing of FHA-insured loans. Compliance experts say the guidance in Mortgagee Letter 2013-41 is a shot across the industry’s bow – a reminder to lenders about existing FHA policy requiring them to self-report fraud and misrepresentation to the FHA. Upon notification, the FHA works with the lender on any potential mitigation actions. In the inaugural issue of Lender Insight in June, the FHA reported ...

The Department of Housing and Urban Development is considering an industry request to delay the implementation of a proposal requiring FHA lenders to perform a financial assessment of all prospective borrowers of Home Equity Conversion Mortgage loans. In remarks during the National Reverse Mortgage Lenders Association’s recent annual meeting in New Orleans, FHA Commissioner Carol Galante said HUD is still studying the comments and will need more time to implement the rule. In September, the FHA published a notice in the Federal Register seeking comment on the financial assessment proposal. The proposal is currently in ...

With the FHA high-cost loan limit set to decline from its current statutory level of $729,750 to $625,500, the same level as Fannie Mae and Freddie Mac, nobody appears to be pushing for an extension. The temporary maximum loan limit for FHA is set to expire on Dec. 31, unless Congress votes for another extension, which appears unlikely, according to mortgage industry analysts. Neither lawmakers nor the White House have shown support for maintaining the current FHA high-cost loan ceiling. Although no one has conceded that the FHA lending ceiling will go down for certain areas, there has been no effort to ...