The FHA is developing standards that would allow FHA financing on homes with existing Property Assessed Clean Energy liens going forward. Specifically, the guidance would require subordination of PACE financing to first-lien FHA mortgages. The FHA is also working on a monitoring mechanism to track the number of PACE loans with FHA insurance in the future, said a HUD spokesman. Mortgage market analysts say FHA’s action could lead to broader adoption of the PACE program for FHA-insured single-family homes. The Mortgage Bankers Association, in a statement, applauded the move. “This modification should allow some homeowners to install energy improvements in their home but not impede the rights of the first lien, something the original PACE program failed to consider,” said David Stevens, MBA president and CEO. PACE programs allow local governments to raise bond-funded financing to ...

Another Cut in FHA Premiums Coming This Winter? Will the FHA take the bold step of cutting annual mortgage insurance premiums this winter? It’s an intriguing question posed by Capital Alpha Partners. The research firm, in a new report, quotes what it calls a “reliable FHA bull” who “presciently foresaw” the last premium cut. Alpha cautions that its source on the matter is not betting on such a move, but raises the possibility “that the tumblers could fall into place once again.” One possible catalyst for an MIP cut would be poor results from a forthcoming Home Mortgage Disclosure Act report that shows FHA as well as Fannie Mae and Freddie Mac are not serving low-income borrowers very well. In January 2015, FHA implemented a half-percent reduction in annual mortgage insurance premiums. At the time, the Department of Housing and Urban Development predicted that 250,000 new homeowners would ...

The Department of Housing and Urban Development this week republished for comment new proposed changes to lender certification for FHA that would allow for minor lender errors while leaving the door open for government enforcement action under the False Claims Act. The proposed revisions, however, failed to impress mortgage lenders and raised the specter of increased overlays unless HUD makes clear assurances that, barring any significant mistakes, lenders will not be on the hook for millions of dollars for small glitches in the loan certification document. “The language in the certification lacks...

Two more long-running legacy MBS lawsuits were resolved last week after defendants Goldman Sachs and Deutsche Bank separately agreed to settle with plaintiffs. The NECA-IBEW Health & Welfare Fund, a union pension fund in Decatur, IL, is seeking preliminary court approval of a $272 million settlement with Goldman Sachs on behalf of entities that purchased MBS issued by defendant GS Mortgage Securities and which Goldman underwrote. If approved, the settlement would put...

Investors have a lot more to worry about these days than the collateral damage stemming from problems in Greece and China and a bumpy U.S. stock market. Ratings analysts indicate some new energy-related risks – most notably earthquakes near “fracking” sites and a plunge in the price of oil – have emerged as potentially significant challenges to investors in real estate and to mortgage lenders. Analysts at Standard & Poor’s said in a recent client note that earthquakes in proximity to fracking sites introduce a unique risk factor into the investment equation for those with a stake in real estate located in affected regions. “In particular, determining whether or not earthquake coverage is...

The Department of Veterans Affairs has adopted a final rule aligning the Home Loan Guaranty Program’s disclosure and interest-rate adjustment requirements with the servicing provisions in the Truth in Lending Act, as recently revised by the Consumer Financial Protection Bureau. The rulemaking will ensure VA remains consistent with other consumer finance and housing regulations governing adjustable-rate mortgages, the agency said. The rule is effective Sept. 11, 2015. The VA adopted without the change the rule as proposed on March 30, 2015. In this rule, VA adopted TILA’s minimum 45-day look-back period to clarify that lenders making VA ARMs must meet the statute’s minimum notification requirements. Specifically, disclosures and notifications must be provided to borrowers before an interest-rate adjustment. Lenders are required to adjust ARM rates based on the most recent ...

Poor oversight of lenders participating in the Section 203(k) Rehabilitation Loan Mortgage Insurance Program has increased the risk to FHA’s Mutual Mortgage Insurance Fund by more than $1.2 million for 40 active loans, according to the Department of Housing and Urban Development’s Office of the Inspector General. HUD’s Office of Housing questioned the findings of its independent auditors, saying that 203(k) lenders are monitored closely despite the limited staff and resources. The IG recommended to HUD that lenders be required to support or indemnify the department for any future losses on the 40 loans and to reimburse actual losses on two 203(k) loans totaling $83,332. An audit of HUD’s oversight of the program uncovered alleged weaknesses in the monitoring of lenders for compliance with the 203(k) program. In addition, HUD did not always ensure that loan-to-value ratios were ...

The U.S. Department of Agriculture’s Rural Housing Service strongly urged approved lenders to recommend the Section 502 Direct Loan Program to low- and very low-income borrowers who do not qualify for the USDA’s single-family housing guaranteed loan program. While some rural home-loan applicants show willingness and ability to pay their debts, they may not be able to afford to repay a guaranteed loan, the USDA observed. However, lenders can help by introducing such borrowers to the USDA direct loan program, a subsidized mortgages that allows the agency to lend directly to households with adjusted income not exceeding 80 percent of the area median. The program requires no downpayment on a mortgage with a fixed interest rate tied to the Treasury benchmark interest rate. The rate in effect for August and September 2015 is ...

The FHA will not issue a new case number for any FHA-to-FHA refinance if the current mortgage has a repair or rehabilitation escrow account in FHA Connection. The change, which is one of several updates to FHA Single Family Policy Handbook 4000.1, applies only to FHA streamline refis. It aims to ensure that escrow funds of the mortgage being refinanced are properly applied as well as conform to system requirements. The updated sections become effective on Sept. 14, 2015. Another change clarifies that the payoff statement for the mortgage being refinanced is the only document required when calculating the maximum mortgage amount for simple refi transactions. In addition, guidance for loan-to-value limits for cash-out refis has been updated to clarify that the 85 percent LTV restriction applies only to cash-out refis. HUD also noted that appraisers have flexibility in regards to when inspections should ...

FHA Begins Registration of Lenders to Prepare their Transition to the EAD Portal. Lender registration for the transition phase of the new Electronic Appraisal Delivery portal began on Aug. 18. Lenders may select any of the seven onboarding phases, which FHA has established to ensure that lenders have more time to work within the EAD portal to ensure that their systems, data flow and operational process meet portal requirements before the June 27, 2016, mandatory-use date. Although lenders may enter at any phase they choose, the FHA strongly encourages lenders to register for the earliest onboarding phase, and to do it as soon as possible. That would give them more time to get ready for the full transition, the agency said. The first phase begins on Oct. 15, 2015, with additional phases beginning each month and running through the first half of 2016. Information on the onboarding phases as well as ...