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Inside FHA/VA Lending

April 14, 2017

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PennyMac Claims Top Rank in Ginnie MBS Production in 1Q17

There is a new boss in the Ginnie Mae mortgage-backed securities market. PennyMac Financial rose to the top of the issuer ranking in the first quarter of 2017 despite a sharp decline in volume, according to a new analysis and ranking by Inside FHA/VA Lending. PennyMac issued $10.78 billion of single-family Ginnie securities during the first three months of the year. The figures in this analysis are based on Ginnie loan-level disclosures, which truncate loan amounts to $1,000 increments. PennyMac’s first-quarter production was off 27.9 percent from the fourth quarter of 2016, a slightly bigger decline than the 24.8 percent drop in overall Ginnie issuance. Even though the firm fared slightly worse than the total market, its first-quarter downturn was less severe than Wells Fargo’s. Wells has been the top Ginnie producer for a long time, as well as the top player in most segments of the ... [ Charts ] Read More

GNMA Officials Attribute Decline in VA Refis to Anti-Churning Policy

A steep drop in VA-backed securities issuance in the first quarter of 2017 suggests that Ginnie Mae’s efforts to curb serial refinancing of VA loans are working, according to agency officials. Speaking on a panel at the annual VA Lenders Conference in Kansas City, MO, this week, Ginnie executives said that a change in pooling requirements for streamlined refinance mortgages appears to have curbed a destructive appetite for refinancing new VA loans within six months of closing. The practice has caused faster prepayments in Ginnie mortgage-backed securities pools and smaller payouts to investors. VA refi volume fell 42.7 percent from the previous quarter (see chart on page 2), contributing significantly to the 32.2 percent decline in total VA loan securitization during the period. John Getchis, senior vice president at Ginnie Mae, said he does not think the churning trend will continue because the ... Read More

Perceived Shortage of Appraisers Delays VA Closings, Raises Costs

The VA mortgage market is experiencing a shortage of qualified appraisers willing to accept VA loan assignments, causing longer wait times, delayed closings and higher appraisal costs. Testifying during a hearing called by the House Veterans Affairs’ Subcommittee on Economic Opportunity, top VA officials complained of difficulty in obtaining appraisals, particularly in rural and remote areas of the country. Jeffrey London, director of the VA Loan Guaranty Service, said the apparent shortage has resulted in turn times for appraisals that can take up to nine weeks. The VA maintains a seven-day timeliness requirement for appraisals for the VA Fee Panel. The problem was more acute last year when loan volumes were strong in many markets, including VA. Turnaround times for appraisals may have exceeded more than 30 days in some rural areas, according to the Appraisal Institute. The markets have ... Read More

MRB Reports Settlements, Fines From Administrative Actions

The Mortgage Review Board reported approximately $454.4 million in settlements against 25 FHA lenders for various violations of agency lending requirements and imposed more than $1.8 million fines and other penalties against 253 lenders for annual recertification violations. The settlements and penalties resulted from administrative actions taken by the board against FHA lenders from Oct. 1, 2015, through Sept. 30, 2016. The settlements did not constitute an admission of liability or fault. The largest settlement amount, $113 million, was between Freedom Mortgage of Mount Laurel, NJ, and the Department of Justice to resolve alleged violations of FHA requirements and the False Claims Act. In August last year, the MRB voted to release Freedom from any civil money penalties or administrative actions as part of the lender’s settlement with the DOJ. The largest civil money penalty imposed by the ... Read More

GNMA Servicing Market Thawing? Stakeholders Hope as Market Stirs

When it comes to selling Ginnie Mae mortgage servicing rights the past two years, it’s been mostly a bear market, but all that may be changing soon. At least that is what sellers and their merger and acquisition advisors hope. Mark Garland, executive vice president of MountainView Financial Solutions, Denver, said that of late, “We have seen a few Ginnie trades go off at a level closer to full value.” Garland told Inside FHA/VA Lending that he expects this trend to continue with prices tightening over the summer “provided rates hold and [prepayment] speeds stay largely in line with expectations.” And if that happens, there could be an increase in the ability of FHA/VA lenders to securitize excess cash flows. But that’s getting a little ahead of the equation. Over the past 24 months, the Ginnie MSR market has been difficult for two reasons: the fear of lawsuits/sanctions tied to FHA lending, and fast ... Read More

MBA Remarks on Defect Taxonomy, LRS, Changes to Data Collection

The Mortgage Bankers Association is calling for improvements and clarifications of the new Loan Review System and the Defect Taxonomy to provide FHA lenders greater certainty as to the type of errors that can expose them to False Claims Act risk. The LRS unifies FHA quality control processes into a single system, including test cases from post-closing lenders, post-endorsement loan reviews, lender monitoring reviews and lender self-reporting. It streamlines all the review processes and analysis of results. The new system includes the defect taxonomy, a streamlined rating system for documenting loan-review results and finding the root cause of defects. In MBA’s view, the defect taxonomy shows how far FHA has advanced to ensure lender accountability for the quality of their loans, protecting borrowers and managing its financial risks. However, the Department of Housing and Urban Development needs to ... Read More

Initial Loan Defect Rate Drops in 4Q16, Missing Docs Leading Cause

The initial material defect rate on sampled FHA loans targeted for a post-endorsement technical review was down in the fourth quarter of 2016 from the previous quarter, according to the FHA’s latest quarterly loan review update. FHA’s Lending Insight reports the material defect rate prior to curing fell to 49 percent in 4Q16 from 53 percent in the previous quarter, based on an analysis of 5,267 sampled FHA loans endorsed between Oct. 1, 2016, and Dec. 31, 2016. Of the loans sampled, 75 percent were purchase-money mortgages; 10 percent were streamlined refinances; 7 percent rate and term refinances, and 8 percent, Home Equity Conversion Mortgage loans. Twenty percent of the sample, 1,081 loans, were conforming while 25 percent, or 1,313 loans, were found to be defective. About 13 percent of the loans were denied endorsement. On the other hand, approximately 41 percent of loans ... Read More

Patenaude for DepHUDSEC? Bright To Replace Tozer at Ginnie Mae?

The Trump White House has yet to fill key positions at the Department of Housing and Urban Development and agencies that fall under the HUD umbrella, including the FHA and Ginnie Mae. According to industry officials who claim to have some knowledge of the process, the administration is seriously considering Pam Patenaude to be the deputy HUD secretary. Patenaude is president of the J. Ronald Terwilliger Foundation for Housing America’s Families. She served as HUD assistant secretary for community, planning and development during the George W. Bush administration. Meanwhile, Michael Bright has been mentioned as a candidate to be the next president of Ginnie Mae. Bright currently serves as director, Center for Financial Markets at the Milken Institute. During his career he has worked for mortgage lender/servicer PennyMac, investment banking firm BlackRock and ... Read More

Around the Industry

Judgment Imposed on Former President and Founder of Loan Correspondent Firm. A federal court in Chicago ordered the former president and founder of MDR Mortgage of Palatine, IL, to pay more than $10 million to the Department of Housing and Urban Development for submitting false certifications on FHA loans. The HUD Inspector General Office and the Department of Justice withheld the identity of the former bank official, who was found liable under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act. The violations allegedly involved loans the FHA insured from 2006 through August 7, 2008, the period during which MDR submitted the allegedly false certifications. The DOJ identified 237 loans that MDR processed during the period in question. The loans defaulted and resulted in $3.4 million in claims paid by the FHA. In addition, MDR provided annual verifications to ... Read More

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