Compliance & Regulation

The Mortgage Bankers Association has developed a warehouse lending proposal that could be administrated by Ginnie Mae if the agency receives Treasury Department approval. MBA, which has been working closely with the Government National Mortgage Association in developing the proposal, has sent Treasury Secretary Timothy Geithner an outline of the program along with a term sheet. The proposal calls for Treasury to initiate a temporary lending facility administered by Ginnie Mae to provide warehouse loans to lenders making Federal Housing Administration, Department of Veterans Affairs, and Rural Housing Service guaranteed loans. "MBA would like to meet with you in order to obtain Treasury's input and refine the proposal," MBA chief John Courson says in a letter to secretary Geithner. "Treasury has not made a commitment to the proposed program," an MBA spokesman said.

The House on Thursday passed a mortgage reform bill by a 300-114 vote that curbs incentivized payments to originators and which could totally ban yield spread premium payments — the main source of income for all loan brokers. The National Association of Mortgage Brokers is concerned that the bill "does not preserve consumers' financing options when working with a mortgage broker," NAMB president Marc Savitt said. NAMB chief lobbyist Roy DeLoach said the language in the bill is "very confusing." The wording suggests that a broker's commission and fees cannot be financed into the mortgage interest rate as a YSP and paid to the broker at the closing table. If true, the consumer would have to pay the broker with cash, which would make it very difficult for brokers to compete with banks, NAMB believes. Mr. DeLoach noted the bill still allows banks to receive servicing released premiums when they sell loans to investors and SRPs can be incentivized. "So all the incentivized payments are not going to be removed from the mortgage market," he said.

The mortgage banking company James B. Nutter & Co. has agreed to a consent decree with the Federal Trade Commission to maintain adequate data security procedures to protect its customers' financial information. FTC did not fine the Kansas City, Mo. company because an e-mail incident that sparked FTC's attention five years ago did not involve the release of sensitive personal information. "Nothing was compromised," said president and chief executive James Nutter Jr. He noted that the software problem was fixed and no other problems have occurred. Working "very diligently with the agency, "we were able to resolve some issues relating to data security that were raised by [an FTC] audit," Mr. Nutter said. As part of the agreement, JBN agreed to hire an independent auditor to assess its data security procedures every two years for 10 years.

The retired head of the American Land Title Association, James Maher, passed away on May 5, 2009. He joined ALTA as general counsel in 1984 and became its top staff person, executive vice president in October 1988. He held that role until October 2007. His successor, Kurt Pfotenhauer said, " I know Jim took great pride in his work, and he especially found joy in the time he spent using his legal skills working with the Forms Committee and the Title Counsel Committee." Mr. Maher came to ALTA from the Department of Housing and Urban Development where he was an attorney advisor in the Home Mortgage Division for 10 years. He is survived by his wife Kathy and son Matthew. A memorial service will be held Sunday, May 17th, at 2:00pm at Trinity United Methodist Church in McLean, Va.

Declining house prices are undermining the performance of the Federal Housing Administration reverse mortgage program, the Obama administration warned. The Home Equity Conversion Mortgage program is expected to face a $798 million budget shortfall in fiscal year 2010. Its budget proposal blames the decline in house prices. The same states with large concentrations of seniors that use the FHA HECM program -- Florida, Arizona, California and Nevada -- are the same ones that have seen the biggest house prices declines over the past two years. However, the FHA single-family program is projected to generate a $1.7 billion budget surplus that can cover the HECM shortfall. The President's budget estimates that FHA lenders will originate $300 billion in single-family loans in FY 2010, up from $285 billion in FY 2009, which ends Sept. 30. 2009. But HECM originations are projected to be $30 billion in FY 2010, unchanged from this fiscal year.

The Senate has passed a housing bill to jumpstart a $300 billion Federal Housing Administration program refinancing program and shield mortgage servicers from investor lawsuits. By a 91-5 vote, the Senate passed the bill (S. 896) to make the $300 billion FHA Hope for Homeowners program more attractive to investors and servicers so it can finally provide relief for homeowners with underwater mortgages. Servicers are expected to reduce the principal amount of the existing mortgage to qualify borrowers for the H4H program that Congress enacted last summer. So far, it has helped less than 60 borrowers refinance into FHA-insured mortgages. During the last two weeks of March, FHA approved only one H4H loan. The bill also gives HUD more authority to modify delinquent FHA-insured loans and to discipline or debar FHA lenders and loan correspondents. Meanwhile, servicers trying to modify mortgages in private-label securities will enjoy congressional protection from investor lawsuits, if they "believe in good faith" the recovery from a modification will exceed that of a foreclosure. Like a similar bill passed by the House, S. 896 increases the Federal Deposit Insurance Corporation's borrowing authority to deal with rising bank failures.

Education and existing law might be better ways to tackle loan modification fraud than new legislation, given the potential for "unexpected interpretations" of the latter, a Mortgage Bankers Association executive testified before a House subcommittee. The House Financial Services Subcommittee on Housing and Community Opportunity held a hearing in Washington Wednesday to examine the need for federal legislation to prevent foreclosure rescue fraud and loan modification scams. MBA chairman-elect Robert E. Story, Jr., testified before the subcommittee, stating that — although the MBA shares the subcommittee's concerns about the rapid rise in loan mod and foreclosure rescue scams — it does not believe that new laws are needed to investigate and prosecute these fraud schemes. "Unlike new legislation, which always carries with it the risk of unexpected interpretations, existing law is tested by years of judicial precedent and can be applied by federal law enforcement officers with confidence," he said. According to Mr. Story, the MBA believes educating borrowers on how to identify and avoid foreclosure rescue scams and increasing law enforcement officials' level of resources will be more effective. "MBA believes the first way to stop this fraud is by raising awareness of these scams," said Mr. Story.

The Treasury Department and HUD are providing up to $5 billion in cash assistance and grants to state finance agencies to finance the construction and renovation of 150,000 low-income housing units.Congress allocated the funds in the economy stimulus bill to jump start housing projects that where shelved or abandoned after the market for low-income housing tax credits dried up. The Department of Housing and Urban Development is providing grants through the Tax Credit Assistance program to complete the construction of 35,000 low-income housing units. Treasury is providing the cash or equity for affordable housing projects that developers previously raised through the sale of LIHTCs to investors. HUD also is soliciting applications from state/local governments and nonprofit housing groups for $2 billion in funds to acquire and rehabilitate foreclose properties. HUD wants to see collaborations between government units and nonprofits to help stabilize neighborhoods and prevent blight.

The last chance for bankers to voluntarily modify mortgages may be at hand, according to a report in American Banker. For the past year and a half, the government has pressed for modifications and set incentives for them — but has stopped short of forcing them. Though servicers have pledged to improve their efforts, progress has been slow, and many still refuse to modify loans in ways that lead to lower payments for the borrower. The result is a wave of re-defaults and increasing evidence that public and private efforts to stop the foreclosure crisis have failed. Observers say if changes being pressed by the Obama administration cannot improve the situation, Congress or regulators are likely to take more drastic action, including a renewed push for legislation to allow judges to rework loans in bankruptcy. "If modifications don't pick up, I think mortgage bankruptcy returns with a vengeance," said Jaret Seiberg, a policy analyst with Washington Research Group. "Bankruptcy is the tool that the government can use to modify contract terms without incurring liability. If we enter the fall, and we've helped hundreds of people rather than tens of thousands, there's going to be tremendous pressure to pass full-scale mortgage bankruptcy. So there's a lot riding on the implementation of the mortgage modification plan."

The mortgage markets have responded positively to the Federal Reserve's purchases of GSE debt and mortgage-backed securities, Fed chairman Ben Bernanke said, but mortgage credit is still tight."The decline in mortgage rates has spurred a pickup in refinancing as well as providing support for housing demand. However, the supply of mortgage credit is still relatively tight and mortgage activity remains heavily dependent on the support of government programs and government sponsored enterprises," Mr. Bernanke told the Joint Economic Committee. In his testimony, the Fed chief noted that that the housing market is showing signs of bottoming and sales have been fairly stable for the past few months.