The strategic default problem is not going away, keeping pressure on servicers and MBS investors to find ways to dis-incentivize these actions. House prices continue to fall, and more underwater homeowners are willing to batter their credit rating and default on their mortgage to get out of an uneconomic deal. In a recent report, analysts at Deutsche Bank said the threat of legal action and risks to assets other than the mortgaged property play a large role in a homeowners decision to strategically default. Eleven states are considered non-recourse states, either because they explicitly forbid deficiency judgments or...
The servicing compensation structure for non-agency mortgages must be reformed, according to Federal Reserve Governor Sarah Bloom Raskin. The Federal Housing Finance Agency noted that the options it proposed for agency mortgages last week could also serve as a model for non-agency mortgages and could help revive the sector. It is imperative to reconsider the compensation structure so that servicers have adequate incentives to perform payment processing efficiently on performing mortgages, and to perform effective loss mitigation on delinquent loans, Raskin said in a speech this week. ...
Holdings of home-equity loans by banks and thrifts fell by 1.9 percent in the second quarter of 2011 compared with the previous quarter, according to the Inside Mortgage Finance Bank Mortgage Database. Delinquencies on the loans remain low but banks are being subject to greater regulatory scrutiny regarding their treatment of HELs. Banks and thrifts held $1.23 trillion in HELs at the end of the second quarter of 2011. The serious delinquency rate on the loans was 2.04 percent, down from 2.09 percent the previous quarter. ... [Includes one data chart]
High-quality endorsements and lower-than-expected prepayment speeds have given a slight boost to the FHA Mutual Mortgage Insurance Fund in the second quarter of 2011 even as agency officials remained cautiously optimistic about the recent book of business. In its quarterly report, the Department of Housing and Urban Development said that the MMI funds total capital improved by $100 million to $31.7 billion from the previous quarter as revenues from premiums and property sales exceeded higher claims payments. Endorsements in the second quarter alone added $1.7 billion to the capital reserve account, which stood at $2.8 billion at the end of June, the report noted. The FHA capital reserve account, which absorbs ...
Ginnie Mae is following its own path in exploring potential changes to servicer compensation, a project that parallels the Federal Housing Finance Agencys Joint Initiative on Fannie Mae/Freddie Mac servicing compensation. As part of the FHAs effort to improve default servicing, Ginnie Mae and other government housing agencies will be working separately to develop better claims mechanisms and pooling services as well as clearer risk and warranty delineations to improve the value of securitizations, the FHFA said. In a discussion paper, the FHFA, which oversees Fannie Mae, Freddie Mac and the Federal Home Loan Banks, said ...
Expanding approved lenders reach in originating FHA-insured single-family mortgage loans is a positive step in improving their ability to compete with non-approved and sponsored FHA originators, according to industry participants. The recently revised FHA policy eliminates the geographical restrictions imposed upon direct endorsement lenders, which limited their FHA originations to designated lending areas. Under the new policy, loan origination and servicing may be conducted from an approved lenders home office, branch office or direct lending branch office. HUD no longer has to approve a lenders branch office facilities. However, all office facilities, regardless of type, must ...
The Department of Housing and Urban Development is testing an alternative method for keeping extremely distressed FHA borrowers in their home until a suitable resolution is found. Dubbed the Mortgage Acquisition and Disposition Initiative, or 601 Note Sales Program, the strategy is being implemented on a pilot basis to help stabilize communities while bringing value to the FHA Mutual Mortgage Insurance Fund, said Acting Assistant Secretary for Housing/FHA Commissioner Carol Galante. Testifying before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity this week, Galante said ...
A report on 2010 mortgage lending activity under the Home Mortgage Disclosure Act further confirms data that government-backed lending and overall purchase lending are falling which may stall economic recovery, according to industry observers. While FHA and VA loans continue to account for a historically large proportion of loans, such lending fell more than did other types of lending, said the Federal Reserve in its analysis of the latest HMDA data. On a yearly basis, home purchase lending in 2010 was down almost 9 percent from 2009 and 62 percent lower than in 2006, when nearly 712,000 purchase mortgages were originated, the Fed said. The volume of home-purchase originations fell ...
With mortgage interest rates touching 50-year lows, the volume of new business at Fannie Mae and Freddie Mac struggled to gain positive traction during the third quarter, according to a new market analysis and ranking based on the Inside Mortgage Finance GSE MarketScope. The two government-sponsored enterprises churned out $177.2 billion of new single-family mortgage-backed securities during the three months ending in September. That was up 14.3 percent from the second quarter, but it still ranked as the second-lowest production level since financial markets tanked at the end of 2008. And it left GSE single-family business volume so...(Includes one data chart)
State attorneys general trying to negotiate a big-ticket settlement with top mortgage servicers saw their coalition fracture further over the past week, including a decision by Massachusetts to move independently toward litigation. A major stumbling block continues to be divergent views among the states on whether lenders should get immunity from non-servicing issues such as potential litigation over securitization as part of the deal. The widely held view is that top banks were willing to put up a combined $20 billion to be used to help struggling borrowers to settle legal challenges that were spawned by...