Lenders must correct erroneous disclosures concerning mortgage insurance premiums (MIP) before submitting loans for FHA insurance, according to new FHA guidance. In an update to Mortgagee Letter 2013-04, FHA Commissioner Carol Galante said some mortgages originated since the termination of the MIP cancellation policy earlier this year still contain incorrect MIP-related disclosures. Under the revised policy, MIPs are no longer cancellable when the current loan-to-value ratio reaches 78 percent. Rather, MIP payments must be made over the entire life of the FHA-insured loan. The change is aimed at increasing ...
Agency issuance of single-family MBS declined modestly in July, according to a new analysis by Inside MBS & ABS, with most of the decline coming in Freddie Macs business. The three government MBS agencies issued a total of $144.26 billion in single-family MBS last month, down 2.5 percent from Junes level. It was the lowest monthly production level so far in 2013, and issuance has generally drifted lower since peaking in January. July did push the year-to-date total for 2013 over the $1 trillion mark, up 17.9 percent from the first seven months of last year. The biggest shift was...[Includes one data chart]
The Federal Deposit Insurance Corp. would be prohibited from repudiating covered bonds when resolving a failed banking institution under the provisions of a controversial housing reform bill put together by the Republican leadership of the House Financial Services Committee and passed out of committee last week. That prohibition would go a long way toward resolving the long-standing hurdles that have thwarted development of a covered bond market in the United States. But it also amps up the level of controversy associated with H.R. 2767, the Protecting American Taxpayers and Homeowners Act of 2013, introduced by Committee Chairman Jeb Hensarling, R-TX, and Rep. Scott Garrett, R-NJ, the architect of a covered bonds bill introduced in the 112th Congress. The relevant provisions in the PATH Act are...
After the dust-up in the capital markets from the last meeting of the Federal Reserves Open Market Committee over when the central bank will begin to taper its huge asset purchase program, this weeks meeting of the FOMC provided no new clues about the timing of the Feds exit strategy. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the committee decided to continue purchasing additional agency MBS at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month, the FOMC said, reiterating previous announcements. Also, the FOMC is...[Includes one data chart]
Of all the compliance problems uncovered during quality-control audits and reviews of mortgage loans, three are recurring with consistency during the origination phase and originators should pay close attention, said a quality-control specialist. Tommy Duncan, chief executive officer of Quality Mortgage Services and a certified mortgage technologist, said errors continue to happen even though lender compliance has improved from previous years. Overall, regulatory compliance on the ...
The Consumer Financial Protection Bureau took its first legal action over alleged violation of the new loan originator compensation rule last week, bringing suit against Castle & Cooke Mortgage, a Utah-based nonbank, and two top executives. The CFPB claims that the defendants had an unwritten policy of paying quarterly bonuses to loan officers based on a formula that rewarded the origination of mortgages with high interest rates, thus incentivizing loan officers to steer consumers into mortgages with less favorable terms, the very practice the compensation rule sought to prohibit, said the CFPBs complaint. Overall, the firm paid...
The Special Inspector General for the Troubled Asset Relief Program is pressing the Treasury Department to focus on servicer actions as part of efforts to reduce re-default rates in the Home Affordable Modification Program. The Treasury has pushed back against the suggestions, stating that it is always looking to improve the program. In a report published last week, the SIGTARP said HAMP mods have re-defaulted at an alarming rate. As of the end of April, the re-default rate on HAMP mods completed in 2009 was 46 percent and the re-default rate for HAMP mods completed in 2010 was 38 percent. While HAMP has helped...
The CFPB has issued new Equal Credit Opportunity Act baseline review procedures for use by its examiners. The procedures are made up of six baseline review modules for examiners to use to identify and analyze risks of ECOA violations, to facilitate the identification of certain types of ECOA and Regulation B violations, and to inform fair lending prioritization decisions for future CFPB reviews. ECOA baseline reviews are one type of fair lending review conducted by the CFPB, in addition to ECOA targeted reviews and Home Mortgage...
A former FHA commissioner said he supports a proposal in the Protecting American Taxpayers and Homeowners Act (PATH Act) to spin off the FHA from the Department of Housing and Urban Development as an independent government-owned corporation. Brian Montgomery, who was assistant secretary for housing and head of the FHA during the Bush administration, said the separation, if enacted, would transfer authority, resources and personnel from HUD to the FHA to manage the insurance fund. This is something I have advocated both during and after my more than four-year tenure as FHA commissioner, said Montgomery, who ...
Federal prosecutors and members of the Justice Departments Residential MBS Working Group are reportedly considering a new strategy for criminally charging Wall Street bankers for alleged fraud in their packaging and sale of MBS backed by subprime mortgages at the peak of the housing frenzy. According to Reuters, the members of the working group are eye-balling a shift in strategy that would involve moving away from the more widely used securities fraud charges to the less common offense of bank fraud. Perpetrators of bank fraud can be charged up to 10 years after their crimes, compared with the five-year statute of limitations on securities fraud, which has already run out on most events leading up to the 2008 financial crisis, Reuters reported. A bank fraud conviction carries up to $1 million in fines and a maximum prison sentence of 30 years. Laurence Platt, financial services practice leader in the Washington, DC, office of the K&L Gates law firm, said...