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Inside Mortgage Finance

October 3, 2013

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FHA Seen as Most Vulnerable to Shutdown, GSEs Provide Guidance, Fed Regulators Still on the Job

The FHA and the Department of Housing and Urban Development have already slipped into somewhat of a “power save” mode since substantial parts of the federal government were shut down early this week. The FHA will continue to endorse new loans under what it calls a “multi-year appropriation authority.” FHA Commissioner Carol Galante said the agency will continue to guarantee single-family loans during the shutdown, refuting earlier news accounts that were based on erroneous materials included in HUD’s shutdown contingency plan. “I do want to clear up any confusion about what this means for FHA single-family home borrowers. FHA will be able to endorse single-family loans during the shutdown,” Galante said. “A very limited number of staff will be available to endorse new loans.” Galante warned... Read More

Large Servicing Packages Continue to Change Hands; Flagstar Sells Again and PHH May Come to Market

Large banks and some smaller shops continue to test the servicing sales market this fall, with bulk offerings from Citigroup and Flagstar garnering attention from investors. Industry advisors who track the market say Flagstar recently wrapped up bidding on a $12 billion package of mortgage servicing rights on newly originated loans. “These were pristine quality receivables, stuff that was funded over the past few months,” said one observer who saw the bid package. This summer, Flagstar – in an effort to capture the value of MSRs held on its balance sheet – sold... Read More

HUD Proposes Qualified Mortgage Rule for FHA Loans, Categories Reflect Those in the CFPB Final ATR/QM Rule

The Department of Housing and Urban Development has issued a proposed rule establishing standards that FHA loans would have to meet to be considered “qualified mortgages,” varying slightly from the QM rule approved earlier this year by the Consumer Financial Protection Bureau. According to HUD, the proposal is aligned with the ability-to-repay criteria set out in the Dodd-Frank Act and the CFPB’s QM rule. The key difference is in the pricing threshold that puts QM loans in the safe harbor, rather than the less desirable rebuttable assumption category that exposes lenders to more legal risk. Under the CFPB rule, safe harbor QM loans must have... Read More

Fannie, Freddie Update Seller Guidance to Address CFPB’s Ability-to-Repay Rule, QM Requirements

Sellers to Fannie Mae and Freddie Mac will get a temporary, limited reprieve from repurchase requirements as the mortgage industry implements the Consumer Financial Protection Bureau’s ability-to-repay rule, according to new guidance from the two government-sponsored enterprises. “During the initial transitional period ..., Fannie Mae will not require repurchase of a loan on the grounds of noncompliance with the applicable QM-related points-and-fees eligibility requirement as long as it was otherwise eligible for acquisition,” the GSE said in a lender letter. “However, if a court of law, regulator or other authoritative body determines the loan exceeded the applicable QM-related points-and-fees limitation in violation of the CFPB final rule, such loan is subject to repurchase.” In addition, if Fannie determines... Read More

No Word Yet on Lower GSE Loan Limits, But Senators Want Answers From FHFA

The Federal Housing Finance Agency has yet to show its hand on 2014 conforming loan limits for Fannie Mae and Freddie Mac, but that isn’t stopping elected officials from sticking their noses in the issue. In particular, a recent letter sent by 13 senators – 11 Democrats and two Republicans – addressed to FHFA Acting Director Edward DeMarco puts pressure on the agency to show what legal authority it has to declare new loan limits and requests a “quantitative analysis” on what impact it will have on “the economy and national and regional housing markets.” The 13 senators want... Read More

Accounting Results Compel FHA to Announce $1.7b Draw Although MMIF is Better than Numbers Suggest, Says Agency

The FHA raised red flags late last week when it announced it will need to draw $1.7 billion from the Treasury, not because the agency’s claims-paying ability is at risk, but rather to comply with federal law requiring it to have reserves to cover anticipated future losses and mandatory capital reserves. The mandatory appropriation is an accounting transfer and does not reflect an up-to-date view of the FHA’s Mutual Mortgage Insurance Fund, its long-term fiscal health or its current cash position, said FHA Commissioner Carol Galante in a letter to Sen. Tim Johnson, D-SD, chairman of the Senate Committee on Banking, Housing and Urban Affairs, and Sen. Mike Crapo, R-ID, ranking minority member. The calculation used... Read More

Signs of Life in Home-Equity? Balances Continue To Shrink, But New Lending May be Gaining

The home-equity market has been down so long it doesn’t take much to make it look like it’s looking up. Firming house prices in 2013 may be leading to a revival. The outstanding balance of home-equity loans, including home-equity lines of credit and closed-end second mortgages, continued to decline during the second quarter, dropping another 2.3 percent, according to the Federal Reserve. Since the end of 2007, the home-equity market has shrunk by 35.5 percent. Depository institutions hold...[Includes three data charts] Read More

Paper: GSE, FHA Buyback Demands Creating Lender Uncertainty, Freddie Scores $1.3b Repurchase Settlement

Policymakers at Fannie Mae, Freddie Mac and the FHA need to work with lenders to identify and resolve sources of buyback risk uncertainty in order to loosen the market’s grip on tight credit conditions, according to a white paper issued this week by Moody’s Analytics and the Urban Institute. Disagreements over lender judgment calls, post-underwriting chances in circumstances and nitpicking over trivial mistakes by the two government-sponsored enterprises and the FHA have stepped up put-backs “in ways lenders cannot adequately address through better underwriting or pricing,” note paper co-authors Mark Zandi and Jim Parrott. In 2011 and 2012, Fannie and Freddie together required... Read More

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