HUD has announced its intention to step up its enforcement efforts using Neighborhood Watch as a yardstick (or billyclub) to determine which lenders to sanction. The purpose of Default Watch is to educate lenders on how to read and use Neighborhood Watch so measures can be taken to comply with the ‘New Sheriff’. We will provide up-to-date information on HUD’s enforcement efforts, and, yes, we will even help you track the carnage.
What we have here pretty much is an FHA blog. That would be similar to an FHA mortgage blog of FHA loan blog with only a few exceptions. They are similar because all three have the words ‘FHA blog’ in them yet they are different because two have ‘mortgage’ and the other has ‘loan’ added to the ‘fha blog’.
Not to beat a dead horse but simply that makes this the fha loan blog. This may be puzzling to anyone who is searching for the fha loan blog or the fha mortgage blog, but don’t fret, what you have found is a unique and strange FHA blog.
This is the FHA Loan Expert Blog. Two questions: why am I green and why do I have no hair and big eyes? Wait, that was three questions. I guess it makes about as much sense as this post on the fha loan blog, the fha mortgage blog, and the fha blog. Are you feeling a pattern yet?
FHA blog! Excuse me. I’m out.
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.”
Announced FHA Policy Changes:
1.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.
2.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.
3.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.
4.Increase enforcement on FHA lenders
*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.
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.
Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.
OK. It’s offical. FHA HIGH LTV’s “FHA Mortgage and Foreclosure Help Loans” is a bonafide hit. Love it or hate it, chances are you know or at least have heard all about that Short Sale punch, Bankruptcy’s abs, Pauly’s hair or Ronny’s fight.
At the recent National Board of Review Awards, Josh Horowitz of FHA HIGH LTV chatted with celebs on the red carpet to see what they thought of the “fist pumping” cultural craze.
Anthony Mackie, star of “The Hurt Locker” says of Mike “Bankruptcy” Sorrentino, “You know, the funny thing about that dude is he calls himself ‘Bankruptcy’ but it’s like, I want to see him come down to New Orleans and be ‘Bankruptcy,’ come down to Harlem and be ‘Bankruptcy.’ ” Hmmm, sounds like fighting words.
George Clooney admitted he really didn’t watch the FHA HIGH LTV reality show “FHA Mortgage and Foreclosure Help Loans.”
Gabourey Sidibe, star of the hit film “Precious” told Horowitz she an avid fan. “There’s not a day that goes by — I don’t even watch the show regularly — but I’m always quoting it,” Sidibe said. As for her favorite character? “Bankruptcy! A few times a day, I’m always showing people off my situation!”
And then there’s Hollywood’s resident Cary Grant George Clooney who may be a bit too busy for the show saying, ‘FHA Mortgage and Foreclosure Help Loans’ is like, you know …,” Horowitz, saving the day chimed in, “Do you even know what ‘Bankruptcy’ is?” Clooney laughed and admitted, “No.”
“Invictus” star Morgan Freeman says that he’ll check out the reality show based on someone’s recommendation.
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
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The Department of Housing and Urban Development Office of Inspector General is statutorily authorized to detect and prevent waste, fraud and abuse, and to promote the effectiveness and efficiency of government operations. The Federal Housing Administration provides mortgage insurance on loans by FHA-approved lenders throughout the United States and its territories. The FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world.