FHA and VA loan performance deteriorated during the third quarter of 2017, a period when the Ginnie Mae servicing market continued to expand. Ginnie had a record $1.749 trillion of single-family mortgage-backed securities outstanding at the nine-month mark in 2017, according to a new ranking and analysis by Inside FHA/VA Lending. That was up 2.2 percent from mid-year and 8.5 percent higher than September 2016. Ginnie servicing has been the fastest-growing part of the market for the past few years. That’s largely because Fannie Mae and Freddie Mac typically see more refinance business, which tends to churn the supply of servicing outstanding more than grow it. The VA side of the government-insured market again was the fastest-growing component, as the dollar volume of VA loans in Ginnie pools rose 3.7 percent during the third quarter. That was more than double the growth rate in the ... [Charts]

The FHA lost ground to private mortgage insurers in the purchase-mortgage market during the third quarter of 2017, according to an analysis by Inside Mortgage Finance.The government-sponsored enterprises securitized $64.59 billion of purchase mortgages with private MI in the third quarter, up 28.5 percent from the prior quarter. This far greater than the 9.5 percent increase in FHA purchase loans delivered into Ginnie Mae mortgage-backed securities during the same period. Although the FHA program remained a favorite among first-time homebuyers, private mortgage insurers saw a substantial gain in the segment. In the third quarter, first-time homebuyers comprised 74.1 percent of FHA purchase loans, but the dollar volume of such loans pooled in Ginnie MBS rose just 9.1 percent, data showed. On the other hand, Fannie Mae and Freddie Mac saw their insured first-timer ...

Brian Montgomery, President Trump’s nominee for assistant secretary for housing and FHA commissioner, reiterated his commitment to fight fraud and misrepresentation in FHA lending but wondered whether the Department of Justice had gone too far in using the False Claims Act as an enforcement tool against lenders. Testifying during his confirmation hearing before the Senate Committee on Banking, Housing and Urban Affairs, Montgomery expressed concern whether the DOJ and the Department of Housing and Urban Development had been adversarial towards lenders in their efforts to stem taxpayer losses and protect the FHA insurance fund. In prepared testimony, the nominee said the government must do better in providing clarity to encourage lenders to make FHA-insured loans and entice those that have exited for fear of exposure and liability to return to the ...

A Ginnie Mae/VA anti-churning task force is looking at a number of options to solve the rapid prepayment problem, which could include extending the seasoning requirement for all refinanced loans and prohibiting access to custom pools. A Ginnie representative declined to provide further details, adding that the task force is not ready to announce changes yet. “But we will take additional action soon, which we can do through program changes like we did last year,” he said. Ginnie issued guidance last year to curb aggressive refinancing of VA loans that underlie Ginnie mortgage-backed securities. The rapid refis have resulted in rapid prepayments to the detriment of investors with no clear benefits to VA borrowers. The guidance required six consecutive monthly payments before delivering a streamlined refi loan into a standard Ginnie MBS. The measure succeeded in stopping the ...

Overall denial rates for nonconventional loan applications (FHA, VA and Rural Housing Service) fell slightly in 2016 to 13.4 percent from 13.9 percent in 2015, Home Mortgage Disclosure Act data showed. In the nonconventional refinancing segment, denial rates rose to 32.9 percent last year from 30.3 percent in the previous year. Approximately 23.9 percent of FHA loan applicants were denied last year while VA turned down 20.0 percent of borrowers who sought a VA loan. An estimated 14.3 percent of FHA purchase-loan applicants were turned down. VA denied 11.4 percent of its purchase-mortgage applicants although its total purchase-loan applications are far fewer compared to FHA. According to the Federal Reserve’s overview of the 2016 HMDA data, as in past years, blacks, Hispanics and “other minority” borrowers had notably higher denial rates overall compared to white borrowers. Denial rates for ...

The Department of Housing and Urban Development and the Department of Veterans Affairs have taken additional steps to provide relief to homeowners in disaster areas hit by hurricanes Harvey, Irma and Maria. This week, the FHA issued policy waivers in storm-ravaged Puerto Rico and fire-stricken counties in California, allowing damage inspections to be completed beginning Oct. 24. FHA currently requires servicers to perform a damage inspection following the close of an “incident period” as determined by the Federal Emergency Management Agency. An incident period is the period For mortgages in disaster areas that have not closed or are pending endorsement, lenders must follow FHA’s guidelines on inspection and repair escrow requirements for loans in such areas. FHA believes that situations in certain jurisdictions in Puerto Rico and California have stabilized and further damage to ...

Legislation was introduced this week to repeal the FHA’s life-of-loan requirement and reinstate a previous policy of requiring borrowers to pay premiums until the outstanding principal balance reaches 78 percent of the original home value. Rep. Maxine Waters, D-CA, ranking member of the House Financial Services Committee, introduced the Making FHA More Affordable Act so that families would not have to keep paying mortgage insurance premiums for the life of their FHA-insured loan. Up until June 3, 2013, FHA was aligned with the private mortgage insurance industry in charging premiums only until the outstanding principal balance reached 78 percent of the original home value. The FHA first announced its intention to require life-of-loan premium payments in January 2013, allowing the agency to collect more premium revenue to bolster its ailing Mutual Mortgage Insurance Fund. FHA’s life-of-loan policy ...

Brian Montgomery, President Trump’s nominee for FHA commissioner, expressed concern that federal housing regulators may have been adversarial in their treatment of mortgage lenders in their effort to stem losses and protect the FHA insurance fund. Testifying during his confirmation hearing before the Senate Committee on Banking, Housing and Urban Affairs this week, Montgomery said regulators must do better providing clarity to lenders. “It’s time we treat [lenders] more like ...

Department of Housing and Urban Development Secretary Ben Carson is getting good reviews from mortgage industry participants regarding his congressional testimony late last week on program reforms, particularly his strategy for dealing with FHA exposure under the False Claims Act. Industry observers noted an improvement in Carson’s knowledge and understanding of HUD programs since taking office in March. His nomination by President Trump was controversial because ...

The securities industry is backing Ginnie Mae’s stepped-up efforts to curb loan churning and rapid refinancing of VA loans and expressed its concern over how such improper lending practices might affect borrowers and MBS investors. In a letter this week to Michael Bright, Ginnie’s chief operating officer and acting president, the Securities Industry and Financial Markets Association lauded the agency’s investigation of aggressive refinancing of VA loans. The practice has ...