Compliance & Regulation

Interthinx has integrated its fraud prevention system with MortgageDashboard's loan origination system. The integration enables MortgageDashboard to offer customers an interface with automatic screening for potential fraudulent activity, according to the Agoura Hills, Calif.-based company. BenchMark Mortgage was recently introduced to MortgageDashboard's expanded loan origination system.

The Federal Housing Administration has insured only $13.8 billion in mortgages with loan balances above the old $417,000 conforming loan limit, including $5.3 billion in California and $2.5 billion in New York, according to new government data. In February 2008 Congress raised the maximum limit on FHA loans to $729,750 from $362,790 as part of the first economic stimulus package. It was later extended until the end of 2009. From April 2008 through April 2009, Department of Housing and Urban Development data shows that only 3% of FHA endorsements involved single-family loans above $362,790 and only 1.7% above $417,000, which used to be the limit for Fannie Mae and Freddie Mac loans. During that April to April period, FHA endorsed 1.7 million loans totaling $292.3 billion and 10.5% are above former limits in each state. In low-cost areas, FHA had minimum loan limits of $200,160 to $271,050 based on median house prices. "The increase in the FHA loan limits has benefited every part of the country," said Brian Chappelle, a mortgage banking consultant with Potomac Partners in Washington.

The Department of Housing and Urban Development issued guidance that opens the door for FHA-approved lenders to provide short-term loans — with restrictions — to borrowers who are eligible for the $8,000 first-time home buyer tax credit. Borrowers must still come up with the required minimum 3.5% down payment using their own funds. But after that, they can use the short-term liens to increase their down payments, cover their closing costs or buy-down their mortgage rate. Calling the tax credit advance "another step towards accelerating the housing market," HUD secretary Shaun Donovan told the National Association of Home Builders' annual spring board meeting in Washington that the initiative is a "real win for everyone." The NAHB estimates the advance will lead to 160,000 more sales — 101,000 to first-time buyers and 59,000 to move-up buyers who are selling their current residences to first-timers. Tax credit loans made by state and local housing finance agencies, government agencies and certain nonprofit groups can be used to cover the minimum 3.5%. However, non-profits that receive fees from sellers cannot provide downpayment assistance under this program. HUD didn't want to do anything that would allow "these seller-funded schemes back in," a senior HUD official said. The department has issued a mortgagee letter (2009-15) with guidance on acceptable interest rates and fees. "We are putting in place the necessary safeguards and consumer protections, and if monitored the right way, tax credit loans can be used efficiently and safely," secretary Donovan said.

A Detroit man who obtained numerous fraudulent mortgage loans, pleaded guilty before Judge Julian Abele Cook, Jr., to related fraud and conspiracy charges. According to Terrence Berg, U.S. Attorney for the Eastern District of Michigan, Myron L. Hooker conspired with others to obtain money from lending institutions, banks and individuals through fraudulent means. Hooker obtained fraudulent mortgage loans on numerous properties in the Detroit metropolitan area and arranged to have the illegal profits from those loans split between himself and his co-conspirators. Beginning in January 2003, Hooker orchestrated the fraud by coordinating the activities of loan officers, straw buyers, collusive sellers, real estate appraisers and closing agents. He obtained falsely inflated appraisals on real estate and paid straw buyers to act as purchasers of the property. To bolster the straw buyer's creditworthiness, he provided false income and asset documentation. Relying on the falsely inflated appraisals and fraudulent documentation, lenders approved the loans, most of which subsequently went into default, leaving them with losses in excess of $1 million. Sentencing is set for Aug. 20.

A trio of men have pleaded guilty to charges related to a $12.6 million mortgage fraud case involving 25 upscale residential properties in Missouri. Steven M. Salas of Hacienda Heights, Calif.; James F. Simpson of Lee's Summit, Mo.; and Willie Charles Cadenhead of Grandview, Mo., are among nine of 17 indicted defendants who have pleaded guilty to a scheme to buy and sell new homes built by Jerry R. Emerick at inflated prices, obtaining mortgage loans for more than the actual sale price by providing false information to mortgage lenders, then keeping the extra proceeds. According to the U.S. attorney's office for the Western District of Missouri, in the scheme, buyers created shell companies for the purpose of receiving kickbacks from Emerick (who pleaded guilty in April) of up to $125,000 on each house. During the course of the conspiracy, mortgage lenders approved loans for 25 homes totaling more than $12.6 million. From that total, buyers received approximately $2.3 million without the lenders' knowledge. Sentencing for the defendants will be scheduled after the U.S. Probation Office completes a pre-sentence investigation.

The Federal Deposit Insurance Corp. reported a surge in single-family originations by banks that contributed to a rebound in earnings for the first quarter. Commercial banks and FDIC-insured savings institutions reported combined earnings of $7.6 billion in 1Q, down 60% from a year ago, but a definite rebound from the $38.6 billion loss posted in the fourth quarter. FDIC officials attribute the first quarter profit mainly to securities trading by the larger banks. But they noted that an increase in refinancing activity also contributed to revenues. Originations by commercial banks and savings banks totaled $369.7 billion in the first quarter, a 72% gain from the previous period. (The total does not include originations by federally chartered S&Ls, which the Office of Thrift Supervision will report on Tuesday, June 2). The FDIC says 836 banks and savings institutions that are heavily committed to mortgage lending and investing earned $1.4 billion in the first quarter, compared to a $4 billion loss in the fourth quarter.

The Federal Deposit Insurance Corp.'s effort to sell troubled bank loans is facing headwinds, including congressional skepticism about the public-private investment funds that would provide government financing for investors, according to agency chairman Sheila Bair. "We are finding both on the buyer and seller side there continues to be discomfort about Congress' review of this program," Ms. Bair told reporters. There are concerns the Congress "could potentially change" the rules, she added. The FDIC chairman also noted that Congress has passed a housing bill (S. 896) that directs the Treasury secretary to craft conflict of interest rules for the PPIF program. Critics of the program are concerned sellers and buyers of the bad assets could game the system and make large profits at the expense of taxpayers. "Banks will not be able to bid on their own assets," the FDIC chairman said. However, Treasury needs to clarify other aspects of the conflict of interest rules mandated by Congress. FDIC is working on the structure of its 'Legacy Loan Program' that will give banks an opportunity to sell troubled real estate loans to PPIF investors. However, a "test sale" may be delayed. "Obviously there are issues we have to look at and take into consideration," an FDIC spokesman said. FDIC has been working toward sending the first sales packages to investors in June.

Freddie Mac's purchases of refinanced mortgages slowed in April despite the launch of the Obama administration's new program to help borrowers with high loan-to-value ratios refinance into lower cost loans. The mortgage giant purchased $43.3 in refinanced mortgages in April, down from $52 billion the previous month. "We began the purchase of refinance mortgages originated under the program in April," Freddie Mac said in its monthly activity report. "Due to the implementation of this program and recent declines in mortgage interest rates, our refinancing activity will likely remain high." Meanwhile, the serious delinquency rate on Freddie Mac-guaranteed single-family loans continues to rise. Loans 90 days or more past due or in foreclosure rose to 2.44% in April, up 15 basis points from the previous month. Issuance of mortgage-backed securities by Freddie Mac also slowed to $51.1 billion in April from $57.7 billion in March. The company also reported that its mortgage portfolio fell by $36.8 billion to $830.3 billion during April.

Lender groups are pressing the Federal Housing Finance Agency to make Fannie Mae and Freddie Mac purchase mortgages that banks originate to satisfy their Community Reinvestment Act obligations. "The GSEs have made it a practice of avoiding CRA-related mortgage loans," the Consumer Mortgage Coalition says in a comment letter to FHFA. "We would encourage FHFA to implement this statutory mandate even though HUD failed to do so," CMC executive director Anne Canfield says. The GSE regulator is in the process of revising Fannie's and Freddie's affordable housing goals for the first time. The National Association of Affordable Housing Lenders says the GSEs continue to ignore $50 billion of CRA-eligible multifamily loans that banks are forced to hold in portfolio. The FHFA proposal only requires Fannie and Freddie (combined) to purchase $9 billion of affordable multifamily loans in 2009. "We urge you to withdraw this proposal, and reconsider how the GSEs can better support the recovery," says Judy Kennedy, NAAHL president and chief executive.

The Department of Housing and Urban Development soon will issue guidance enabling FHA-approved lenders to provide short-term "bridge loans" to borrowers who are eligible for a one-time $8,000 first-time homebuyer tax credit. HUD issued a mortgagee letter on May 12 outlining a program that enabled borrowers to use tax credit funds toward downpayment and closing costs. But HUD took the letter off its website a few hours later — after the Office of Management and Budget objected. Apparently HUD had not consulted with OMB officials on the issue. Meanwhile, HUD has drafted new guidance that is expected to be posted any day now, according to sources. HUD secretary Shaun Donovan told the National Association of Realtors on May 12 that FHA approved-lenders, nonprofit housing groups, as well as state and local government entities would be permitted to "monetize the tax credit through short-term bridge loans." HUD expects these bridge loans will help more borrowers to become homeowners. The department also wants to prevent lenders from abusing the program by charging FHA first-time homebuyers excessive fees and rates.