The Mortgage Bankers Association called upon Congress to pass legislation to restore Ginnie Mae eligibility for so-called orphaned VA loans, which have caused a temporary disruption in the government-backed secondary market. In written testimony to the Senate Committee on Veterans’ Affairs last week, the MBA urged lawmakers to make technical corrections to restore the eligibility of certain Interest Rate Reduction Refinance Loans for pooling. The MBA estimated the VA orphan loan mess at roughly $500 million. Due to new loan seasoning requirements in the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, sime IRRRLs were rendered ineligible for Ginnie MBS pools. The loans were in transit when legislation addressing the problem of VA loan churning and serial refinancing became law in May. The new law’s seasoning provisions turned out to be ...

A Treasury Department report called on the Department of Housing and Urban Development to establish clear standards for determining which mortgage-related violations and loan defects the Department of Justice should pursue under the False Claims Act. The report also recommended that DOJ ensure that materiality, for purposes of the FCA, is linked to the standards of the agency administering the program to which the claim has been filed. Furthermore, it urged both HUD and the DOJ to work together to clarify the process by which they can jointly resolve claims. The report was issued pursuant to President Trump’s February 2017 executive order establishing his administration’s policy to regulate the U.S. financial system according to a set of core principles. Both HUD and the DOJ have been successful in using the statute to prosecute FHA lenders who knowingly commit fraud or make ...

On Aug. 1, the U.S. Senate voted 92-6 to pass a four-bill appropriations package that includes FY 2019 funding for the Department of Housing and Urban Development and the U.S. Department of Agriculture housing programs. The bill passed without changes to program funding levels previously approved by Senate appropriators. The House Appropriations Committee has approved FY19 spending bills for both HUD and USDA. The full House, which is away for the summer break until Sept. 4, has not yet voted on the package. The Senate bill retains the previous fiscal year’s $400 billion in new loan commitments in the FHA Mutual Mortgage Insurance Fund and $30 billion for the general insurance and special risk insurance program, which include special purpose single- and multifamily loans, multifamily rental housing and condominiums. The bill also sets aside $550 billion for Ginnie Mae ...

Fewer rural single-family mortgages and modified home loans with a USDA guarantee were securitized during the first six months of 2018 compared to last year. Delivery of USDA loans into Ginnie Mae pools over the last two quarters totaled $8.6 billion, down 10.1 percent from the same period last year but up 12.4 percent in the second quarter from the prior period. PennyMac topped all USDA issuers with $1.7 billion worth of rural housing MBS issued during the first half of 2018, up 22.1 percent year-over-year. New issuance also rose 30.0 percent in the second quarter from the previous quarter, enough for a 20.2 percent share of the securitized USDA market. ... [chart]

Lenders will be asking the Department of Housing and Urban Development to clarify the eligibility of borrowers with deferred immigration status for an FHA-insured loan. A mortgage industry trade group is currently drafting a letter on “a series of technical FHA handbook recommendations,” including greater clarity on loan applications submitted by borrowers registered under the government’s Deferred Action for Childhood Arrivals (DACA) program. DACA status was offered to children who were brought illegally into the U.S. by their parents or guardians but have been in the country for most of their lives. The program was created by the Obama administration as a way for recipients to work legally in the country while Congress could agree on what to do with them. The program faces uncertainty after President Trump rescinded it in September last year as part of his administration’s zero-tolerance immigration ...

More than half of FHA-insured loans analyzed for material defects have been mitigated over a 12-month period, according to the Department of Housing and Urban Development’s latest quarterly loan-review analysis. Approximately 31,396 loans were analyzed over four quarters for possible defects, beginning in the third quarter of 2017 and ending the second quarter of 2018. Approximately 59.8 percent of the reviewed loans were initially deemed unacceptable. HUD data showed that most, 54.1 percent, of the loans reviewed have been successfully mitigated. The report provides a quarter-by-quarter snapshot of the FHA’s Loan Review System results. Net defects represent outcomes after lenders have implemented methods and techniques to mitigate or remediate the initial findings. Of the reviewed loans, 24.7 percent were conforming while 15.5 percent were found to be deficient. About 0.2 percent of loans were ...

The U.S. District Court for the Southern District of Iowa earlier this month granted preliminary approval of an $11.2 million settlement in a proposed class-action against national bank JPMorgan Chase. According to the complaint filed in 2016, Chase charged and collected interest on FHA-insured loans that paid off early. Chase was either the lender or the servicer of the loans. The lawsuit, Audino et al. v. JPMorgan Chase Bank, alleges that the bank breached the promissory notes underlying the class’s FHA-insured home loans when it collected post-payment interest without providing disclosures to borrowers who made a prepayment inquiry, request for payoff figures, or tender of prepayment. Plaintiffs allege that the bank did not use the proper FHA form to provide the disclosures to consumers. Chase denies any wrongdoing and neither admits nor concedes any actual or potential fault or liability. The bank also denies it was ...

Both FHA and VA saw measurable declines in the number of seriously delinquent loans during the second quarter, although early-stage default rates were up slightly. A new Inside FHA/VA Lending analysis of Ginnie Mae mortgage-backed securities data found timely payments being made for 93.6 percent of FHA loans and 96.7 percent of VA loans at the end of June. Those numbers were off slightly from the first quarter, when seasonal factors typically lead to the lowest delinquency rates of the year. The increase in late payments was concentrated in loans that were one or two months overdue. There were 419,366 FHA and VA loans in this category at the end of June, up 13.5 percent from the end of March. They represented 4.13 percent of total FHA and VA loans in Ginnie MBS. FHA delinquency rates were substantially higher than those in the VA program, and the number of early-stage delinquencies ... [Charts]

The Department of Housing and Urban Development has issued an interpretive rule to clear up some of the confusion created by the recently approved Dodd-Frank reform act regarding the eligibility of certain VA refinance loans to serve as Ginnie Mae collateral. Although interpretive rules are exempted from public comment under the Administrative Procedures Act, HUD is seeking public input on its interpretation of the loan-seasoning provision of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which President Trump signed into law on May 24, 2018. Among other things, the statute prohibits Ginnie from guaranteeing payment on a security backed by a mortgage that does not meet its seasoning requirements. The protective measure was designed to deter lenders from encouraging veterans to refinance their loans often and repeatedly. Loan churning led to faster prepayment speeds on the ...

The mortgage industry this week continued to look for ways to resolve the VA streamline refi loan mess, which arose from the implementation of statutory seasoning requirements under the Dodd-Frank reform act, even as Ginnie Mae pointed to Congress to come up with a solution. At issue is approximately $500 million worth of “orphaned” VA Interest Rate Reduction Refinance Loans that are now ineligible for Ginnie Mae securitization. The Mortgage Bankers Association is asking Congress for a legislative fix but is also looking for other forms of relief. Pete Mills, MBA’s senior vice president of residential policy and member management, is trying to drum up investor interest in the orphan loans, which, for now, appear destined for the secondary “scratch and dent” market. More buyers could potentially generate higher bids for the loans and lower losses for nonbanks that could not deliver them ...