01 Jul 10 FHA and VA Get Exemptions in Finance Reform Bill
According to a report from the American Banker, the Federal Housing Administration and the Department of Veterans Affairs were awarded exemptions in the finance reform bill that passed last week. From a loan origination perspective, VA and FHA lenders would be getting an unfair advantage. The reality is that in today’s mortgage market loan companies are offering FHA or VA or both loan products so will this have a dampening effect? This could pose more of a risk of defaults on FHA and VA home loans. So FHA and VA home loans Former MBA chairman David Kittle thinks FHA is getting a pass from Congress in this bill.
How will the Exemptions Effect the Non Government Mortgage Companies?
Under the final mortgage reform bill, federal banking agencies, the Securities and Exchange Commission, and Federal Housing Finance Agency will draft rules establishing underwriting standards and allowable product features for these fully documented loans. Qualified home loans also have to meet a new and tougher “ability to repay” standard in the bill along with a 3% limit on points and fees and a separate 2% limit on bona fide discount points. Regulators have the flexibility to set risk-retention requirements lower than 5% for residential loans that don’t meet the qualified mortgage test.
Balloon, negative amortization, and most interest-only notes will be excluded from the definition but debt-to-income ratios and verification practices must be defined by regulators and could change. The bill, as expected, gives little boost to a revival of the private-label securitization market. “Time and time again we keep hearing that we need the private sector to jump in, yet all the regulations that are being passed are keeping them out of the game, on the bench, on the sidelines,” said Sylvia Alayon, senior vice president of national operations at due diligence firm Capital Markets Assessment Corp. “We do need the private sector because many loans, like jumbo loans, can never be absorbed by the government agencies, and they represent a significant part of the market.”
Still, mortgage insiders were relieved that the mortgage reform bill will not force them to retain risk on all securitizations, regardless of loan characteristics, as in the initial language they had lobbied against. “It’s nice to win one,” said Lewis Ranieri, co-inventor of the mortgage-backed security. Read the original mortgage reform article online. > FHA Loan Program is Exempt from Risk in Mortgage Reform Bill
29 Dec 09 Fannie Mae and Freddie Mac Ready to Buy Delinquent Home Mortgage Loans
According to Credit Suisse Group analysts, the U.S. government’s expanded capital backstops and portfolio limits for Fannie Mae and Freddie Mac increase “the prospect of large-scale” purchases by the companies of delinquent mortgages out of the securities they guarantee. The Treasury Department announced Thursday that the two mortgage-finance companies, which were seized by the United States almost 16 months ago, could tap an unlimited amount of capital for three years, up from as much as $200 billion each. It reworked caps on Fannie Mae and Freddie Mac’s mortgage-asset portfolios to require the holdings to fall to $810 billion each by Dec. 31, 2010, rather than about $690 billion. “This announcement increases the prospect of large-scale voluntary buyouts by removing the portfolio cap hurdle and helping funding by potentially increasing debt-investor confidence,” Mahesh Swaminathan and Qumber Hassan, the Credit Suisse debt analysts in New York, wrote in a report Monday.
Analysts including those at Credit Suisse and J.P. Morgan Chase have been predicting a spike in the companies’ buyouts of home mortgage loans from their securities early next year. Aside from more purchases being required by the debt’s contracts as additional home loans get modified under the government’s Making Home Affordable program or fall more than two years past due, accounting-rule changes will force all mortgage loans in their securities onto their balance sheets, limiting the financial impact of actually buying them. The portfolio-limit adjustment will give Fannie Mae and Freddie Mac “enough headroom” to absorb the approximately $220 billion “pipeline” of delinquent FHA home loans in their securities without having to sell other bonds, the Credit Suisse analysts wrote. The home loan buyouts may occur over one or three months, the analysts wrote.
29 Dec 09 Updated Good Faith Estimate for Mortgage Lending
After talking about changing home finance disclosures for the last decade, HUD is finally updating and revising the Good Faith Estimate in the RESPA loan disclosures. They also re-released “Shopping for Your FHA loan: HUD’s Settlement Cost Booklet.” A large share of content in the 49-page publication, which helps consumers comparison-shop mortgages, addresses the standardized Good Faith Estimate (GFE) and HUD-1 settlement statement forms that lenders must start using on Jan. 1, 2010. HUD estimates that borrowers may benefit financially by saving $700 in lending costs and fees per mortgage loan on average as a result of the new requirement, which is one of several changes to the Real Estate Settlement Procedures Act (RESPA).
Here is the location of the .pdf of the booklet that you can save or print out for your reference. http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement Booklet December 15 REVISED.pdf
17 Dec 09 Mortgage Rates Up but Stay Below 5 Percent
Mortgage interest rates crept up for the 2nd consecutive week, but borrowers who applied for mortgage refinancing remained strong. Refinance applications continued to rise, as homeowners are making a last ditch effort to lower their monthly home loan payment before the rates rise.
Freddie Mac reported the average fixed rate on a thirty-year home loan was 4.94% this week, up from 4.81 % last week. Mortgage rates are closely tied to yields on long-term government debt, which have risen since the average fixed rate on thirty-year mortgages hit a record low of 4.7% the week of Dec. 3.
A Federal Reserve program to buy $1.25 trillion in mortgage-backed securities has kept rates on thirty-year mortgages under 5% this year. The government mortgage programs, like FHA and VA were created to make home buying more affordable, is set to end next spring.
The low rates resulted in a wave of refinancing activity: The Mortgage Bankers Association reported that nearly 3 out of 4 home loan applications were for home refinancing during the first few weeks of December, Freddie Mac collects mortgage rates each week from lenders around the country. Home mortgage rates often fluctuate, even within a given day.
The average rate on a fifteen-year fixed mortgage rose to 4.38% from 4.32% last week. Mortgage rates on five-year, adjustable-rate mortgages averaged 4.37%, up from 4.26% last week. Rates on one-year, adjustable-rate mortgages rose to 4.34% from 4.24%.
08 Dec 09 FHA Mortgage Insurance Premiums Rising
FHA unexpectedly delayed the release of a much-anticipated audit of its capital reserves in November. Of course, the mortgage lending industry feared the worst that the government’s FHA mortgage insurance fund was negative. After the audit was released showing a thin $3.6 billion cash cushion with promises from FHA to keep the fund solvent, a new worry emerged revealing the government could move to raise the FHA mortgage insurance premium it charges borrowers, increasing closing costs for millions of potential customers. At a press conference unveiling the audit, housing secretary Shaun Donovan confirmed that FHA is weighing its options, including a possible hike in the upfront MIP. Mr. Donovan would not rule it out entirely but also said that it was not imminent.
Currently, FHA mortgage lenders charge a borrower roughly 165 basis points at the closing table plus 50 basis points monthly. The points are often financed and the borrower cannot recoup the premium. The 50 bps are part of the monthly payment and can be adjusted up or down, depending on the FHA’s needs and concerns. Today, FHA mortgage loans account for between 25% and 30% of all new originations and have become the program of last resort for homebuyers with both poor credit and low or no down-payments. “If they (FHA) need to raise cash I would rather see them raise the monthly rather than the upfront MIP,” said one mortgage executive following the issue. But Jim Pair, president of the National Association of Mortgage Brokers, wasn’t thrilled with the idea of raising the MIP unless FHA really needs to. “An increase at this time would be detrimental to the housing market,” Mr. Pair told Origination News. The audit found that the Mutual Mortgage Insurance fund actually has $30.7 billion in cash on a total book-of-business approaching $700 billion but $27.1 billion of that amount has been set aside to cover anticipated losses on FHA mortgages, leaving it with a cash cushion of just $3.6 billion.
The new study believes the MMI will stay in the black unless the housing recession deepens significantly. If that happens, the fund would have a negative capital ratio of 0.46%. But if the mortgage market suffers what FHA calls a “downward interest rate shock” the fund could go negative by as much as 2.33%. The actuarial study (audit) of FHA was done by IFE Group of Rockville, Md. Mr. Donovan said the release of its findings were delayed because HUD wanted the firm to conduct “more extreme” stress modeling on the reserve fund. “We felt some of the loss scenarios were not as bad as we expected,” said the HUD secretary.
Commenting on IFE’s findings, Howard Glaser, a former HUD attorney who is now a lobbyist, said FHA is not immune from the laws of economics. “Facing the equivalent of a 500-year flood in the housing market, and having stepped into the void left by reckless lenders who pillaged the mortgage system, FHA now finds itself tight on capital.” To many mortgage bankers, the FHA loan program is the only game in town, and without it originations to cash strapped and low-income borrowers would seize up.
09 Sep 09 New FHA Requirements for Condominiums
HUD announced new FHA rules for condos with ineligible properties include condotels, timeshares, houseboat projects, multi-dwelling unit condominiums, and all projects not deemed to be used primarily as residential. Project approval is no longer required for FHA. FHA streamline refinance loans for HUD Real Estate Owned sales.
See the HUD revised FHA loan standards for condo properties:
ü FHA will allow a minimum owner occupancy amount equal to 50% of the number of presold units.
ü No more than 15% of the total units can be in arrears of their condominium association fee payment.
ü Projects consisting of four or more units will have no more than 30% of the total units encumbered with FHA insurance
See the original article> New FHA Condo Guidelines Could Limit Mortgage Refinancing online.
07 Aug 09 FHA Having Trouble Insuring Reverse Mortgages
The increase in FHA funding authority means the government is following the marketplace. FHA mortgages now represent some 35% of all new financing, up from about 5% just a few years ago when the program was crowded out of the marketplace by bad credit loans. It would be counterproductive to restrict the program when FHA loans enjoy great public confidence, especially FHA loans for borrowers with poor credit. In this economy we need home buyers, reason enough to encourage people to enter the marketplace.
Reverse Mortgages: what HUD calls home equity conversion mortgages (HECMs) — those reverse mortgage loans remain attractive for many senior borrowers, but have become troublesome for HUD to insure because of falling home values. While HUD asked Congress for $800 million to subsidize the reverse mortgage program this year, Congress in this bill is saying forget it. Instead of more money, the bill requires HUD “to ensure that the program operates at a net zero subsidy rate.” Given that reverse mortgage are amazingly risky to insure in a slow market what can HUD do to meet the net zero requirement? It can cut back on the number of reverse mortgages it’s willing to insure, it can reduce the maximum amount it will cover, or both. The bottom line: If you want an FHA-insured reverse home loan it might be best to get one before October 1st, the start of the new fiscal year. Read the rest of the article at FHA Loan Pros.
Tags: bad credit loans, FHA, FHA loans, FHA mortgages, FHA-insured, HUD, reverse home loan, reverse mortgages
13 Apr 09 HUD Warns FHA Lenders in Mortgagee Letter
The Dept. of Housing and Urban Development recently released an important FHA Mortgagee Letter that is important for all mortgage brokers, lenders and finance companies that would like to continue originating FHA loans in their future. In an effort to protect the public trust and the FHA Insurance Fund, HUD has vowed to ensure that mortgagees are accountable for their home loan origination practices. FHA expects each mortgagee to exercise the same level of care in originating, underwriting and servicing an insured FHA mortgage as it would for a loan in which the mortgagee would be entirely dependent on the property as security to protect its investment.
When a mortgagee fails to comply with HUD’s policies and procedures, HUD will take the appropriate action. For example, FHA mortgage brokers or lending companies that materially violate FHA program statutes, regulations and handbook requirements may be referred to the Mortgagee Review Board for appropriate sanctions, which may include termination of mortgagee approval. For a mortgage broker in 2009, losing a FHA license would be like a barber have their scissors revoked. It seems that brokers may start following the rules.
Read the original finance article from Jason Cardiff tips online > HUD Updates FHA Mortgage Letter and Cracks Down on Lenders. For more questions, you can go online to HUD.gov or for additional FHA resources, please call 1-800-CALL-FHA.
Tags: FHA, HUD, lenders, mortgage brokers, Mortgagee Letter
