The Department of Housing and Urban Development will raise the annual insurance premium on new FHA originations, reverse the agency’s current policy on mortgage insurance premium cancellation and institute other policy changes to improve the health of the FHA insurance fund. The new measures aim to offset significant losses from FHA’s legacy loans, which have caused significant stress to the agency’s Mutual Mortgage Insurance Fund. Results of a new FHA actuarial audit showed that the stress has plunged the MMI Fund into a deep hole, revealing negative capital of $16.3 billion (negative $13.5 billion excluding Home Equity Conversion Mortgages) on a $1.13 trillion FHA portfolio. The capital reserve ratio fell ...

Securitization market professionals are jointly promoting the practice of “margining” transactions involving Fannie Mae, Freddie Mac and Ginnie Mae MBS, despite the costs involved, to reduce counterparty and systemic risks. Last week, the Treasury Market Practices Group revised its existing “best practices” for Treasury, agency debt and agency MBS markets to include a recommendation that forward-settling agency MBS transactions be margined in order to prudently manage counterparty exposures. “In order to allow market participants to develop...

Members of the Residential Mortgage-Backed Securities Working Group filed a lawsuit this week against Credit Suisse Securities and reached separate settlements last week with JPMorgan Securities and Credit Suisse. New York Attorney General Eric Schneiderman, a co-chair of the working group, said federal and state regulators are working on a number of other actions. “We’re a long way away from wrapping this up,” he said. The lawsuit against Credit Suisse was filed this week by Schneiderman, alleging that ...

Mortgage lenders will be facing tougher enforcement if Congress decides to act on a series of proposals to hold lenders accountable for noncompliance with FHA policies and regulations. In the wake of an adverse actuarial report regarding the health of the FHA’s Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante announced that the agency will seek new powers to recoup losses from lenders that originate bad FHA loans. The proposals are designed to provide the FHA with greater flexibility to revise policies and procedures to avoid unnecessary losses before they occur. They will also improve the agency’s ...

JPMorgan Securities and Credit Suisse Securities have agreed to pay more than $400 million combined to settle government charges that they misled investors in offerings of non-agency MBS from 2005 to 2010, according to the Securities and Exchange Commission. The SEC, working with the federal-state Residential MBS Working Group, reached separate settlement agreements with the two financial institutions after filing a complaint and issuing a cease-and-desist order. Neither JPMorgan nor Credit Suisse admitted to or denied the findings against them or any of their affiliates. The SEC alleged...

The five banks participating in the $25.0 billion national servicing settlement are on track to meet their obligations under the settlement – some two years ahead of the 2015 deadline – according to a report this week from the settlement’s monitor. Loss mitigation activity is focused on portfolio loans, though Bank of America has completed significant principal forgiveness on mortgages in non-agency mortgage-backed securities. The settlement requires $19.11 billion in consumer relief, and the participating servicers ...

Wells Fargo originated the most rate-spread loans in 2011, according to an analysis by affiliated publication Inside Mortgage Finance of Home Mortgage Disclosure Act data compiled by ComplianceTech/Lending Patterns. The loans, also known as higher priced mortgages, are federal regulators’ proxy for subprime mortgages. Wells had $1.73 billion in rate-spread originations in 2011, accounting for 6.0 percent of such originations. While a number of lenders focused almost exclusively ... [Includes two data charts]

The Consumer Financial Protection Bureau announced this week that the implementation date for certain mortgage disclosures will be delayed beyond Jan. 21 to allow for coordination with the pending integrated Real Estate Settlement Procedures Act and Truth in Lending Act disclosures. Chimera Investment announced last week that it will miss reporting deadlines for its quarterly report for the third quarter of 2012. The real estate investment trust said the report required by the ... [Includes two briefs]

Reactions were mixed in the mortgage industry and on Capitol Hill on the heels of an independent actuarial study that projected a deficit of $16.3 billion in the FHA insurance fund and a negative1.44 percent capital reserve ratio. The FY2012 annual actuarial report to Congress on the condition of the Mutual Mortgage Insurance Fund reignited the debate on whether the FHA’s solvency issues may be resolved without a taxpayer bailout. The capital reserve ratio dropped from 0.24 percent at the end of FY2011, which is already way below the ...

The Department of Housing and Urban Development is taking aggressive actions to mitigate the negative impact of future Home Equity Conversion Mortgage books of business on the FHA Mutual Mortgage Insurance Fund. HUD said changes in borrower use of the HECM program, particularly among younger users, and the modeling changes in the FY2012 actuarial review of the MMI Fund show substantial stress in the HECM program. Besides softening the impact of HECM losses on the fund, the department wants to ensure that consumers are better protected and able to sustain their reverse mortgages. While the MMI Fund’s economic value fell to ... [1 chart]