The Department of Housing and Urban Development inspector general, over the last several weeks, has reported a series of final civil actions that resulted in an enforcement action or monetary settlement between an FHA lender and the federal government. On Oct. 6, the IG announced the results of an audit of TXL Mortgage Corp., a direct endorsement lender, in Houston. The audit found TXL in violation of HUD requirements and that it had no acceptable quality-control plan in place. Specifically, 16 of the 20 sample loans the IG reviewed did not comply with HUD standards. Of the 16 loans, eight had significant underwriting defects and failed to qualify for FHA mortgage insurance. Two loans qualified but were over-insured, according to the report. As a result, TXL exposed HUD to more than $713,000 in unnecessary insurance risk and caused the department to incur more than ...

Back in August, the CFPB proposed to dump the current “dispute” function in the consumer complaint closing process and replace it with a short survey – an idea that went over like a lead balloon with the mortgage industry. Through the proposed survey, a customer would have the opportunity to state, using a one- to five-point scale, whether he agreed or disagreed with the following three statements regarding the company’s response to, and handling of, his complaint. They are: “The company addressed all of my issues,” “I understood the company’s response,” and “The company did what it said it would do.” The customer would also be given the opportunity to provide a narrative description to explain the rating. The Consumer Bankers ...

Trade groups representing the mortgage industry wrote to the Consumer Financial Protection Bureau late last month to express their opposition to the agency’s proposal to incorporate a short survey into its consumer complaint closing process, which would replace the current “dispute” function. Under the CFPB’s proposal, which was published in the Aug. 1, 2016, Federal Register as a notice and request for comment rather than a formal proposed rule, consumers would have the option to provide feedback on a company’s response to and handling of their complaints via all channels including online, phone, fax and mail. Consumers would be able...

The initial material defect rate of FHA loans has increased to 50 percent in the third quarter of 2016 from the previous quarter, according to the latest FHA Lender Insight report on quality control. A good portion of the defective mortgage loans, however, has been mitigated during the post-endorsement technical review process, the report indicated. In the second quarter, the initial material defect rate had been flat, averaging 47.4 percent over the last eight quarters. The latest report show the top five mitigated findings, which reflect the number of initially unacceptable ratings and the number of findings mitigated for loans between April and June, 2016. Some 6,312 FHA loans comprised the sample, and they consisted of purchase loans (71.0 percent), streamline refinance (13.5 percent), rate and term refis (9.0 percent), and Home Equity Conversion Mortgages (6.7 percent). In addition, ...

The Department of Veterans Affairs is urging VA lenders, borrowers and other participants in its loan guaranty program to adopt recommended standards, equipment and activities to reduce water and energy usage and to ease the impact of natural disasters. The VA has recommended wind-hazard standards, resilient building and retrofitting standards, a water- and energy-saving program, and property-and-energy conservation strategies to help VA borrowers protect their homes against storms, flooding, earthquakes and other calamities. VA made clear it allows, but does not require, any of the recommended standards, strategies or equipment. The programs are strictly voluntary, it said. The agency noted the increasing incidence of extreme weather events, earthquakes and flooding, which makes planning and building in the most resilient and economically feasible ways all the ...

The Department of Veterans Affairs adopted without change its interim final rule increasing the maximum amount of civil fines it can assess on lenders and other offenders for violations of agency loan-guaranty rules and regulations. Under the interim final rule VA issued for comment back in June, maximum civil monetary penalties would increase from $10,000 to $21,563 for false loan-guaranty certifications. Civil fines for fraudulent claims or statements in any VA program would increase from $5,500 to $10,781. The VA published the interim final rule on June 22, 2016, to implement the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 and to improve the effectiveness of civil fines and maintain their deterrent effect. The new penalty amounts became ...

Further empirical confirmation of a recovering mortgage market continued to accumulate at the CFPB during the third quarter, as related consumer complaints dropped 19.8 percent, according to a new analysis by Inside the CFPB. For the first nine months of 2016, consumer gripes about their mortgages fell 8.4 percent compared to the same time period the year before. Criticisms about mortgage servicing fell 21.8 percent quarter-over-quarter and 2.0 percent year-over-year, the data show....

The Department of Veterans Affairs is working on a change to its existing streamline refinancing policy to address a problem that is giving VA and Ginnie Mae the fits. Under the VA’s qualified-mortgage rule, a VA borrower must wait six months and show six months’ worth of mortgage payments before they can refinance into an IRRRL (Interest Rate Reduction Refinance Loan) and take advantage of the lower rate. However, it seems not all VA lenders are adhering to the rule and that a good number are refinancing veterans into IRRRLs even before the mandatory seasoning period ends for fear interest rates might rise and the borrower might not benefit from the lower rate. “I’ve redone the numbers in 20 different directions on how much a borrower would save if they had to wait two more months and the rate went up a quarter of a point because they lost those two months ...

The Department of Housing and Urban Development is set to receive more than $140 million in settlements with three individual lenders in connection with defective loans they originated with FHA insurance. Freedom Mortgage Corp., M&T Bank, and Land Home Financial Services all reached separate agreements this year with the Department of Justice on behalf of the HUD Inspector General to resolve the allegations. On April 15, Freedom agreed to pay $113 million, in response to charges that “it engaged in certain conduct in connection with its origination, underwriting, property appraisal and quality of certain single-family mortgages insured by FHA.” The disputed forward loans were insured by FHA between Jan. 1, 2006, and Dec. 31, 2011, which resulted in claims submitted to HUD on or before June 15, 2015. HUD incurred substantial losses when it paid claims on the ...

New FHA guidance for dealing with mortgages with a Property Assessed Clean Energy (PACE) obligation went into effect last week but uncertainty lingers and its full impact remains to be seen, according to an industry attorney. The Department of Housing and Urban Development has issued guidance specifically allowing properties encumbered by a PACE lien to be eligible for FHA mortgage financing for both purchase and refinance loans. The department of Veterans Affairs has issued similar guidance. According to Erika Sonstroem, an attorney with the law firm Bradley Arant Boult Cummings, the PACE industry is touting the guidance in its pitches to lenders as posing no risk to mortgage investors. PACE is a program that lends money to homeowners for home-energy savings projects. It is treated much like a tax lien on a property and is included in the ...