The FHA’s net-worth requirement, now fully phased in nearly three years since it was revised, will help ensure that only responsible, well-capitalized lenders and mortgagees are involved in the origination of FHA-insured loans. However, small FHA lenders may get squeezed out in the process. On May 20, the second and final phase of FHA’s new net-worth rule became effective. The final rule provides that, regardless of size, all applicants for FHA approval and those with current approval must have a ...

Lenders are at odds with housing finance agencies over the benefits of a new FHA guidance, which calls for documentation of downpayment assistance (DA) that HFAs provide to borrowers. The new guidance requires mortgagees to show written proof that funds provided by a federal, state or local government entity to help borrowers meet the FHA’s 3.5 percent minimum cash investment requirement actually came from the entity and not from some impermissible source. The guidance follows up on a rule issued by HUD last year clarifying an interpretation of the National Housing Act. The rule expressed HUD’s view that ...

A recent Federal Reserve survey of bank lending practices further confirmed a continuing trend among FHA lenders of refusing to lend to borrowers with FICO scores below 620 even though they qualify for the loan and could afford the required minimum 3.5 percent cash investment. About a third of senior loan officers who responded to the April 2013 survey indicated they were less likely to approve FHA home-purchase loan applications within the 580-620 FICO range this year compared to last year. They prefer lending to borrowers with a 720 FICO and who are making a 10 to 20 percent downpayment, the survey showed. An estimated 75 percent of banks cited the ...

The Texas House of Representatives has approved legislation that will let voters decide on Nov. 5 whether to allow home-equity purchase lending in the Lone Star State. The bill would amend the Texas constitution to authorize Home Equity Conversion Mortgage for Purchase loans, which would make the program available to Texans for the first time. The state legislature voted 139 to 1 in favor of Senate Joint Resolution 18, which the Texas Senate approved unanimously in March. Specifically, the bill would amend the state constitution to ... [One chart]

The prospect of legislation being offered that would grant the Department of Housing and Urban Development greater authority to manage the Home Equity Conversion Mortgage program has improved significantly after two House lawmakers declared their intention to introduce a bipartisan bill. Reps. Michael Fitzpatrick, R-PA, and Denny Heck, D-WA, announced during a recent hearing by the House Financial Services Subcommittee on Housing and Insurance that they will co-sponsor legislation to give the FHA the authority it needs to swiftly implement HECM reforms by mortgagee letter. Fitzpatrick expressed his support for ...

A top official of the Department of Housing and Urban Development said the agency is as concerned as Congress and the industry about mortgages seized through the power of eminent domain and will not refinance any mortgage taken in this manner. Testifying at a recent hearing before the House Financial Services Subcommittee on Housing and Insurance, Charles Coulter, deputy assistant secretary for housing, said FHA leadership is very much concerned about the idea of seizing troubled mortgages held in private-label securitizations under the power of ...

SunTrust Mortgage is in settlement discussions with the Department of Housing and Urban Development and the Department of Justice over alleged violation of the False Claims Act in connection with the bank’s origination of FHA loans. The Atlanta-based mortgage lender disclosed the ongoing talks in a recent regulatory filing after being notified by the agencies of the results of their preliminary investigation during the first quarter of 2013. Even with the ongoing settlement talks, SunTrust continued to deny any wrongdoing, making clear its disagreement with the government’s analysis and methodology. It gave no further ...

Changes to the FHA’s mortgage insurance premium cancellation policy, which take effect on June 3, could ultimately cause some FHA loans closed after the effective date to become a “higher-priced mortgage loan” that no investor would want to purchase, lenders warned. Eliminating the MIP cancellation and requiring insurance to be kept for the life of the mortgage loan will raise the annual percentage rate 150 basis points above the average prime offer rate (APOR) index. This will trigger a higher-priced mortgage loan (HPML) designation for some ...

FHA lenders now face more stringent default monitoring and reporting requirements as federal housing regulators try to keep close tabs on loan performance to reduce losses to the FHA insurance fund. New guidance issued by the Department of Housing and Urban Development requires FHA lenders to use new status codes in their monthly reporting of delinquent single-family mortgages, special forbearances and trial payment plans. At the same time, HUD announced a new reporting requirement for FHA loan modifications in which the servicer receives no incentives. The requirement to use the new codes and to ...

FHA jumbo loan originations increased in the first quarter of 2013 as well as from the same period last year pending hikes in the mortgage insurance premium and the required downpayment on loans above $625,500, according to Inside FHA Lending’s analysis of FHA data. FHA jumbo lenders produced an estimated $5.44 billion in loans over $417,000 during the first three months of the year, up 6.6 percent from the fourth quarter of 2012 and 14.0 percent higher compared to the volume from a year ago. Consumers continued to use the FHA jumbo product despite FHA’s decision to raise the annual mortgage insurance premiums on ... [2 charts]