SunTrust Mortgage’s recent settlement of a dispute with the federal government and 49 state attorneys general over defective FHA loans and Wells Fargo’s losing bid to quash a similar lawsuit are raising concerns about doing business with the FHA. Industry attorneys say the lesson for lenders in these recent industry debacles is that it is “extraordinarily dangerous” to do FHA loans these days given the outcome of the two cases. It is also getting harder to trust mortgage settlement agreements with the government, they added. “The scariest part in all these is the combination of government forces involved in these claims – state AGs, Department of Justice, Department of Housing and Urban Development and the Consumer Financial Protection Bureau,” said an attorney, who worked on both cases. “When they want to get you, they can get you.” Others believe these developments could have a ...

Two federal agencies have announced separate actions to protect reverse mortgage borrowers and rural home purchasers from deceptive advertising and marketing. This week, the FHA warned lenders participating in the Home Equity Conversion Mortgage program not to use misleading or deceptive language in marketing FHA-insured reverse mortgages to consumers. The FHA said the guidance is intended to protect HECM borrowers from advertising and presentations that appear to limit their options rather than informing them of the full range of available HECM products. Underscoring senior borrowers’ “freedom of choice,” FHA Commissioner Carol Galante said the agency wants lenders to know their marketing and advertising practices are under constant surveillance to prevent customers from being steered to unsuitable reverse mortgage products. Galante noted the ...

Barring any unpleasant news, Julian Castro, President Obama’s nominee for secretary of the Department of Housing and Urban Development, apparently has passed his job interview with the Senate Banking, Housing and Urban Affairs Committee. This week, Castro, a three-term mayor of San Antonio, TX, laid out his priorities as HUD secretary before committee members if he is confirmed for the job. Castro underscored the importance of “partnership and pragmatism” as the key drivers in running a city. As HUD secretary, Castro said he would enhance “cross-agency collaboration” and emphasize the value of “measuring results” by setting precise goals, consulting with the public on major issues, developing a public report card and annual updates – tools he employed in his municipal housing education and affordable housing initiatives in San Antonio. As mayor, Castro worked to ...

The FHA’s Homeowners Armed With Knowledge (HAWK) pilot program is getting strong public support, particularly from first-time homebuyers and housing counselors.Based on comments received by the Department of Housing and Urban Development so far, the HAWK pilot is already taking hold in the public’s mind despite its limited publicity. -Rachel Andreyo, a new college graduate who was turned down recently for a mortgage loan pre-approval, said HAWK not only would educate potential first-time homebuyers about homeownership but also raise their hope of becoming a homeowner before the age of 30. “The knowledge this program would provide could be a game changer for young people and struggling Americans everywhere,” she wrote. Shawanda Walker, a single mother, sees HAWK as an opportunity for her to learn how to negotiate her first home purchase, learn about property taxes and ...

FHA jumbo loan originations fell significantly in the first quarter of 2014 due primarily to higher mortgage insurance premiums and a decrease in the mortgage loan limits, particularly in high-cost areas of the country, according to Inside FHA Lending’s analysis of agency data. FHA lenders reported a meager $2.4 billion in jumbo originations during the first three months of the year, a decrease of 21.2 percent from the previous quarter and down a whopping 55.7 percent from the same period a year ago. Purchase loans accounted for 81.0 percent of new originations while fixed-rate loans comprised 86.8 percent. FHA jumbo loans are those over $417,000 and they comprise a very small slice of the FHA’s overall loan portfolio. Citing FHA data, Brian Chappelle, a mortgage industry consultant, said that of the FHA loans originated in the last 12 months, roughly 11,000 loans were above $500,000, down from ... [ 2 charts]

BNY Mellon will launch a new business later this year that would enable it to purchase, securitize and service reverse mortgages and provide advisory services to lenders that offer such loans. The new business segment, Home Equity Retirement Solutions, is aimed primarily at retirees experiencing significant financial shortfalls. “We view the funds generated by suitable reverse mortgages as an additional fixed-income component of retirement portfolios, an important part of retirement planning that complements other aspects of the plan,” explained Michael Gordon, managing director for BNY Mellon Investment Management. Gordon noted BNY’s long record of accomplishment working with retirees, including managing assets for 401(k) and defined benefit investments. He said reverse mortgages may now be more prudent based on ...

NY Passes Bill to Reduce Number of FHA Loans that Would Fall Under Subprime. The New York Assembly recently passed legislation that would result in fewer FHA loans being classified as “subprime” under state banking law, according to the law firm Ballard Spahr. Already passed by the Senate, the bill would make permanent prior emergency rules issued by the Department of Financial Services, which raised the subprime threshold 75 basis points for those loans subject to the revised FHA mortgage-insurance premium cancellation policy. Although the emergency rules were set to expire on Dec. 31, 2013, the DFS granted an extension to allow the state legislature additional time to find a permanent solution, said Ballard Spahr attorneys. The bill passed with overwhelming bipartisan support and strong industry backing, and is expected to ...

Barring the discovery of a skeleton in his closet, Julian Castro’s nomination for secretary of the Department of Housing and Urban Development appears to be a lock in the Senate Committee on Banking, Housing and Urban Affairs. Appearing before the committee this week, Castro, a three-term mayor of San Antonio, TX, laid out his priorities for HUD if confirmed. He said he would emphasize working closely with agencies as well as the value of “measuring results” by setting precise goals, public consultation, development of a public report card and annual updates – tools he employed in his municipal housing education and affordable housing initiatives in San Antonio. Castro said...

SunTrust Mortgage has agreed to pay $968 million to the federal government and 49 state attorneys general to resolve allegations of improper FHA origination and servicing practices. The company will pay $418 million to resolve potential liability under the False Claims Act for flawed FHA loans made from January 2006 through March 2012. …

Production of “agency jumbo” mortgages fell sharply in the first quarter of 2014 and is likely to drop even more as new FHA loan limits show up in endorsement data. According to a new Inside Mortgage Finance analysis, Fannie Mae, Freddie Mac and the FHA saw $10.5 billion in single-family business with loan amounts exceeding the traditional agency limit of $417,000 during the first quarter of 2014. That was down 30.6 percent from the fourth quarter. It was also the lowest three-month volume since the fourth quarter of 2008, not long after dramatically higher “emergency” loan limits were put in place by the agencies. In comparison, originations of non-agency jumbo loans fell...[Includes three data charts]