Mortgage Banking Profitability

Browse articles from all of our Newsletters related to Mortgage Banking Profitability.

July 13, 2018 - Inside FHA/VA Lending

Ginnie Crackdown Narrows Prepay Gap Between Ginnie, Market Peers

Ginnie Mae’s efforts to clamp down on rapid refinance schemes and realign prepayment speeds with the conventional mortgage-backed securities market appear to be paying off. Securities analysts say the crackdown on issuers suspected of loan churning combined with increasing primary mortgage interest rates have reduced the prepayment-speed gap between conventional and Ginnie-backed collateral. Ginnie/Fannie Mae price swaps have improved greatly since Ginnie issued warnings to nine issuers in February to address churning in its MBS program and faster prepayments on loans backed by VA, said Kevin Cavin, head of mortgage strategy at Stifel Nicolaus & Co. Ginnie required the issuers to submit a plan to bring prepayment speeds in line with market peers. They were warned that failure to comply would result in temporary debarment from the agency’s multi-issuer pools and ...

July 13, 2018 - Inside FHA/VA Lending

MBA Asks HUD to Rethink Stance On VA Refis as Eligible Collateral

The mortgage industry this week continued to look for ways to resolve the VA streamline refi loan mess, which arose from the implementation of statutory seasoning requirements under the Dodd-Frank reform act, even as Ginnie Mae pointed to Congress to come up with a solution. At issue is approximately $500 million worth of “orphaned” VA Interest Rate Reduction Refinance Loans that are now ineligible for Ginnie Mae securitization. The Mortgage Bankers Association is asking Congress for a legislative fix but is also looking for other forms of relief. Pete Mills, MBA’s senior vice president of residential policy and member management, is trying to drum up investor interest in the orphan loans, which, for now, appear destined for the secondary “scratch and dent” market. More buyers could potentially generate higher bids for the loans and lower losses for nonbanks that could not deliver them ...

July 13, 2018 - Inside FHA/VA Lending

HUD Issues Interpretive Rule to Fix Ginnie Mae’s VA IRRRL Snafu

The Department of Housing and Urban Development has issued an interpretive rule to clear up some of the confusion created by the recently approved Dodd-Frank reform act regarding the eligibility of certain VA refinance loans to serve as Ginnie Mae collateral. Although interpretive rules are exempted from public comment under the Administrative Procedures Act, HUD is seeking public input on its interpretation of the loan-seasoning provision of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which President Trump signed into law on May 24, 2018. Among other things, the statute prohibits Ginnie from guaranteeing payment on a security backed by a mortgage that does not meet its seasoning requirements. The protective measure was designed to deter lenders from encouraging veterans to refinance their loans often and repeatedly. Loan churning led to faster prepayment speeds on the ...

July 13, 2018 - Inside FHA/VA Lending

Seasonal Factors Boost Ginnie Mae MBS Issuance in Second Quarter

The spring homebuying season fueled a relatively modest increase in production of Ginnie Mae single-family mortgage-backed securities during the second quarter of 2018, according to a new Inside FHA/VA Lending ranking and analysis. Lenders issued $98.66 billion of Ginnie MBS backed by forward mortgages during the April-May cycle. That was up 6.6 percent from the first three months of the year, but 2018 continued to lag behind the pace set in 2017 by 10.7 percent. Given current trends, annual Ginnie MBS issuance in 2018 could fall short of the $400 billion mark for the first time since 2014. The flow of FHA and VA purchase mortgages was up a solid 23.7 percent from the first to the second quarter, bringing the total for the first half of the year to $121.01 billion. However, that was down 4.7 percent from the same period in 2017. Ginnie securitized $75.02 billion of FHA purchase loans in the ... [Charts]

July 6, 2018 - Inside Mortgage Trends

GSE Buybacks Nudge Higher in 1Q18 But Reflect Miniscule Share of Business

There was an increase in the volume of home loans lenders had to buy back from the government-sponsored enterprises in the first quarter of 2018, but repurchase activity remained subdued. [Includes two data charts.]

June 29, 2018 - Inside FHA/VA Lending

Vendor Collecting Servicing Data For VA to Cease Service in March

Black Knight Financial Services, which currently collects all servicing data for VA, will no longer do the job after March 2019, according to the Department of Veterans Affairs. BKFS will stop providing the service when VA transitions to a new enhanced VALERI system. VA servicers currently use the VA Loan Electronic Reporting Interface system to upload servicing information. VALERI is undergoing a multi-phase restructuring for conversion to a fully automated system spanning loan application, origination and servicing. The enhanced servicing component of VALERI will be ready by late spring next year. As part of the transition, VA will ensure that all servicers are plugged into the new VALERI system before it becomes fully operational. VA’s transition plan covers all methods and procedures for reporting information to VALERI. These include use of a licensed servicing system or a proprietary in-house servicing system that automatically reports data to VALERI, or logging into the VALERI web portal to manually upload and enter data.

June 29, 2018 - Inside FHA/VA Lending

MBA Backs Legislative Efforts to Reform False Claims Act, FIRREA

The mortgage banking industry is backing a legislative proposal that would limit the government’s use of the False Claims Act to pursue hefty damages against FHA lenders. In a recent letter to the bill’s co-sponsors, the Mortgage Bankers Association expressed its strong support for H.R. 5993, the Fixing Housing Access Act of 2018. The MBA noted that originating FHA-insured loans has become very risky in recent years largely due to the civil actions brought by the Department of Justice under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Fifty-four FCA and FIRREA cases against financial institutions have settled for billions of dollars between July 2011 and January 2018, according to data compiled by the Buckley Sandler law firm. Four cases are pending and one civil penalty award was reversed on appeal. Those lenders who were on the ...

June 29, 2018 - Inside FHA/VA Lending

Reshuffle Plan Calls for Moving USDA Housing Programs to HUD

A Trump administration plan to roll the U.S. Department of Agriculture’s rural housing loan guarantee and rental assistance programs into the Department of Housing and Urban Development should not be too difficult, said HUD’s top executive. Absorbing the USDA housing programs “would not be a very difficult shift” for the department, HUD Secretary Ben Carson said during testimony on Capitol Hill this week. The proposal is part of the administration’s plan to reform and reorganize federal agencies to cut costs, eliminate duplications and overlap, and streamline regulations. However, Rep. Kenneth Lucas, R-KY, worried that rural communities face challenges that are far different and beyond those faced by typical FHA or VA homebuyers, adding that many rural homes may not meet FHA standards. Industry observers noted that even though USDA has expanded its definition of “rural areas,” FHA’s authority ...

June 29, 2018 - Inside FHA/VA Lending

Carson Wary of Riskier FHA Loans, Certain Policies Under Scrutiny

Department of Housing and Urban Development Secretary Ben Carson reiterated concerns raised previously by his deputies regarding certain lending trends that could potentially endanger FHA’s financial health. Testifying during a HUD oversight hearing in the House Financial Services Committee this week, Carson said the department is scrutinizing certain policies that may be causing or contributing to the growth of cash-out transactions, unusually high debt-to-income ratios, serious loan delinquencies and early payment defaults. Carson said maintaining the health of the FHA mortgage insurance fund is critical in maintaining the agency as a source of credit for first time, low- and moderate-income, and minority homebuyers. The share of cash-out among all of FHA’s refinance transactions has increased to 60 percent as of April 2018 from 45 percent a year ago, he said. Also during that ...

June 29, 2018 - Inside FHA/VA Lending

Ginnie to Gauge Issuer Liquidity Through Periodic Stress Tests

Ginnie Mae will soon require issuers to undergo stress testing to see if they have the financial strength to withstand adverse circumstances or a severe economic downturn.The agency said it will soon begin phasing in stress testing, which would play a key role in issuer oversight and liquidity. The initiative is part of Ginnie’s effort to enhance the management of counterparty risk, one of the so-called three pillars of progress underlying the agency’s 2020 initiative. In addition to stronger risk management, the initiative aims to make significant technological improvements by 2020 and explore new opportunities to strengthen Ginnie’s MBS program. Issuers that meet the thresholds for required ratings will probably be the first ones to be stress tested, the agency said. Ginnie is also looking for ways to evaluate exposure to a single counterparty, relative to the counterparty’s financial health and the value of ...

June 29, 2018 - Inside FHA/VA Lending

Ginnie Mae Unveils Plan for Digital Mortgages; E-Loans on the Horizon

Ginnie Mae will be working with FHA, VA and the U.S. Department of Agriculture to standardize origination policies and requirements for digital mortgages as it moves into the digital age of its secondary market business. Ginnie will coordinate with the agencies while developing technical standards for electronic closings, digital mortgage instruments and electronic vaults. All this work is part of the agency’s three-year strategy, Ginnie Mae 2020, to modernize its mortgage-backed securities program and platform, strengthen its counterparty risk management capability, and explore new ways to lower or eliminate risk from the system. As part of the modernization effort, Ginnie envisions a process that would allow it to accept digital promissory notes and other digitized loan files as eligible collateral for its MBS. It would encompass loan application through securitization. The plan calls for gradual implementation of ...

June 29, 2018 - Inside FHA/VA Lending

FHA Condominium Rule Out in September, Issues ‘Too Complex’

The issues behind the Department of Housing and Urban Development’s draft FHA condominium rules are “too complex” but lenders may expect a final rule in September, said HUD Secretary Ben Carson. Carson’s announcement of a release date for the long-anticipated condominium rules eases the mounting pressure on the secretary and the department to finalize the draft rules. On June 18, 54 senators and 120 members of the House signed a letter urging Carson to implement the changes in H.R. 3700, the Housing Opportunity Through Modernization Act, which would ease FHA requirements for financing condo purchases and refinancings. The bill was signed into law on July 29, 2016, and HUD published a proposed condo rule two months later. “We have been pushing it,” Carson said during a House committee oversight hearing this week. “It is a complex issue because when you are talking ...

June 29, 2018 - Inside FHA/VA Lending

FHA Borrowers Stretch Payment Ability, Cash Out More Equity

The credit risk profile of incoming FHA business has shifted significantly since the beginning of last year, according to a new Inside FHA/VA Lending analysis of Ginnie Mae mortgage-backed securities data. The biggest development has been the growth of loans with high debt-to-income ratios. There has also been a significant increase in the share of refinance loans that are cash-out transactions. FHA officials are well aware of these developments, having publicly mentioned them in testimony on Capitol Hill and at industry conferences. Officials have also raised concerns about FHA loans with downpayment assistance, although the MBS data don’t seem to indicate that there has been much change on that score. Among FHA loans endorsed in April and May, only 41.9 percent were at or below the benchmark DTI test for qualified mortgages, which is 43 percent. Through 2015 and 2016, well over half of new ... [Chart]

June 22, 2018 - Inside Mortgage Trends

Bank Repurchase Volume Fell in First Quarter

Commercial banks and thrifts repurchased $732.9 million of single-family mortgages during the first quarter of 2018, a 6.9 percent decline from the previous period, according to a new Inside Mortgage Trends analysis of call report data. [Includes one data chart.]

June 22, 2018 - Inside Mortgage Trends

Survey Shows Mortgage Demand Weakening

Lenders have become even more pessimistic about profitability and consumer demand for mortgage credit, according to Fannie Mae’s most recent lender sentiment survey.

June 22, 2018 - Inside Mortgage Trends

Ginnie to Address MSR Liquidity, Credit Risk

Ginnie Mae is considering three possible initiatives that would meet issuers’ needs that are not fully accommodated under its mortgage-backed securities program.

June 22, 2018 - Inside Mortgage Trends

Mortgage Bankers Eke Out Profit in 1Q18

Mortgage banking operations generally lost money on loan production during the first quarter of 2018 but managed to more than make it up with positive servicing results, according to the Mortgage Bankers Association quarterly performance report.

June 22, 2018 - Inside The GSEs

GSE Repurchases Bounce Higher As Fannie Buyback Volume Rises

GSE mortgage sellers repurchased a slightly larger volume of defective single-family mortgages during the first quarter of 2018, according to a new Inside The GSEs analysis. During the first three months of the year, lenders repurchased or made other indemnification on $240.91 million of home loans sold to the GSEs, a 4.6 percent increase from the record low set in the fourth quarter of 2017. Buybacks of Fannie loans were up 27.2 percent, but ... [Includes one data chart.]

June 22, 2018 - Inside Mortgage Trends

Bank Loan Sales Down Sharply in 1Q18

Secondary mortgage market activity cooled dramatically in the first quarter of 2018, according to bank call report data analyzed by Inside Mortgage Trends. [Includes one data chart.]

June 15, 2018 - Inside FHA/VA Lending

USDA Securitization Fell in 1Q18, PennyMac Grabs Market Lead

Issuance of mortgage securities backed by USDA loans dropped during the first three months of 2018. Approximately $4.03 billion of rural housing loans with a USDA guarantee were delivered in Ginnie Mae MBS during the first quarter, down 18.3 percent from the previous quarter. Agency data also showed an 11.7 percent decline in USDA securitization volume from the same period a year ago. Rural housing loans accounted for 1.5 percent of all loans securitized in Fannie Mae, Freddie Mac and Ginnie Mae pools and 2.8 percent of loans with private or government-backed mortgage insurance. Purchase loans comprised the bulk of USDA loans that were delivered into Ginnie MBS pools. PennyMac knocked Freedom Mortgage out of first place with a total of $753.3 million in securitized USDA loans despite a 10.4 percent decline in production. Freedom Mortgage accounted for $523.3 million of USDA loans pooled in ... [Charts]

June 15, 2018 - Inside FHA/VA Lending

Bill Introduced to Address Issues Raised by DOJ Use of FCA, FIRREA

Bipartisan legislation was introduced recently in the House to addresse problems arising from the use of the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act in the context of mortgage insurance claims. Co-sponsored by Reps. Josh Gottheimer, D-NJ, and Lee Zeldin, R-NY, the bill would provide certain restrictions and clarifications on false claims and civil actions related to loans with FHA, VA or U.S. Department of Agriculture guarantee. H.R. 5993, the Fixing Access to Credit Act of 2018, has been sent to the House Financial Services Committee and to the House Committee on the Judiciary. A Civil War statute, FCA seeks to deter fraud against the government by providing hefty penalties for violations and establishing a 10-year statute of limitations to file civil claims. Enacted in the wake of the savings and loan debacle in the 1980s, FIRREA outlawed abusive lending and ...

June 15, 2018 - Inside FHA/VA Lending

Reverse-Mortgage Lenders Seek Backend Changes in HECM Rules

Now that Housing and Urban Development Secretary Ben Carson has sworn in a new FHA commissioner, reverse mortgage lenders are hoping to see some changes in the Home Equity Conversion Mortgage program. The National Reverse Mortgage Lenders Association is planning to ask FHA Commissioner Brian Montgomery for changes in the HECM program, particularly at the back end, to make it more profitable for lenders. Peter Bell, the group’s chief executive officer, believes there are opportunities to reduce the cost of the HECM program to the FHA fund by having better servicing procedures. “We would like to see certain loss mitigation procedures in the new HECM rules to be made available to all reverse-mortgage loans,” he said. Some of those procedures apply only to loans originated on or after the new rules became effective, such as “cash for keys.” Cash for keys is a cash offer by a lender to a ...

June 15, 2018 - Inside FHA/VA Lending

HECM Originations Rise in 1Q18, Draw Cut Slows HMBS Issuance

Reverse mortgage lenders started out strong in the first three month of 2018 with a 19.2 percent increase in Home Equity Conversion Mortgage production from the previous period. HECM endorsements totaled $5.4 billion in the first quarter, with purchase reverse loans accounting for the bulk of originations, 81.9 percent. First quarter production was up 18.5 percent from the same period last year. Meanwhile, HECM mortgage-backed securities issuance totaled $2.97 billion for the quarter, down from $3.25 billion in the prior quarter, Ginnie Mae data showed. The top five HECM originators in sequential order – American Advisors Group, Reverse Mortgage Funding, One Reverse Mortgage, Liberty Home Equity Solutions, and Synergy One Lending – accounted for $1.66 billion, or 30.8 percent, of total production during the first quarter. American Advisors maintained its top ranking with $841.4 million of HECM loans, which ... [Charts]

June 15, 2018 - Inside FHA/VA Lending

Ginnie Announces New Metric for Monitoring Issuer Performance

Ginnie Mae has added a new metric to make it easier for approved issuers to track the prepayment rates of single-family loans underlying they have delivered into mortgage-backed securities. The new prepayment metric would enhance Ginnie’s Issuer Operational Performance Profile (IOPP) tool, which was launched in 2015 to help issuers measure their performance against the agency’s standards. The new tool is the latest move by Ginnie to ensure the integrity and market predictability of Ginnie MBS. The prepayment tool will be available to lenders beginning June 25. The announcement follows an agency administrative action last week against three VA lenders that were penalized for cherry picking and refinancing unseasoned VA loans not to benefit borrowers but to charge them higher fees. The lenders – Freedom Mortgage, SunWest Mortgage Co. and NewDay USA – were among nine issuers that ...


With mortgage production down noticeably this year from 2017, how many lenders might disappear via M&A or failure during the next 12 months?

10% or less. It’s not that bad out there.
11% to 25%. It’s a challenging market.
25% to 40%. It’s going to be very ugly.
No opinion.

vote to see results