Loan processing for incompetent veterans presents significant challenges to VA lenders, requiring strict compliance with special guidance on top of the basic VA underwriting rules. One challenge is dealing with legal appointees who assist and represent veterans in legal transactions, such as applying for a mortgage loan. There are ways to determine whether a veteran is incompetent, said Mark Jamison, loan production officer (LPO) with the VA Cleveland Regional Center, during the VA Lender Conference in Kansas City, MO, last month. The Department of Veterans Affairs or a probate court can deem a veteran incompetent due to severe injury, medical conditions, mental disorders, and financial instability, he said. A mortgage lender could make a determination of incompetency if the initial purchase contract documents were signed by an attorney-in-fact, the veteran divulged the incompetency, or the ...

Moody’s Rates Credit Suisse FHA Securitization Transaction. Moody’s assigned investment-grade ratings to Credit Suisse’s first securitization deal in 2017 backed by seasoned re-performing and performing, fully amortizing, fixed- and adjustable-rate mortgages insured by FHA. The deal is the first FHA-insured re-performing transaction since 2010, according to the rating agency. The collateral pool is comprised of 672 first-lien, fixed-rate loans and ARMs with a weighted average updated FICO score of 614 and loan-to-value ratio of 94.2 percent. Approximately 82.4 percent of the loans in the collateral pool were previously modified. Approximately 52.8 percent of the loans have been current for at least 24 months. Another 17.3 percent of the loans have been current for more than 12 months. Comments Sought on Various Information Collection Proposals. The Department of Housing and ...

Nonbank lenders far out-produced depository institutions in originating FHA mortgages during the first quarter of 2017. A new Inside FHA/VA Lending analysis reveals that nonbank lenders produced over 83 percent of FHA forward loans endorsed during the first quarter. With over 8,000 entities listed as originators and sponsors in FHA loan-level data, the overwhelming majority of them were independent mortgage banks, mortgage brokers and other nonbank lenders. The 14 largest FHA originators were all nonbanks, led by Quicken Loans, Freedom Mortgage and loanDepot. One sign of the overwhelming fragmentation in the FHA primary market is the fact that these three lenders accounted for just 11.3 percent of first-quarter endorsements. The largest depository originator of FHA loans was PrimeLending, an affiliate of PlainsCapital Bank. It ranked 15th in production with a ... [charts ]

What is an “egregious” VA mortgage loan? Panelists at last month’s VA Lending Conference in Kansas City, MO, helped shed light on such loans by describing them as flawed and in violation of VA requirements. “But there’s more,” said Greg Nelms, VA chief of loan policy. Unstable income and use of active-duty income when that income will be extinguished within one year could taint a VA loan and make it egregious, said Nelms. High debt-to-income ratio, residual income that is below VA requirements and failure to consider a spouse’s debts or credit in a community-property state also could have an adverse effect on a VA loan, he added. The panel presented several “egregious loan” scenarios involving reviews of several mortgages from 2016 in which lenders were required to sign indemnification agreements. The first example consisted of a VA home loan for $102,047, which closed in ...

The Department of Veterans Affairs’ interim final rule on qualified mortgages (QM) implements the Dodd-Frank provision requiring creditors to make a reasonable and good faith determination that the borrower has a reasonable ability to repay the loan. The VA interim final rule defines QM to mean any loan that the agency guarantees, insures or originates. However, certain limitations apply to VA’s Interest Rate Reduction Refinance Loans (IRRRLs) in the rule’s guidance for “safe harbor.” Under the safe harbor requirements for an IRRRL, the loan being refinanced must have been originated at least six months before the new loan’s closing, and six payments must have been made. In addition, the veteran should not have been more than 30 days past due during the six months preceding the new loan’s closing. The QM rule’s six-month seasoning requirement, however, inadvertently created an ...

The Department of Veterans Affairs has issued guidance clarifying its requirements for completing the Interest Rate Reduction Refinance Loan Worksheet. The guidance is effective for all IRRRL applications originated on or after July 2, 2017. The VA said it has received many inquiries from lenders regarding the proper completion of IRRRL Worksheet (VA Form 26-8923) since the implementation of the TRID-LE and CD (Truth in Lending Act-Real Estate Settlement Procedures Act Integrated Loan Estimate and Closing Disclosure.) The guidance clarifies and establishes VA policy regarding the following: Amount of the existing allowable loan balance (Line 1); Principal reduction from veteran (Line 2); Maximum allowable discount points (Line 5); Maximum allowable closing costs (Line 8); Maximum allowable closing costs (Line 11); and Maximum loan amount (Line 18). VA said it understands the ...

Appropriation levels for FHA and Ginnie Mae from the previous fiscal year were unchanged in the FY 2017 omnibus spending bill, which President Trump signed into law on May 5. The bill, which passed the House by a 309-118 vote and the Senate by a 79-18 vote on May 4, will fund the federal government through the rest of the fiscal year ending Sept. 30, 2017. Among other things, the bill allocates $400 billion to single-family guarantee commitments under the FHA Mutual Mortgage Insurance Fund, and provides $130 million for administrative contract expenses. In addition, the budget provides an additional $30 million if guaranteed loan commitments exceed $200 billion. The agreement also sets aside up to $30 billion for FHA multifamily and specialized loan guarantees during FY 2017. A total of $55 million was set aside for housing counseling programs, $65.3 million for fair housing activities, and $4 million to ...

With only days to go before the implementation of its new Loan Review System, the FHA is encouraging lenders to take a few more steps to ensure smooth transition to the new system. The LRS will go live on May 15, 2017, as the new electronic platform for FHA’s Title II single-family, quality-control processes. Lenders will use the LRS to interact with FHA during post-endorsement loan reviews, direct endorsement authority test cases, lender monitoring reviews and lender self-reporting of fraud and other material findings. Findings will be communicated through the system’s defect taxonomy, which provides a streamlined method of identifying and capturing information about defects uncovered during individual loan reviews. In its latest guidance, the FHA instructs lenders to check access to FHA Connection for any potential glitches. All users access the LRS through FHA Connection via the ...

Mortgage default rates for FHA and VA loans followed seasonal trends and shifted significantly lower in the first quarter of 2017, according to a new analysis and servicer ranking by Inside FHA/VA Lending. While both portfolios showed strong growth in the dollar volume of loans outstanding in Ginnie Mae mortgage-backed securities, there were also huge declines in the number of loans past due. Some $1.036 trillion of FHA forward mortgages were in Ginnie pools at the end of March, up 1.1 percent from the previous quarter. But delinquency rates for the less-severe categories of late payment were down sharply. The number of FHA loans 30-60 days past due, for example, declined by 28.4 percent, lowering the delinquency rate by 1.51 percentage points, leaving it just about where it was a year ago. The same thing happened in the VA sector. Total VA supply grew 3.2 percent to ... [Charts]

The VA Home Loan Guaranty Service is revisiting agency rules on allowable fees and charges veterans pay to obtain a VA loan for possible changes. VA is seeking comments on a proposed rule that would ease current restrictions to put borrowers in a better position to bargain during negotiations for a home purchase. While the current rule continues to protect veterans from incurring unreasonable closing costs as originally intended, some veterans and their representatives have complained that the restrictions weaken their ability to negotiate with sellers and lenders. Compared with a conventional purchase-loan transaction, sellers and lenders find it more difficult to deal with a borrower with a VA loan because they end up bearing many of the customary fees and charges, the VA explained. “The restrictions on fees and charges puts borrowers at a bargaining disadvantage against ...