Total originations of FHA forward and home-equity conversion mortgages across the U.S. and in the territories increased from the first to the second quarter, with California accounting for the lion’s share of all FHA loans produced by state. Production of FHA-insured forwards, including jumbo loans, and HECM loans during the first half of 2014 totaled $68.3 billion, a whopping 49.0 percent drop from volume reported over the same period last year. On the other hand, total originations in the 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands rose 11.5 percent quarter-over-quarter. Originations totaled $36.1 billion in the second quarter. Forward mortgages accounted for $61.1 billion of new FHA-insured loans originated during the first six months while HECMs comprised $7.2 billion of loans produced over ... [ 1 Chart ]

The CFPB is proposing to implement a limited “no-action letter” policy to reduce the regulatory uncertainty that may exist for certain emerging products or services which stand to benefit consumers. This proposed policy is suited for new financial products or services where there may be uncertainty about how they fit in the existing statutes and regulations – assuming such products or services hold the promise for significant consumer benefit, according to CFPB Financial Analyst Dan Quan. The proposed policy would allow bureau staff to send a no-action letter to a company informing it that the CFPB isn’t planning to recommend initiation of supervisory or enforcement action in connection with a firm’s offering or provision of a new product. Also, an NAL ...

A routine supervisory examination ultimately led the CFPB to bring a $3.1 million enforcement action against M&T Bank because of its allegedly deceptive advertising practices for checking accounts. The bureau accused M&T Bank, based in Buffalo, NY, of luring in consumers with promises of “no strings attached” free checking, without disclosing key eligibility requirements. When consumers failed to meet the requirements, M&T automatically switched them to checking accounts with fees, the CFPB alleged. Under the terms of the consent order, announced last week, the bank will provide $2.9 million in refunds to approximately 59,000 consumers (roughly $49.15 each), and will pay a $200,000 penalty for the alleged violations. According to the consent order, during the period between Jan. 1, 2009, ...

The CFPB’s recent, high-profile $35 million enforcement action against Flagstar Bank over its mortgage servicing practices got the attention not only of the industry but also many legal professionals serving it. One industry legal expert, speaking off the record, said it was heavy handed, at best, for the CFPB to use its authority over unfair, deceptive or abusive acts or practices (UDAAP) to assert legal claims over activities that took place prior to its servicing rule. “It somewhat makes a mockery of the whole rulemaking process by effectively implementing regulations before the regulations were even proposed, much less finalized,” he said. “It also reinforces the fear of making loans to any borrower who presents any risk of default because there ...

Missing or incorrect files was the most common defect found in 49 percent of the loans, of which 29 percent were deemed initially unacceptable. Flawed credit or underwriting came in second at 26 percent, of which 67 percent were rated unacceptable. Program eligibility and operational deficiencies each had a 9 percent share while defective appraisals were common in 7 percent of all reviewed loans. Properly mitigated, the percentage of initially unacceptable loans usually drops to about 7 percent. The FHA tends to blames lenders for the defects but the bottom line is mistakes cut both ways, according to compliance experts. “Lenders make mistakes that can easily be corrected,” said one compliance consultant. “FHA also can be guilty of causing a mistake.” For example, poor communication and lack of clarity caused lenders to check a yes/no box to confirm whether or not they ...

The Department of Housing and Urban Development’s Office of the Inspector General has announced a total of $581.8 million in recoveries in September to strengthen and stabilize the ailing Mutual Mortgage Insurance Fund. The recovered amounts are part of larger settlements between the federal government, U.S. Bank and Bank of America to resolve allegations of false claims and mortgage fraud in relation to FHA-insured mortgages. Both banks were investigated separately by the HUD-OIG, Department of Justice and U.S. attorneys’ offices in Michigan, Ohio and New York in connection with their lending and underwriting practices and quality-control programs for FHA-insured loans. On June 30, U.S. Bank entered into a settlement agreement to pay $200 million, of which nearly $144.2 million went to the MMI Fund. The bank admitted to poor underwriting, flawed quality control and ...

The Department of Housing and Urban Development’s Inspector General has recommended that HUD require an approved FHA lender to reimburse the FHA $1.6 million for improper claims on 11 preforeclosure sales, including lender and borrower incentives. An IG audit of EverBank of Jacksonville, FL, attributed FHA’s losses to the bank’s failure to determine whether or not defaulted borrowers qualified for the agency’s preforeclosure sale program. The IG looked into the bank’s short sale activities because it had the highest preforeclosure sale claims in Florida. More than 50 percent of EverBank’s FHA claims were from short sales, with more than $12.9 million paid from 2011 through 2013, the audit found. In response, EverBank questioned the accuracy of the IG report. The bank maintained that certain allegations do not constitute violations of ...

An internal audit found as many as 136 borrowers not living in the properties for which they have obtained FHA-insured reverse mortgages because they were also receiving federal housing assistance under a different address. The Department of Housing and Urban Development’s Office of the Inspector General discovered the anomaly during a follow-up review of HUD’s oversight of the home-equity conversion mortgage program to ensure HECM borrowers comply with residency requirements. A previous audit had red-flagged potential residency violations. In the latest review, auditors analyzed HUD’s data warehouse for single-family mortgages and its public housing information system from April 2011 through March 2014 and identified 159 potential violators of the residency rule. Of those potential violators, 136 were found to be not occupying the properties associated with their HECM loans but, instead, ...

Like all new automated systems, FHA’s Lender Electronic Assessment Portal (LEAP 3.0) was not without technical glitches when the agency rolled it out back in May. Users immediately reported difficulties in certain functions, such as adding new branches, making changes to existing branches and changing cash flow accounts. The FHA ever since has been working to iron out the kinks to allow lenders to submit their annual recertification packages with ease. So far, certain fixes have been implemented allowing lenders to add, edit and delete branch and regional managers, delete attachments uploaded to LEAP and properly update cash flow accounts in the database. The FHA also changed the way lenders edit their principal affiliations in LEAP. In addition, newly approved lenders now have access to the new system. Furthermore, the FHA expanded to 250 the maximum allowable characters lenders may use when ...

Ginnie Mae issuance for the first nine months of 2014 totaled $207.5 billion as government-backed purchase-mortgage activity picked up in the third quarter, according to an analysis of agency data. New issuances rose 19.8 percent from the second quarter. FHA loans accounted for $116.9 billion of new Ginnie Mae issuances while VA and the Rural Housing Development funneled $75.9 billion and $14.2 billion, respectively, of new loans into Ginnie Mae pools. Mortgage securities backed by home-equity conversion mortgages are not included. Purchase mortgages totaling $140.6 billion comprised the bulk of new issuances over the nine-month period while the share of refinances totaled $49.8 billion. Modified loans accounted for $17.1 billion. Most of the FHA and VA loans originated during the first nine months came through the ... [ 2 charts ]