The Department of Housing and Urban Development’s Office of the Inspector General will begin internal audits later in 2012 on various aspects of the FHA single-family mortgage insurance program and release results of some that were begun last year. In August, OIG auditors will begin review of the FHA TOTAL (Technology Open to All Lenders) Scorecard to determine whether the automated underwriting system approves loans that otherwise would not be approved under manual underwriting. Auditors will also check whether the scorecard could ...

Home Equity Conversion Mortgage loans remain widely available, thanks to the independent lenders that rallied to plug the gaps as major players bolted from the reverse mortgage market, an industry executive told lawmakers this week. In testimony during a House subcommittee hearing on FHA regulation of the HECM market, Jeffrey Lewis, CEO of Generation Mortgage Co., said MetLife’s departure from the market and closure of its traditional mortgage-origination business say nothing about the value of the HECM product to consumers. Lewis said MetLife’s decision was a strategic one and had nothing to do with ... (1 chart)

Deutsche Bank and its mortgage subsidiary MortgageIT this week agreed to pay $202 million to settle civil claims that they engaged in a decade of misconduct and deception to qualify risky mortgage loans for FHA insurance. The civil fraud lawsuit was brought against the two companies by the Department of Justice as a result of a referral from the Department of Housing and Urban Development. Filed in May last year, the government lawsuit sought damages and civil penalties under the False Claims Act. The suit alleges that MortgageIT, which Deutsche Bank acquired in 2007, used its authority as a direct endorsement lender (DEL) to ...

Fannie Mae posted a profit large enough to cover its government dividend payment for the first quarter of 2012, while Freddie Mac came up a little short and had to ask the government for an additional $19 million to remain solvent. Fannie reported $2.7 billion in net income during the first quarter, compared to a net loss of $2.4 billion in the fourth quarter of 2011 and a net loss of $6.5 billion in the first quarter of 2011. The company credited its better results to lower credit-related expenses, resulting from a less significant decline in home prices, a decline in the company’s inventory of real estate...

The combination of weak legal protection, a narrow definition of “qualified mortgages” and growing use of the disparate impact theory of lending discrimination is creating rifts in the mortgage banking industry and leading some companies to pull back or abandon the market altogether. The ability-to-repay rule being developed by the Consumer Financial Protection Bureau was arguably the most talked-about issue at this week’s secondary market conference held by the Mortgage Bankers Association. Its two major ingredients are a definition of qualified mortgages – loans that are underwritten to certain...

The Consumer Financial Protection Bureau is putting together a group of small businesses related to the mortgage lending industry to brief them on the CFPB’s pending proposed rule on discount points and fees paid to mortgage originators and to gather initial industry input on the subject. Senior officials told the press this week they are assembling a panel per the Small Business Regulatory Enforcement Fairness Act, which requires the CFPB to convene a small business panel before rolling out regulations that the bureau expects to have a significant impact on a substantial number of small business...

Bank of America’s pending $8.5 billion settlement with non-agency MBS investors appeared to gather some momentum last week following a BofA-favorable ruling by a New York state court. New York State Supreme Court Justice Barbara Kapnick ruled the case will move forward under Article 77 rather than a broader plenary action sought by investors opposed to the amount of the settlement. The proposed settlement reached last June with 22 institutional investors would resolve BofA’s liability related to non-agency MBS issued by Countrywide. Supporters of the settlement, including the trustee, Bank of New York Mellon...

The Federal Housing Finance Agency is still mulling over accepting principal reduction payments from the Treasury Department even as the debate between the factions for and against GSE loan writedowns is quickly dissolving into a partisan food fight. This week, two ranking House Republicans urged FHFA Acting Director Edward DeMarco to stand fast against mounting political pressure directed at him by the Congressional allies of the Obama administration as House Democrats took the gloves off, accusing the Finance Agency of falsely withholding pertinent information about the agency’s principal reduction analysis.

Don’t expect the long-awaited White House plan to wind down Fannie Mae and Freddie Mac “anytime soon,” an Obama administration official told lawmakers last week. Housing and Urban Development Secretary Shaun Donovan told members of the Senate Banking, Housing and Urban Affairs Committee that the administration has made “significant” strides toward bringing private capital back into the housing market without help from Congress. However, the GSE overhaul promised for the first of the year needs more work, he said.

Even as the still-regenerating Home Affordable Refinance Program is already proving itself to be a boon for banks’ bottom lines, participants of an exclusive Inside Mortgage Finance webinar last week said so far there’s little indication borrowers are disadvantaged because there are currently fewer new lenders originating HARP 2.0 as same servicers. Since January, one month after the revised program took effect, lenders have reported intense interest and a more significant uptick in new refinance applications.