A nonsupervised Arizona FHA lender whose high default and claims rate triggered a supervisory audit earlier found itself in a deeper mess for improper underwriting on a number of FHA streamline refinanced loans that resulted in losses to the FHA insurance fund. The Department of Housing and Urban Development’s Inspector General found that Allen Mortgage of Centennial Park, AZ, violated HUD’s regulations , procedures, and instructions in the underwriting of FHA-insured loans. Specifically, of the 73 streamlined refinance mortgage loans reviewed by the IG, 23 were ...

VA Home Loan Program Celebrates 20-Millionth Loan Beneficiary. The Department of Veterans Affairs this week commemorated the 20-millionth recipient of a VA loan under the agency’s Home Loan Guaranty Program. Agency officials held a ceremony at the Woodbridge, VA, home of the loan’s recipient, Mrs. Elizabeth Carpenter, whose husband, Capt. Matthew Carpenter, passed away in 2010. Since 1944 as part of the original GI Bill of Rights, the VA has been providing guarantees to 30-year mortgage loans with low interest rates and has guaranteed ...

Rep. David Schweikert, R-AZ, said this week that in the coming months he will introduce bipartisan legislation to establish a regulatory framework for prime non-agency MBS. “I’ve spent the last two years trying to figure out what the box will look like,” he said. Non-agency MBS participants continue to debate whether reform of the government-sponsored enterprises is necessary before the non-agency MBS market can return in a meaningful manner. At the ABS East conference sponsored by Information Management Network this week in Miami, Schweikert said a functioning non-agency MBS market is necessary before members of Congress can be convinced to move forward with GSE reform. “I need to have...

Regulatory uncertainty continues to frustrate mortgage bankers who can see the outlines of major pending changes in consumer protection, securitization rules and capital requirements that remain largely enshrouded in bureaucratic fog. “We have these new concepts, qualified mortgages and qualified residential mortgages, but we don’t know what their exact definitions are,” said Michael Heid, president of Wells Fargo Home Mortgage, during a panel session at this week’s annual convention of the Mortgage Bankers Association in Chicago. “We are in a gray state; the concepts are there, but the rules aren’t. At the same time we’re having to clean up issues from the past.” Debra Still, president and CEO of Pulte Mortgage, said...

It increasingly appears that the Consumer Financial Protection Bureau will come out with a qualified mortgage/ability-to-repay rule that will include a legal “safe harbor” for most mortgages – and a “rebuttable presumption” for the rest. Industry attorneys, lobbyists and consumer advocates indicate the CFPB is leaning towards granting a safe harbor for what will be defined as “prime” mortgages – presumably most of the loans that are backed by the federal government. “What we’re hearing is there could be...

The Mortgage Insurance Companies of America urged U.S. banking regulators not to exclude private mortgage insurance as they consider the proposed Basel III risk-based capital framework for the nation’s banks. Commenting on the proposed rules this week, MICA urged regulators to acknowledge the crucial role private mortgage insurance plays in the single-family residential market and recognize it in the proposed capital rules “with a reduced capital charge.” “Exclusion of private mortgage insurance in the proposed rules is a departure from accepted banking practices and would have ‘unintended adverse consequences on housing finance and the broader U.S. economy,’” said Suzanne Hutchinson, MICA executive vice president. Under the proposed U.S. implementation of Basel III, conventional residential mortgages with loan-to-value ratios in excess of 80 percent, regardless of the presence of private mortgage insurance, could trigger...

Recent efforts by the government-sponsored enterprises and the Federal Housing Finance Agency to offer clarity and consistency about repurchase demands may or may not bear fruit as neither agency officials nor industry observers can speak confidently as to its ultimate effectiveness. According to participants at an Inside Mortgage Finance webinar this week, the GSE representation and warranty framework unveiled by the FHFA last month and the GSEs’ new quality control guidelines announced last week are steps in the right direction but there are a lot of moving parts to take into account. “We tried the best we could to address...

No matter how bad mortgage market watchers believe this week’s headline-grabbing lawsuit against Morgan Stanley by the American Civil Liberties Union is, it could be much, much worse for a swath of new potential defendants throughout the securitization pipeline and for the industry as a whole, according to one legal expert. The ACLU headed a group that filed suit in the U.S. District Court in New York on behalf of five Detroit residents. The lawsuit claims that Morgan Stanley pushed a unit of now-bankrupt New Century Financial Corp. to target minority borrowers for high-risk subprime mortgages. Between 2004 and 2007, Morgan Stanley “ramped up”...

The Commodity Futures Trading Commission late last week issued a temporary exemption for “securitization vehicles,” including MBS, from burdensome rules required by the Dodd-Frank Act regarding commodity pools. The exemption from rules for swaps lasts through the end of the year and was detailed in a series of no-action letters. Industry participants including the American Securitization Forum and the Securities Industry and Financial Markets Association requested the no-action letter from the CFTC for rules that went into effect on Oct. 12. The groups warned that applying the new regulation to MBS with simple interest rate swaps would harm the market for new issuance as well as outstanding securities. “This legal and regulatory uncertainty could have...

Mortgage real estate investment trusts that invest in MBS are likely to see their profitability reduced in coming quarters, largely as a result of the competition they’re facing from the Federal Reserve for assets to buy. Since the Fed’s Sept. 13 announcement that it would snap up an additional $40 billion of agency MBS a month as part of its latest quantitative easing, yields have dropped and spreads have narrowed, and that’s cutting into the earnings and dividends of mortgage REITs. Paul Miller, a securities analyst at FBR Capital Markets, agrees...