Investors should see a higher share of VA collateral in Ginnie Mae mortgage-backed securities pools due to increasing VA loan originations, according to Deutsche Bank analysts. Given their rising share of VA collateral, new Ginnie pools are likely to have worse convexity than most of those originated in 2015, analysts said. “VA loans tend to prepay faster than FHA loans when in the money as VA loans have larger loan sizes, higher FICO scores and a more efficient streamline refi program that requires a minimum three months seasoning,” they observed. In addition, analysts expect the population of younger veterans to surge approximately 36 percent over the next five years. “[As such], there will be a healthy supply of new VA originations eligible for pooling,” they said. As a result, the share of FHA relative to VA collateral in new Ginnie II pools will likely decrease, they said. Such a trend has manifested itself slowly as ...

FHA lenders funded $12.3 billion in new Home Equity Conversion Mortgage loans during the first nine months of 2015, up a hefty 22.2 percent from the same period in the prior year, according to Inside FHA/VA Lending’s analysis of agency data. Likewise, HECM endorsements increased 17.3 percent to $4.5 billion in the third quarter from $3.9 billion in the prior quarter. This was the highest HECM endorsements have been since the second quarter of 2013, when they totaled $4.1 billion. Purchase loans accounted for 85.8 percent of all HECM originations over the nine-month period. The majority of borrowers favored adjustable-rate HECMs over fixed-rate HECMs, which accounted for only 14.8 percent of HECM transactions. In addition, the initial principal amount at loan originations totaled $7.3 billion, up from $4.6 billion midway through 2015. The volume increase is attributable to program changes implemented ... [1 chart]

Nearly 2,400 FHA lenders will receive electronic notifications on Jan. 1, 2016, from the Department of Housing and Urban Development instructing them to begin their recertification process or risk exclusion from the FHA program. HUD is encouraging the estimated 85 percent of FHA lenders that operate on a calendar-year basis, instead of a fiscal-year basis, to prepare their recertification packages for submission to the Lender Electronic Assessment Portal (LEAP). LEAP allows FHA lenders to complete annual recertification, among other things. The portal is accessible through FHA Connection, which provides lenders and business partners a path to HUD’s computer systems. Annual recertification can be a lengthy, time-consuming process for ...

The Department of Veterans Affairs has announced its loan limits for 2016, which are the same as the loan limits set by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac this year. Currently, the VA’s maximum guaranty amounts are indexed to the FHFA loan limits, which range from a base of $417,000 to a high-cost area limit of $625,500. The FHFA conforming loan limit will remain unchanged at $417,000 for single-family homes, effective Jan. 1, 2016, to Dec. 31, 2016. However, in 39 counties deemed “high cost,” the conforming loan limits will increase this year. VA loan limits are calculated based on the county median home values reported by FHA. The maximum guaranty amount for loans over $144,000 is 25 percent of the current VA county loan limit. Veterans with full entitlement available may borrow up to this limit and VA will guarantee 25 percent of the loan amount. In addition, the VA county limits ...

The Department of Veterans Affairs is planning to propose changes to rules under its Home Loan Guaranty program related to loan fees, appraisers, limited denial of participation and residual income. Three of the proposed rules are slated for publication in the first quarter of 2016, according to the VA’s semiannual regulatory agenda. Agenda items, however, usually do not follow their publication dates and most rulemakings take a while before they are finalized. One proposed rule would establish reasonable fees that VA lenders may charge in connection with the origination and servicing of VA loans. All proposed fees would be in line with those charged by private mortgage lenders, assuring the sustainability of the VA loan program, the agency noted. In addition, the VA plans to propose rule changes regarding limited denials of participation (LDPs). LDPs are VA-specific sanctions that the Loan Guaranty Service may ...

The share of “unacceptable” ratings for defective FHA loans following a post-endorsement technical review has dropped from double- to single-digits in FY 2015 due to lenders’ mitigation efforts, according to the FHA’s latest loan-review results. FHA’s initial unacceptable rate has remained at 45 to 47 percent over the last four quarters, but lender submission of mitigating documentation has reduced that rate to 5 percent as of Oct. 31, 2015, the FHA report said. This means an overall mitigation rate of nearly 90 percent of the FHA-insured loan sample. The number of initially unacceptable findings and those findings subsequently mitigated are based on 6,415 FHA-insured mortgages that underwent post-endorsement technical reviews between April 1 and June 30, 2015. Of the total loans reviewed, 68.6 percent were purchase loans, 17.9 percent streamline refinance and ...

Joint civil fraud initiatives have resulted in $558.5 million in recoveries and receivables to the Department of Housing and Urban Development in FY 2015, according to the HUD inspector general’s semiannual report to Congress. The amount includes civil settlements of $212.5 million from First Tennessee Bank, $29.6 million from Reverse Mortgage Solutions, and $1.8 million from three other settlements. The settlements resolved enforcement actions brought by the Department of Justice on behalf of HUD in pursuit of civil remedies under a variety of statutes, including the False Claims Act, Program Fraud Civil Remedies Act, and the Financial Institutions Reform, Recovery and Enforcement Act. Recoveries and receivables for other entities during the reporting period – April 1 to Sept. 30, 2015 – totaled $86.9 million and $268.2 million for the entire fiscal year. Some of the payments were made to the ...

VA Servicer Reminders. The new maximum allowable foreclosure timeframes published in the Federal Register on Dec. 4, 2015, will be effective for all loan terminations completed on or after Jan. 3, 2016. In addition, the new Net Value percentage (15.95 percent) took effect on Dec. 23, 2015. All Notices of Value issued on or after Dec. 23, must be calculated using the new percentage. Meanwhile, pre-approval requests to deviate from a regulation must be submitted through VALERI (VA Loan Electronic Reporting Interface), the agency’s loan administration system. VA does not grant pre-approval on claim expenses or for additional time to foreclose. These items must be appealed ...

A precedent-setting court case decided in May has disrupted the MBS and ABS markets, according to the Securities Industry and Financial Markets Association and the Structured Finance Industry Group. The trade groups filed an amicus brief to the Supreme Court of the United States late last week, calling for the court to hear an appeal of the ruling in Madden v. Midland Funding. In May, the U.S. Court of Appeals for the Second Circuit ruled that federal preemption under the National Bank Act doesn’t apply to nonbanks that purchase loans from banks. The Madden ruling subjects nonbank purchasers of loans originated by banks to state usury laws. If a bank’s preemption from such laws isn’t transferred when a nonbank acquires a loan originated by a bank, the loan can be...

The legacy of the housing bust continues to play out in the enforcement arena. Last week, the National Credit Union Administration announced a $225 million settlement with Morgan Stanley, bringing to a close litigation stemming from the purchase of allegedly faulty residential MBS by four corporate credit unions that ultimately failed. The settlement addresses claims brought in 2013 by the NCUA on behalf of U.S. Central Federal Credit Union, Western Corporate FCU, Members United Corporate FCU and Southwest Corporate FCU. As a result of the settlement, the NCUA will dismiss pending suits against Morgan Stanley in federal district courts in New York and Kansas. The firm did not admit...