The proposed capital requirements for Fannie Mae and Freddie Mac aim for risk-based standards that will allow the government-sponsored enterprises – and future competitors – to earn an acceptable return while remaining strong enough to withstand severe economic downturns.
Increasingly worried about the financial condition of its largest nonbank issuers amid declining market conditions, Ginnie Mae in late October shot off a liquidity letter to 14 companies, asking them to develop contingency plans. The identity of the firms was not revealed to Inside FHA/VA Lending, but it’s no secret which companies rank among the top echelon of issuer/servicers. The five largest nonbank Ginnie MBS servicers as of Sept. 30 are PennyMac Financial Services, Lakeview Loan Servicing, Freedom Mortgage, Quicken Loans and Mr. Cooper. According to the letter, a copy of which was obtained by this publication, Ginnie wants the companies to develop strategies to right-size their operations. One of the agency’s goals is to lay the groundwork for financial stress tests that all issuer/servicers eventually must meet. Ginnie expects to sit down with the executive management teams of the ...
This week, Ginnie Mae issued an all-participants memo dictating new standards for firms seeking to become issuers, including the stipulation that applicants submit to a corporate credit evaluation. Ginnie said the financial exercise will be “similar to those employed by credit rating agencies.” The evaluation will determine whether an applicant is qualified to be an issuer or whether additional criteria should be imposed even if the basic standards are met. Applicants that rely on a subservicer arrangement will be scrutinized even more. The bulletin also notes that, effective immediately, the agency is implementing new notification requirements for MBS issuers engaged in “certain subservicer advance or servicing income agreements, which do not require prior Ginnie Mae approval, but can impact an issuer’s ongoing liquidity position and financial obligations.” While Ginnie currently permits subservicers to advance ...
The FHA is recommending a statutory change to strengthen the Mortgagee Review Board’s authority in lender enforcement. The agency discussed the merits of enhancing MRB’s powers in a 2018 audit report on the health of the Mutual Mortgage Insurance Fund. While the goal of a stronger MRB is not new, it has taken on a new urgency in discussions between the Department of Housing and Urban Development and the Department of Justice regarding the use of the False Claims Act in FHA enforcement. The DOJ and HUD have used the statute to pursue lenders that have inflicted millions of dollars in losses on FHA due to misrepresentation, carelessness and generally sloppy underwriting. Lenders, on the other hand, have complained about the agencies’ indiscriminate use of the FCA against even the slightest technical error. The FCA and its treble-damages provisions have squeezed billions of dollars ...
A memorandum of understanding is in the works at the Department of Housing and Urban Development to clarify the use of the False Claims Act in FHA enforcement. At the same time, the department is considering seeking statutory authority for the Mortgagee Review Board to impose stiffer penalties on lenders for violations that do not require a False Claims Act response. (See following story.) During a public policy luncheon hosted by the Washington-based Women in Housing and Finance this week, HUD Assistant Secretary and FHA Commissioner Brian Montgomery said the draft MOU would provide a “level of fairness” in terms of whether the FCA or some other mechanism would be appropriate. Montgomery did not discuss specifics but said the memo would ensure that HUD has a say in what type of offense would qualify for a false claim. Montgomery gave no timeframe for when the ...
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