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Inside FHA/VA Lending

November 22, 2017

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FHA Endorsements Rise in 3Q17, Nonbanks Remain Dominant

FHA single-family endorsements rose 2.0 percent in the third quarter from the prior quarter as more borrowers took out purchase loans and nonbanks remained in control of the market during the period. The FHA endorsed $62.1 billion of forward mortgages during the third quarter, which brought total production over the first nine months of 2017 to $182.7 billion (excluding reverse mortgages), a 2.5 percent decline from 2016. Fixed-rate loans continued to comprise nearly all of FHA’s business. Adjustable-rate endorsements totaled $935.3 million for the first nine months of 2017, up from $701.7 million a year ago. FHA purchase activity was up 4.4 percent to $48.5 billion in the third quarter while annual volume increased 2.6 percent from 2016. Purchase loans accounted for 73.6 percent of total FHA endorsements for the nine-month period. Of the $182.7 billion of FHA loans endorsed during the ... [Charts] Read More

Prospect of FHA MIP Reduction Fades as MMIF Cap Ratio Drops

Any chance of a mortgage-insurance premium reduction in the near future has dimmed in the wake of an actuarial report placing the FHA insurance fund on shakier ground at the end of FY 2017. One clear thing from the report released on Nov. 15 was that FHA’s flagship single-family home mortgage program continued to grow stronger with an economic net worth of $38.4 billion in fiscal 2017. In contrast, problems persisted in the Home Equity Conversion Mortgage portfolio, driving the program’s economic value down by another $6 billion to negative $14.5 billion. The drag HECM losses inflicted on the MMIF has renewed calls to separate the ailing portfolio from the fund, which can only be accomplished by legislation. Right now, the reverse mortgage issue is not even on Congress’ legislative agenda. HECM losses also caused the fund’s economic net worth and capital reserve ratio to decline in fiscal year ... Read More

Alert Out on Unwanted Refi Offers; CFPB, VA Warn of Misleading Ads

The Department of Veterans Affairs and the Consumer Financial Protection Bureau have issued a joint warning to servicemembers and veterans about VA refinancing offers that sound too good to be true. There is a good chance that borrowers with a VA loan have already received unsolicited offers to refinance their mortgages even just months after closing, the agencies said in their first “warning order” (WARNO). Many of these refi solicitations promise extremely low rates, thousands of dollars in cash back, skipped mortgage payments, no out-of-pocket costs and no waiting period, the agencies noted. The VA and the CFPB said lenders offering VA refinances may use aggressive and potentially misleading advertising and sales tactics. “Lenders may advertise a rate just to get you to respond or you may receive a VA mortgage refi offer that provides limited benefit to you while adding thousands of dollars to your loan balance,” the agencies warned. Even though the VA prohibits a lender from advertising skip payments on ... Read More

Ex-FHA Chief Suggests Raising FHA Capital Ratio, Other Reforms

A former FHA commissioner has recommended raising the agency’s capital reserve ratio to 3 percent, to make FHA stronger and more resilient. Carol Galante, who served two years as FHA commissioner and assistant secretary for housing in the second term of the Obama administration, laid out her proposal along with other recommendations in a paper that she co-authored. Housing-finance reform without a retooled FHA could threaten families’ access to homeownership and increase risk to taxpayers, contrary to the goals of reform, said Galante, currently the faculty director of the Terner Center for Housing Innovation at University of California Berkeley. In her paper, Mission Critical: Retooling FHA to Meet America’s Housing Needs, Galante spelled out the changes necessary to help FHA perform its complementary and countercyclical role in the nation’s housing markets. Galante called for ... Read More

VA Reports Slight Uptick in Use of Loan Benefit; 56% Still Non-Users

A newly released study by the Department of Veterans Affairs showed a 4.0 increase in the number of veterans who have used a VA mortgage in FY 2016 compared to the previous fiscal year. Also, a recent survey conducted by loanDepot found that 56 percent of veterans who participated did not take advantage of their VA loan benefits. Respondents included 400 targeted active servicemembers, veterans and surviving spouses. Conducted by the National Center for Veterans Analysis and Statics, the VA study focused on veterans who have used at least one of 22 benefits or services provided by the VA during fiscal years 2007 through 2016. The study found that loan guarantee was the third most used benefit by veterans behind health care and pensions. Of the 7.1 million vets who used at least one VA benefit, 2.6 million (36.6 percent) took advantage of the zero-downpayment, low-interest ... Read More

Ginnie Spots Inconsistent Reports Regarding First Payment Date

Ginnie Mae called on issuers to ensure that the data they submit are accurate following the discovery of erroneous payment reports. The agency said it has noticed discrepancies in the reporting of the first payment date on loan modifications in violation of Ginnie guidelines. Specifically, the first payment date some issuers reported as part of the loan-delivery data did not match the date submitted for the same mortgage loan as part of issuers’ monthly report of pool and loan data. Ginnie blamed the errors either on loans set up incorrectly for servicing or faulty data issuers had reported to the Department of Housing and Urban Development. Guidance issued by Ginnie on Nov. 14 reminded issuers to report the first scheduled payment date of the re-amortized loan when reporting the first payment date for modified mortgages through either the GinnieNET or the Reporting and Feedback System. The date ... Read More

Nominee for GNMA President Withdraws, Search Continues

Mortgage banker David Kittle, a candidate for Ginnie Mae president, has informed the White House and Housing and Urban Development Secretary Ben Carson that he is no longer interested in the position, according to industry sources. Kittle, a founding partner and vice chairman of the Mortgage Collaborative, an industry vendor, could not be reached for comment. Kittle was first approached by the White House nine months ago about the job. A background check on the potential nominee was reportedly underway but he was never officially nominated. The industry veteran began his mortgage-banking career as a loan officer with American Fletcher Mortgage Co. He is a past chairman of the Mortgage Bankers Association, completing his term in October 2009. A Republican, he also once served as president of the Kentucky Mortgage Bankers Association. Kittle’s withdrawal leaves the ... Read More

Waters’ Proposal to Reinstate Life Of Loan Policy Would Weaken FHA

Congress and the FHA should avoid undertaking policy changes that would further weaken the agency’s ability to cover insurance losses and potentially lead to another taxpayer bailout, according to a recent analysis by The Heritage Foundation. THF analyst John Ligon and Norbert Michel, a research fellow, said FHA policy reforms should ensure that the agency maintains a limited role in the housing finance system. FHA should make way for private capital to enter the market and serve the housing needs of American households, they added. FHA can accomplish such policy goals by lowering its loan limits and adequately pricing insurance for borrower risk, the analysts said. In addition, Congress should ensure that FHA borrowers are required to maintain mortgage insurance over the full life of the loan as required currently by the Department of Housing and Urban Development, said ... Read More

PennyMac Drops 4506-T Rule but Expects Lenders to Remain Vigilant

PennyMac no longer requires tax transcripts, or IRS Form 4506-T, for delegated FHA and VA programs despite its continuing concerns over income fraud. The lender announced the new guidance on Nov. 13, 2017, and it took effect immediately. It applies to borrowers of FHA, VA and government-sponsored enterprise loans who qualify solely with W-2 wage-earner income and/or fixed income reported on a 1099 form. Meanwhile, tax transcripts will continue to be required for all loan applicants where tax returns are required to document qualifying income and income sources for non-delegated, US Department of Agriculture rural-housing and jumbo loans, said PennyMac. Such requirement includes but is not limited to self-employed borrowers, those earning commissions greater than 25 percent of income and borrowers working for family. The tax transcript requirement may be ... Read More

Around the Industry

House Passes Flood Insurance Bill. On Nov. 14, the House of Representatives passed on a vote of 237 to 189 H.R. 2874, the 21st Century Flood Reform Act, which would reauthorize the National Flood Insurance Program for five years. The program expires on Dec. 8, 2017. In addition, the bill would make changes that would allow private companies to sell not only NFIP coverage but to write and offer their own flood insurance policies as well. The Senate is still negotiating the terms of its own flood insurance bill. Northwest Trustee Sued for Illegal Foreclosure of Servicemembers’ Homes. The Department of Justice is seeking, among other things, monetary damages and civil penalties against a foreclosure trustee for allegedly foreclosing on homes of active members of the US military without proper court order. In a lawsuit filed Nov. 9 in U.S. District Court for the Western District of Washington, the ... Read More

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