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Inside FHA/VA Lending

February 14, 2014

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JPMorgan Settles FHA ‘Qui Tam’ Suit

FHA-approved lenders should make sure they leave no stones unturned to ensure that loans submitted for endorsement meet FHA’s strict underwriting criteria. It is the responsibility of direct endorsement lenders to scrutinize every loan for compliance with FHA lending guidelines, including income verification, credit analysis and property appraisals. JPMorgan Chase admitted it failed to do all of the above. Last week, the bank acknowledged it violated the False Claims Act and agreed to pay $614 million in cash to settle government charges it improperly certified poorly underwritten loans for FHA and VA guarantees. The defective loans later ... Read More

‘Robo-sign’ Figure Sues 22 Firms for FHA Fraud

The whistleblower whose investigative efforts led to the landmark $25 billion national mortgage settlement between the federal government, 49 state attorneys general and five of the largest mortgage servicers is at it again. This time, Lynn Szymoniak is suing 22 companies for using fraud to obtain FHA insurance – in some instances, VA guaranties – for defective loans that later were securitized through Ginnie Mae and sold to investors. Szymoniak, who is suing under the False Claims Act, gained notoriety from a 2011 interview on “60 Minutes” in which she ... Read More

FHA to Suspend Processing of FHA Approval Applications

The Department of Housing and Urban Development has declared a one-month freeze on all mailed-in applications for FHA lender approval beginning March 31 as the department shifts from the current paper-based system to a new online electronic processing system. HUD said the blackout period would be from March 31 to April 30, during which system enhancements would be implemented, including replacement of the current Lender Assessment Sub-System (LASS) with the Lender Electronic Assessment Portal (LEAP), formerly known as “HUD/FHA Lender Approval Files.” The changes are ... Read More

Lenders Lower Credit Scores for FHA Loans

Buoyed by improvement in FHA loan quality, some lenders have begun lowering the credit score requirements for FHA and other government-backed mortgages. Last month, Wells Fargo alerted FHA lenders of its decision to lower the minimum credit score for purchase home loans through its retail channel from 640 to 600. “We felt it was an appropriate time to do it given the improvement in FHA loan quality,” a spokesman explained. “The change applies to all FHA borrowers. Last year’s resolution of the FHA indemnification issue also prompted the change at Wells Fargo, according to a bank official. In addition, resolving the putback risk with ... Read More

VA Production Slows in 4Q13 Though Still a Reco

VA activity appeared to lose momentum in the fourth quarter of 2013 as approved lenders reported $129.9 billion in total originations for the year, according to Inside FHA Lending’s analysis of Department of Veterans Affairs data. Production has been gradually slipping since the end of the first quarter, when lenders posted an aggregate $37.5 billion in new VA loans. The fourth quarter ended with $22.4 billion in total originations, which was down a hefty 32.1 percent from the previous quarter. On a year-over-year basis, however, VA originations were up by 1.5 percent. Refinancing accounted for 9.9 percent of VA production in 2013, up slightly from ... [1 chart] Read More

Around the Industry

NRMLA Plans to Recruit Certain Borrowers to Offer HECM Testimonials. Seeing so much negative publicity against reverse mortgages, the National Reverse Mortgage Lenders Association is planning to recruit borrowers who are willing to share with reporters their positive experiences with the product. The aim is to build a “repository” of borrowers who are willing to be interviewed by reporters on the merits of having a Home Equity Conversion Mortgage loan. Media representatives typically contact the NRMLA for borrower interviews, and having a borrower contact list would ... Read More

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