The FHA Mutual Mortgage Insurance Fund for single-family loans again fell short of minimum capital standards, spurring renewed warnings of a taxpayer bailout if losses continue to mount. According to FHA’s annual report to Congress on its financial status and the condition of the MMI Fund, reserves dropped to 0.24 percent in 2011 from 0.50 percent last year. This means that the agency is holding only $2.6 billion of excess reserves, down from $4.7 billion the year before, against roughly $1.1 trillion of FHA-insured loans. The report also noted that unless housing prices stabilize and losses drop, the fund has a 50 percent chance of a taxpayer bailout. The negative effects in the report’s “base case” scenario were caused by ...

The Department of Housing and Urban Development will integrate risk management efforts as soon as the agency’s new Office of Risk Management (ORM) is up and running, according to a new report from the Government Accountability Office. Although the report provides no timeline, it said that HUD has indicated a willingness to adopt changes the GAO recommended to speed up the implementation of an overall risk management strategy. The FHA needs to reassure Congress that it has the proper controls in place to minimize financial risks arising from increased reliance on FHA mortgage insurance, the GAO said. Lawmakers are concerned that ...

Legislation that would keep VA funding fees at their current levels through FY 2016 was sent this week to President Obama for signature. The House of Representatives passed the bill, H.R. 674, the 3 Percent Withholding Repeal and Job Creation Act of 2011, on Nov. 16, with amendments from the Senate. The Senate approved the bill on Nov. 10. The president is expected to sign the bill. However, if the bill is not signed by Nov. 18, funding fees will decrease as scheduled for a short period, according to the Department of Veterans Affairs in a published guidance to VA lenders. If funding fees do reset to the lower amounts ...

The FHA and the Internal Revenue Service are working on implementing electronic signatures in loan documents and certain federal tax forms in 2012. In a recent letter to members, David Stevens, president and chief executive officer of the Mortgage Bankers Association, said the trade group has been working with both agencies for the past 18 months to allow the use of e-signatures on FHA loan documents and to automate the IRS Form 4506-T process as early as next year. Form 4506-T is a request for a transcript of a filer’s tax return.

A federal judge in Houston ruled that Allied Home Mortgage Corp. can continue to originate and underwrite FHA-insured loans, putting into question the validity of the Department of Housing and Urban Development’s suspension of the lender’s FHA privileges. U.S. District Court Judge Melinda Harmon, in a 22-page decision issued filed on Nov. 15, said the “potential destruction” of Allied’s business outweighs any harm the government would suffer before the issues can be litigated.

Home Equity Conversion Mortgage claims increased by a whopping 48.3 percent in FY 2011 from last year, while the number of loans originated under the program also fell on a year-over-year basis, according to Inside FHA Lending’s analysis of FHA data. HECM claims were up to 7,951 in 2011 compared to 5,361 claims filed under the program the year before.

A significant drop in the FHA’s Mutual Mortgage Insurance Fund’s excess capital reserve has renewed calls for a smaller FHA and a limited government role in the mortgage market, even as opponents argued for the agency to remain on track and continue insuring high-quality loans. The annual actuarial report on the condition of the MMI Fund released this week revealed that the fund’s capital reserves dropped from 0.50 percent at the end of fiscal 2010 to 0.24 percent as of the end of September, the close of the government’s 2011 fiscal year. The program is required to have minimum capital reserves of 2.00 percent. The FHA was...

The private mortgage insurance industry, driven toward irrelevance during the first two years of the housing market collapse, is staging a quiet comeback in 2011. A new Inside Mortgage Finance ranking and analysis reveals that private MI activity in the third quarter rebounded to its strongest market share in three years, and accounted for 24.2 percent of new primary mortgage insurance written. While FHA volume dropped 6.2 percent from the second quarter, private MIs provided coverage for $22.01 billion in new mortgages, a gain of 38.6 percent. The increase in private MI activity outstripped...(Includes three data charts)

Delays, staff shortages and changes in leadership have put a damper on FHA efforts to identify risks in its single-family mortgage insurance programs, which could affect its ability to minimize financial risks, according to the Government Accountability Office. In a report to the chairman and the ranking minority member of the Senate Banking, Housing and Urban Affairs Committee, the GAO concluded that while the FHA has taken steps to assess credit and operational risks, the assessment strategy is not comprehensive. The risk assessment efforts are not integrated, and the FHA lacks annual assessments and mechanisms to...

Finding itself in one of the largest mortgage fraud cases ever prosecuted by the federal government, the Department of Housing and Urban Development may have a hard time explaining why it failed to act earlier against a lender that scammed the FHA for nearly a decade. It appears HUD, notwithstanding its assertions of increased vigilance and aggressive enforcement against violators of department regulations, dropped the ball on Allied Home Mortgage Corp. According to a lawsuit filed by the U.S. Attorney in Manhattan district court this week, Allied, an FHA loan correspondent, and its two top executives engaged in ...