14 Nov 11 New Mortgage Lender Liability Rule for HARP Coming Soon
The effectiveness for government sponsored mortgage relief may become evident as soon as tomorrow, when the specifics for the revised program named the Home Affordable Refinance that will be spelling out the lender liability. The Federal Housing Finance Agency is the regulator that oversees government mortgage programs like, Fannie Mae and Freddie Mac announced last month that they were expanding the guidelines for the HARP program that was created in an effort to help struggling homeowners who are unable to qualify for conventional refinancing because they have little or no equity in their homes. According to Reuters, the HARP mortgage program, hinges on lenders voluntarily writing new mortgages for distressed borrowers who have suffered because falling home prices that have sunk their property values underwater.
The Chicago Tribune published an article that underscores how important the new changes for the Home Affordable Refinance Act really are. It’s no secret that many mortgage lenders have been concerned that they could be forced to buy back refinanced loans if defects with the initial mortgage are found, a concern that has undercut the program’s effectiveness. FHFA made it clear that they would be loosening the guidelines including the representations and warranties participating home loan lenders have to abide by as part of its revamp of the program.
Lenders will learn on Tuesday to what extent those contracts, which determine their liability for bad loans, will be waived. “For those originating the new loans, they will look at how these waivers are going to structured,” said Bose George, an analyst with Keefe, Bruyette & Woods Inc in New York. “If they provide enough of a comfort zone, these changes to the representations and warranties could bring meaningful participation.”
Analysts at Barclays Capital estimate up to 3.1 million mortgage liens are eligible for the program. The Home Affordable Refinance is open to borrowers who have little or no equity in the homes as long as they are making timely payments and their loans are guaranteed by Fannie Mae and Freddie Mac, which back about half of all residential mortgages in the United States. As part of the HARP expansion announced in October, FHFA said it would eliminate the LTV restrictions that prevented borrowers whose home loan exceed 125% of the property’s value from participating in the program. Read the original Chicago Tribune Article.
28 Jul 10 Is the Financial Reform Bill Flawed?
Much to the surprise of many pundits, the recently signed Financial Reform Bill did not outline guidelines for regulators to begin crafting the future of Fannie Mae, Freddie Mac, and Ginnie Mae. Although this was viewed as an oversight by most, it was the right move because it will allow our political and financial leadership to focus on repairing the mortgage finance system. Remember that the government loan programs Fannie, Freddie, VA and FHA loans maintain nearly 96% of the mortgage market-share yet they are exempt from most of the financial reform repercussions.
Watch Glen Beck Discuss the Pitfalls of Finance Reform Bill on Fox News
httpv://www.youtube.com/watch?v=IeREpKxIYhY
Read the original mortgage news article > Financial Reform Bill Flawed?
Tags: financial reform bill
21 Jul 10 California Mortgage Brokers Get Criminal Checks Yet Banks Are Exempt
One would think after the recent mortgage debacle and housing crisis that the government would really want to implement mortgage loan reform that closed the “loop holes” to significantly reduce the foreclosures and loan defaults that have been costing U.S. tax-payers billions of dollars each year. California mortgage brokers face closer scrutiny as the state adopts a federal law aimed at curbing the fraud and abuse that helped decimate the housing market. According to Bloomberg, mortgage brokers in the nation’s most populous state will be required by July 31th to have passed criminal-background and credit checks, as well as licensing exams. California, along with about a third of U.S. states, previously didn’t require mortgage sellers to have individual licenses.
That’s about to change as all states by January 1st must implement the national rules, which Congress developed after record mortgage defaults and foreclosures were triggered by rampant lending to people who couldn’t afford to repay their loans or never intended to. Brokers will be assigned identification numbers to enable regulators and borrowers to track their lending histories. “When someone buys 100 shares of stock, they must go through a licensed securities broker,” said Senator Dianne Feinstein, a California Democrat and co-sponsor of the law, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. “Until recently, some purchased their home — a far more valuable asset — through an independent mortgage broker or lender who may have had a criminal background or no license at all. This lack of accountability enabled unscrupulous brokers to commit fraud at the expense of unsuspecting homebuyers.”
Why Are Banks Exempt?
The 2008 law, dubbed the SAFE Act, doesn’t require testing for mortgage brokers at federally regulated mortgage lenders. That may help companies such as BofA Home Loans, Citi Mortgage and Wells Fargo Home Mortgage increase market share because they face fewer training requirements and costs, said William Emerson, chief executive officer of Quicken Loans Inc., a closely held nonbank lender in Livonia, Michigan. “For large, independent, nonbank lenders, this is certainly an operational challenge,” Emerson, whose company originated $25 billion in mortgages in 2009, said in a telephone interview. “It certainly adds costs.” Bank of America and Wells Fargo together accounted for 46 % of the residential-lending market in the first quarter, according to data compiled by Inside Mortgage Finance Publications in Bethesda, Maryland. Of $320 billion in new mortgages in the quarter, about $184 billion, or 57 %, was originated by lenders whose employees are exempt from the licensing exams, according to Inside Mortgage Finance data. “You see mortgage brokers take the test and fail it and wind up working for banks,” Emerson said. “If you can’t pass a test and work for an independent, why are you qualified to work for a bank?” According to according to Pete Marks from the Conference of State Bank Supervisors, about 71 % of people who took the national broker exams passed on the first try, which was assigned responsibility under the SAFE Act to maintain the licensing system and national registry. Mortgage originators must also pass separate tests in each state they do business.
Increased Protections from Bank Lenders
Bank of America, based in Charlotte, North Carolina, conducts background investigations and credit checks of all hires and provides training in legal compliance and regulations, Terry Francisco, a spokesman, said in an e-mail. Wells Fargo takes similar precautions, said Jason Menke, a spokesman for the San Francisco-based bank.
Borrowers were victimized last year by brokers engaged in fraudulent loan-modification plans, home appraisals and applications for the first-time homebuyer tax credits, the Federal Bureau of Investigation said June 17 in its annual report on mortgage fraud. The top states for fraud in 2009 were California, Florida, Illinois, Michigan and Arizona, based on law enforcement and industry data, according to the bureau. In a law-enforcement crackdown on mortgage fraud announced by the FBI on June 17, mortgage brokers accounted for 169 of the 1,215 defendants charged in the operation; 56 of the 485 arrests; and 46 of the 336 convictions to date. “From homebuyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” FBI Director Robert Mueller said in a statement.
Mortgage Fraud Repercussions
According to RealtyTrac Inc, mortgage companies will take-over more than one million homes this year, forecast July 15th. Mortgage defaults soared to 10.1 % and foreclosures reached 4.63 % in the first quarter, both records, the Mortgage Bankers Association said May 19. Median existing-home prices have fallen 22 % to $179,600 since the July 2006 peak, the National Association of Realtors said June 22.
The number of U.S. mortgage brokers shrank to 246,900 in May, less than half of the February 2006 high of 504,400, according to the U.S. Bureau of Labor Statistics. The decline was driven by tighter compliance standards, said David Olson, president of Access Mortgage Research & Consulting, a firm in Columbia, Maryland, that works with residential lenders.
The personal identification number will help weed out brokers with histories of writing home loans that quickly go bad, said Ann Fulmer, vice president of Interthinx Inc., an Agoura Hills, California-based company that sells mortgage-fraud detection software. “One of the things we saw over and over during the boom was that a bad actor would work at a shop for several months, frequently ending up as the ‘top producer,’ and then leave for presumably greener pastures,” Fulmer said in an e-mail. “In actuality, they usually left because their bad loans were about to start blowing up and, if they stayed, they’d be discovered.”
Mortgage Modification Implications
The U.S. Department of Housing and Urban Development, which oversees compliance with the SAFE Act, has proposed that employees handling loan modifications for struggling homeowners also meet the licensing requirements, a policy opposed by banks. Mandating licenses for loan modification advisors would slow hiring and stall efforts to reduce foreclosures, said John Courson, CEO of the Mortgage Bankers Association. “We say this is not originating a new loan, it’s reducing the terms of their loan to get them to affordability,” he said in a telephone interview.
The housing department hasn’t set a deadline for a decision, said Lemar Wooley, a spokesman. It costs $3,000 to $6,000 to train and pay the fees for each new employee to comply with the mortgage-licensing system, said Anthony Hsieh, CEO of LoanDepot.com, an online mortgage originator based in Irvine, California. “The law is supposed to make sure we kick the bad ones out,” said Hsieh. “It could be the opposite — keep the good ones out.”
States with the highest fraud and foreclosure rates are among the last to put the national mortgage-licensing system in place. Nevada, which had the highest foreclosure rate in the first half of this year, goes live Oct. 1. Behind the delay was the state’s multilevel approval process, said Elisabeth Daniels, a spokeswoman for Nevada’s Department of Business and Finance. Florida, where a 2008 Miami Herald investigation found state regulators allowed 10,529 people with criminal backgrounds to work in the mortgage industry, also is scheduled to begin issuing licenses Oct. 1. States including Georgia, Illinois, New Jersey, Ohio and Virginia have already adopted the SAFE Act. Article written by John Gittelsohn for Bloomberg
Tags: California mortgage brokers
03 Feb 10 FHA Credit Improving
The FHA home loans originated last year went towards borrowers with better credit scores than in previous years. These borrowers migrated to FHA when the subprime market disappeared. The average credit score of an FHA borrower is now 690, up from 630 only two years ago, agency officials said.
The agency banned 268 FHA lenders from making FHA mortgage loans last year, more than double the total terminated in the previous eight years. The FHA suspended six other firms. Among them were some of the largest FHA mortgage lenders –Taylor, Bean & Whitaker and Lend America, both of which shut their doors soon thereafter. Consumers taking out FHA mortgage loans will have to pay higher upfront fees, perhaps as early as this spring. Those with especially weak credit scores will also have to put down at least 10% instead of the usual 3.5% down-payment. Read the original article from the FHALoanBlog, > Better Credit FHA Loans Performing Well
01 Sep 09 Freddie Mac Compliant for NYSE Listing
Mortgage rates are low and the home financing industry looks like it’s getting back on track. Is Freddie Mac poised to gain their NYSE listing back on the stock market? Mortgage giant, Freddie Mac soon may be receiving a notice from the New York Stock Exchange, saying it is back in compliance with the NYSE’s listing requirements. As of yesterday, Freddie Mac’s common stock was trading at $2.22, which means that its average share price will have been north of $1 for the past 30 days – that is, as long as its stock price doesn’t collapse by close of business Monday. Under NYSE rules, the exchange can initiate delisting proceedings for companies whose 30-day average price falls below $1. “We’re waiting for official notification from the NYSE,” a company spokeswoman said Monday. In a week it will mark the one-year anniversary since Freddie Mac and its sister company, Fannie Mae, were taken over the government and placed into conservatorship. The share price of both GSEs has been rising over the past month. Some stock analysts attribute the price increase to bottom fishing and speculation by short sellers. Freddie’s 52-week low is 25 cents, its high $5.52. In the second quarter Freddie actually posted a profit while Fannie lost money.
31 Aug 09 Closing Cost Rules and Mortgage Disclosure Changes Confusing
Mortgage lenders, bankers and loan officers are never excited about changes to RESPA or Reg Z. Essentially, expanding and adding new rules for home loan disclosure and mortgage settlement practices is a growing concern for mortgage professionals nationally.
According to a July industry survey by Wolters Kluwer Financial Services, the new disclosure and mortgage settlement rules are a big worry for compliance officers. Sixty percent said Truth-in-Lending compliance was a top concern; 58 percent also expressed anxiety with RESPA. “There are so many different mortgage regulations that are changing in the next 18 months or so, it’s kind of an overwhelming task,” said James Barber, the chairman and chief executive at the $1.4 billion-asset Acacia Federal Savings Bank in Falls Church, Vrginia.
Just a month ago, amendments to the Federal Reserve’s Regulation Z went into effect to enforce speedy cost disclosures for consumers. This coming January, banks are bracing for the compliance deadline for related Real Estate Settlement Procedures Act (RESPA) changes, finalized last year by the Department of Housing and Urban Development to help consumers shop around for mortgage terms with easy-to-understand, good-faith estimates and limits on pre-closing fees.
For community bankers ramping up for more mortgage origination activity, working under these new rules is already proving to be a cumbersome exercise. RESPA and Reg Z (the Fed’s Truth-in-Lending Act regulations) are forcing banks into costly upgrades of originations systems to accommodate compliance needs-processes, which many larger banks already have in place. Banks also must refocus their business-line and customer-service activities to meet with the inherent delays and confusion as part of new disclosure procedures. “We are handing our customers a letter at the time of the application spelling this out,” said Tom Myers, executive vice president and chief lending officer at the $1.5 billion-asset Monroe Bank & Trust in Michigan. “In the past, if you were expecting to close this loan in 35 to 40 days, it’s now 60 days.”
The most immediate impact on these bankers has been the TIL rules, which were enacted by the 2008 Mortgage Disclosure Improvement Act. Mortgage lenders must now wait at least seven days after an early good-faith estimate disclosure before closing on a loan. If the APR at close varies by more than .125 percent from the early disclosure, a “re-disclosure,” or new good-faith-estimate, is then required-which restarts the clock on the pre-close waiting period. That includes actions by consumers who decide at closing to buy down points or change terms themselves. “The customer can’t make a change at the last minute,” without delaying the close, said Monroe’s Pat Williams. “If he wanted a $100,000 mortgage and now wants $102,000, he has to go back and have a seven-day waiting period.”
The major RESPA changes included a new standardized good-faith-estimate form that gives more transparency on fees, settlement procedures and closing costs. But critics say consumers could potentially be perplexed by dual TIL and RESPA forms, since both estimates are derived from different numbers. RESPA calculates from the actual loan rates, while Reg Z is based from the annual percentage rate. “One relates to interest rates and one relates to fees,” said Rod Alba, the senior regulatory counsel with the American Bankers Association. Both the ABA and the Mortgage Bankers Association are seeking a delay in the implementation of RESPA regulations until the two agencies can match up disclosure rules. The ABA “is not saying pull back the rule,” said Alba. “We’re saying delay the rule so you can work out the kinks with your sister agency.” — Article was written by Glen Fest who is an executive editor of US Banker.
