Posted by admin | Under FHA Mortgage
Friday Jan 29, 2010
WASHINGTON – U.S. Department of Housing and Urban Development (HUD) Inspector General Kenneth M. Donohue and Federal Housing Administration (FHA) Commissioner David H. Stevens announced today an initiative focusing on mortgage companies with significant claim rates against the Federal Housing Administration mortgage insurance program.
HUD Office of Inspector General (OIG) subpoenas were served to the corporate offices of 15 mortgage companies across the country demanding documents and data related to failed loans which resulted in claims paid out by the FHA mortgage insurance fund.
Inspector General Donohue said, “The goal of this initiative is to determine why there is such a high rate of defaults and claims with these companies and whether there is wrongdoing involved. We aren’t making any accusations at this time, we have no evidence of wrongdoing, but we will aggressively pursue indicators of fraud. We are members of the President’s Financial Fraud Enforcement Task Force and today’s activities reflect our commitment to seeking information on red flags that may arise from data analysis.
” This initiative was prompted, in part, by the FHA Commissioner, David Stevens, who was alarmed by the incidence of claims against the FHA insurance fund by a number of poor performing companies and reached out to the HUD OIG for assistance.
FHA Commissioner David Stevens said, “We are taking risk management extremely seriously. In addition to the policy changes we are implementing and additional changes we plan to announce later this month, we need to hold FHA lenders accountable for the high rates of defaults and claims against FHA. The Inspector General’s initiative will help us determine whether there is fraud and better manage risk in the long run.
” The HUD OIG identified these direct endorsement companies from an analysis of loan data focusing on companies with a significant number of claims, a certain loan underwriting volume, a high ratio of defaults and claims compared to the national average, and claims that occurred earlier in the life of the mortgage. These are key indicators of problems at the origination or underwriting stages. The HUD OIG wants to see why these loans failed.
Some actions available to the HUD OIG are audits, investigations, and inspections and evaluations. In addition, we rely on the support of the Department of Justice (DoJ), and of State and local law enforcement. The DoJ is available to pursue both civil and criminal legal actions against wrongdoers. HUD is available to proceed with administrative sanctions such as suspensions, limited denial of participation, debarment, and civil monetary penalties.
The probe will be conducted by the HUD OIG’s Audit and Investigation staff jointly. They will assess why these companies have high default rates, especially at this unprecedented time when the FHA mortgage insurance program represents such a significant percentage of mortgages currently in force in our country.
This probe is a new type of approach in which HUD OIG is focused on corporate offices rather than individual branch offices. This is a starting point for more detailed reviews if abuses are uncovered, and the HUD OIG anticipates that more probes may follow.
“The FHA market share has skyrocketed,” Inspector General Donohue further said. “Our job is oversight. We work for the American taxpayer. Each loan on this list will be thoroughly examined and we will track down the reasons why it failed. Once we determine the causes, we will look to see whether there is a need for further review or remedial action. We want to send a message to the industry that as the mortgage landscape has shifted we are watching very carefully and that we are poised to take action against bad performers.”
The following companies were served OIG subpoenas today:
First Tennessee Bank N.A., Memphis, TN Alethes LLC, Lakeway, TX Security Atlantic Mortgage Co., Edison, NJ Pine State Mortgage Corporation, Atlanta, GA Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI Alacrity Financial Services, LLC, Southlake, TX Assurity Financial Services, LLC, Englewood, CO D and R Mortgage Corporation, Farmington, MI Webster Bank, Cheshire, CT Mac-Clair Mortgage Corporation, Flint, MI Americare Investment Group, Inc., Arlington, TX 1st Advantage Mortgage, Lombard, IL American Sterling Bank, Independence, MO Sterling National Mortgage Company Inc., Great Neck, NY Dell Franklin Financial LLC, Columbia, MD
Interesting to see that Pine State Mortgage is on this list. Pine State’s CEO Robert Motley was defending seller paid down payment assistance a couple of years ago in an Atlanta Journal editorial entitled “Keep the down payment assistance program“.
Posted by admin | Under FHA Mortgage
Friday Jan 29, 2010
HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS Measure to help bring stability to home values and accelerate sale of vacant properties
WASHINGTON – In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.
“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”
With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.
“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.
In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.
The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”
The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:
All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program
Posted by admin | Under FHA Mortgage
Friday Jan 29, 2010
FHA today announced some rather major guideline changes which will tighten up the availability of FHA loans. Your view regarding these changes is likely to be guided by your vantage point in the process.
Members of the general public who are not in the market for a home or a mortgage refinance will most likely approve. These changes certainly will improve the quality of the FHA loan pool moving forward. Provided, that is, the average FHA buyer can still meet the requirements.
That is where the real estate/mortgage industry may run into snags. One of the primary problems for all FHA buyers is coming up with the down payment plus closing costs to buy the home. The traditional FHA allowed seller contribution of 6% went a long way toward creating many good new FHA loans that paid on time and contributed to the FHA insurance pool. This has been lowered to 3% for all FHA borrowers. The net result is likely to be either higher interest rates for FHA borrowers, or less FHA loan availability because mortgage originators just won’t be incentivized to do the work necessary to get an FHA loan through the process.
For many years the FHA required down payment was a little less than 5%. I had expected FHA might revert to this former guideline. Instead, they have retained the 3.5% down payment for borrowers with credit scores above 580. Borrowers without credit scores, or with lower credit scores will have to put down 10% of the purchase price as a down payment.
I’m concerned that there is rapidly becoming no need for the FHA program, because if current trends continue there will be little difference between FHA loans and conventional loans.
Here is the full text of HUD’s announcement:
FHA Announces Policy Changes to Address Risk and Strengthen Finances
New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities
WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.
The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement. U.S. Housing and Urban Development Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”
Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
Update the combination of FICO scores and down payments for new borrowers.
New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
Reduce allowable seller concessions from 6% to 3%
The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.
This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
Legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches
In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.
Posted by admin | Under FHA Mortgage
Friday Jan 29, 2010
For years I have been warning anyone who would listen that, sooner or later, FHA would start cracking down on all the lenders out there flouting the rules and risking the safety of the FHA program. It seems our present mortgage crisis, along with some increased funding, may have finally triggered this crackdown. I couldn’t be more pleased. For a long time, bad lenders have been making the mortgage business hard for the originators who want to do things the right way.
Here are some of the details of the crackdown:
FHA WITHDRAWS THREE LENDERS, SUSPENDS A FOURTH Mortgagee Review Board underscores FHA’s stepped up lender enforcement efforts
WASHINGTON – The Federal Housing Administration’s Mortgagee Review Board (MRB) today announced that it is immediately and permanently withdrawing the FHA approval of three mortgage lenders and is suspending a fourth. The MRB withdrew the FHA approval of Strategic Mortgage Corporation (Strategic), ProMortgage Inc., and Americare Investment Group Inc. (doing business as Premier Capital Lending. Additionally, the MRB has suspended the FHA approval of Home Mortgage, Inc. (HMI) of Burr Ridge, Illinois.
“FHA takes its oversight role very seriously and will move swiftly and decisively to protect borrowers from unscrupulous lenders,” said FHA Commissioner David Stevens. “Any lender who refuses to comply with FHA requirements will simply no longer enjoy the privilege of participating in FHA programs.”
Today’s withdrawal actions will permanently prevent Strategic, ProMortgage and Americare from participating in FHA programs while the suspension of HMI will apply for a minimum of six months or until a federal court rules in a related matter (see below). The MRB took these actions based upon the following serious violations of FHA requirements:
Strategic failed to comply with employment requirements, charged borrowers impermissible or excessive fees, failed to disclose all fees on the Good Faith Estimates, and submitted a false certification to HUD in connection with an application for FHA insurance. The MRB also voted to seek civil a monetary penalty from Strategic in the amount of $71,000.
ProMortgage failed to adopt and maintain a Quality Control Plan, failed to perform Quality Control reviews of loans that went into default within six months after closing, engaged in a prohibited branch arrangement, made false certifications on the HUD/VA Addendum to the Uniform Residential Loan Application (URLA), failed to comply with home office operation requirements, and failed to report employee compensation on the appropriate form. In addition, the Company allowed borrowers to provide verification of employment directly to the lender which creates an opportunity for manipulation or falsification of documents submitted. Verification of employment must be submitted directly to the lender by the employer. The MRB also voted to seek a monetary penalty from ProMortgage in the amount of $124,000.
Americare breached the terms of a settlement with HUD by failing to make any of the required monthly payments. On October 8, 2009, the Board entered into a settlement with Americare requiring the Company to pay of a monetary penalty of $124,000 and placing it on probation for a period of six months. Since then, Americare failed to make a single monthly payment as required under the terms of the earlier agreement.
HMI retained its part owner and Chief Executive Officer despite his indictment and subsequent guilty plea for bank fraud. In June 2009, HMI’s part owner and CEO was indicted in the U.S. District Court for the Northern District of Illinois, Eastern Division for his role in a scheme to obtain money for 450 fictitious residential mortgage loans; a guilty plea was entered in this matter on January 15, 2010. HMI failed to notify HUD of this indictment as required. Additionally, HMI failed to comply with FHA’s annual recertification requirements.
In addition to these sanctions, the Mortgagee Review Board also took action against the following lenders:
Action Mortgage Corporation of Cranston, Rhode Island was placed on probation for a period of six months due to its misleading advertising practices. The Mortgagee Review Board also voted to impose a monetary penalty in the amount of $7,000.
Cooper and Shein, LLC (doing business as Great Oak Lending Partners) of Timonium, Maryland was placed on probation for a period of six months due to its misleading advertising practices. The Mortgagee Review Board also voted to impose a monetary penalty in the amount of $11,000.
While these lenders may appeal the Board sanctions by submitting a written request for a hearing before an Administrative Law Judge within 30 days, the filing of an appeal does not delay these actions. Complaints seeking these civil money penalties will be served upon Strategic, ProMortgage, Action Mortgage, and Cooper and Shein, in due course and the lenders will have the opportunity to contest the imposition of the penalties before an Administrative Law Judge.
And further:
FHA AND GINNIE MAE TAKE ACTION AGAINST TOPDOT MORTGAGE Lender faulted for gross violations of FHA underwriting standards
WASHINGTON – The Federal Housing Administration’s Mortgagee Review Board (MRB) today immediately and permanently withdrew the FHA approval of Premium Capital Funding, LLC, a Jericho, New York-based lender doing business as TopDot Mortgage. Today’s action prevents TopDot from participating in FHA programs and seeks a monetary penalty of $674,000.
In addition, the Government National Mortgage Association (Ginnie Mae) is defaulting and terminating TopDot as an issuer in its Mortgage-Backed Securities (MBS) program and is ending the Company’s ability to continue to service Ginnie Mae securities. Servicing of TopDot’s $181.2 million dollar Ginnie Mae portfolio will be transferred to LoanCare Servicing Center, Inc.
The MRB and Ginnie Mae took these actions based upon TopDot’s numerous and egregious violations of FHA requirements, including failure to document borrowers’ income, evaluate borrowers’ creditworthiness, and approving loans with grossly excessive debt-to-income ratios without compensating factors to justify approval.
“This lender demonstrated a pattern of utter disregard for how we do business and its behavior not only put the FHA insurance fund at risk, but placed their own customers at greater risk of foreclosure,” said FHA Commissioner David Stevens.“FHA approval is a privilege that we entrust to the most responsible lenders. If any lender violates that trust, the MRB will take action to protect borrowers, the FHA insurance fund and FHA programs.”
Mary Kinney, Ginnie Mae’s Executive Vice President, said “Ginnie Mae’s requirements are in place to protect the borrower and the American taxpayer. Both, Ginnie Mae and FHA are working aggressively to ensure that borrowers are not harmed by the misdeeds of lenders. These lenders are on notice that they must strictly adhere to Ginnie Mae and FHA regulations to maintain their status within HUD programs.”
While TopDot may appeal FHA’s withdrawal by submitting a written request for a hearing before an Administrative Law Judge within 30 days, the filing of an appeal does not delay the actions announced today. A complaint seeking civil money penalties will be served on TopDot in due course and the Company will have the opportunity to contest the imposition of the penalties before an Administrative Law Judge.
The U.S. Department of Housing and Urban Development (HUD) is also continuing to evaluate the conduct of individuals who participated in TopDot’s violations of FHA requirements and will move quickly to take appropriate action against those individuals.
If TopDot is your mortgage company, see HUD’s website for more information about the status of your loan and the next steps for borrowers. FHA and Ginnie Mae have taken several steps to minimize the disruption to borrowers whose loans are serviced by TopDot and are committed to protecting all FHA-insured borrowers and the American taxpayer.
Posted by admin | Under FHA Mortgage
Tuesday Jan 5, 2010
Richard Geller helped a lot of folks get into the business of doing loan mods for profit and helped a lot of people successfully get their own loan modifications done.
And now he has revealed how to get loan mods for investor owned properties, and how to get REAL principal REDUCTIONS and How to use the Home Affordable (Obama program) to get loan mods.
Many people missed the live webinars last weekend because of receiving the notice late. In spite of that, both of them filled up. This video is coming down in a few days so learn from it now.
Loan mods and violations, forensic audits and how they fit in.
How to get principal reductions by pushing the lenders around instead of being pushed around
Investor owned properties — rental properties NEED loan mods, and here’s how to get them
Repairing your credit (or your client’s credit) easily and quickly if you have to stop making payments and therefore have a bunch of “lates” on your credit report
Delayed Implementation Date for New Requirements in ML 2009-28
Enactment of ML 2009-28, Appraiser Independence, will be delayed until February 15, 2010. ML09-28 (originally planned for a January 1, 2010 implementation) has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection. The effective date for both sections of this guidance will now take effect for all case numbers assigned on or after February 15, 2010. This extension will provide FHA and lenders additional time to adjust systems to accommodate the changes.
Detailed instructions on changes to FHA Connection will be issued in a new mortgagee letter. However, lenders should be aware that the requirement for inputting the appraiser ID and the appraisal assignment date in the FHA Connection case number assignment screen will be removed. Instead, lenders will be required to enter all appraisal data, including the appraiser ID, in the Appraisal Update Screen once the completed appraisal is received by the lender and prior to closing the loan.
Delayed Implementation Date for ML 2009-51
ML 2009-51, Adoption of the Appraisal Update and/or Completion Report, states an effective date of January 1, 2010. The effective date is being extended and will now apply to all case numbers assigned on or after February 15, 2010. This extension will provide additional time needed by FHA and lenders to adjust their systems to accommodate use of the form.
Posted by admin | Under FHA Mortgage
Tuesday Jan 5, 2010
As part of our government’s continuing crusade to over regulate and over complicate the mortgage process for consumers and mortgage industry professionals alike so that they can continue to blame mortgage brokers for the current crisis instead of government, the new RESPA guidelines took effect on January 1, 2010. More on this later.
One requirement of the new guidelines is that the single origination charge on the GFE and HUD-1 must include all administrative and processing fees related to the origination of the loan.This must include all the compensation for both the mortgage lender and mortgage broker. This is one of the few real simplifications involved in the new regulations.
For years this origination fee has been capped at 1% of the loan amount. Obviously, if the 1% cap remained in effect then there would be no incentive whatsoever for anyone in the mortgage industry to help any potential borrower get an FHA loan.
Therefore, on December 30, 2009 HUD issued Mortgagee Letter 2009-53 which removes the 1% origination fee limit effective January 1, 2010.
It is a safe bet to assume that a new limit, or some sort of fee guidance, will be forthcoming from HUD.
Consumers should not panic over the change. It does not mean that fees are increasing. It simply means that all fees will be included in one figure to make them easier to compare between lenders.
Recent Comments