Compliance & Regulation

Primary insurance-in-force among the nation's mortgage insurers fell to $937 billion in March, a slight decline from the pervious month, according to new figures released by the Mortgage Insurance Cos. of America.The decline, however slight, means MI firms are not writing enough new policies to replace the ones running off. In March, the nation's six active MI firms wrote $9.9 billion of primary new insurance, compared to $8.5 billion in February. A very small percentage of the policies were "bulk" in nature. The MI industry is facing a competitive threat from the boom in FHA/VA-backed loans. Meanwhile, the cure/default ratio improved for the second consecutive month, going from 75.5% in February to 83.2% in March, its best performance in a year. There were 69,931 cures and 84,042 defaults in March.

The U.S. Senate easily defeated an amendment by Sen. Richard Durbin, D-Ill., that would have allowed bankruptcy court judges to cram down a mortgage loan as a way to reduce foreclosures and help stabilize the housing market.The amendment was defeated by a vote of 51-45, with just 45 of the 59 Senate Democrats supporting it. The amendment would have given bankruptcy court judges the authority to reduce the interest rate and principal amount of a mortgage secured by a borrower's principal residence. Citigroup was the only bank to support Sen. Durbin's amendment after months of intense negotiations. Sen. Durbin complained that other banks and industry groups refused to compromise and negotiate in good faith. Sen. Tom Carper, D- Del., noted, however, that he might have voted for the amendment if Sen. Durbin had restricted cramdowns to subprime and nontraditional mortgages and made other changes.

Benefiting from historically low interest rates and a refinancing boom, Fannie Mae issued $87.8 billion in mortgage-backed securities in March, nearly doubling the previous month's volume. The last time MBS issuance was this high was in 2003. The mortgage giant's refinancing volume totaled $77 billion in March, nearly double February's total. And in April, Fannie began accepting refinancings that lenders are originating under the guidelines of President Obama's Making Home Affordable program. "We expect that the MHA program will bolster refinance volumes over time as major lenders adopt necessary system changes and consumer awareness continues to build," Fannie said. Fannie and Freddie are expected to refinance 4 million to 5 million homeowners under the President's program. Despite the surge in new business, Fannie reported that its ratio of "seriously delinquent" loans is continuing to rise. The percentage of loans 90 days or more past due rose 19 basis points during the month of February to 2.96%, compared to 1.1% a year ago. (The delinquency figures lag by a month.) Fannie will report March delinquencies in its next monthly report. Freddie has already reported its serious delinquency rate: 2.29% for March.

The U.S. Senate easily defeated an amendment that Sen. Richard Durbin, D-Ill., had pushed for the past two years to allow bankruptcy court judges to cram down a mortgage loan as a way to reduce foreclosures and help stabilize the housing market. The amendment was defeated by a vote of 51-45, with just 45 of the 59 Senate Democrats supporting it. The amendment would have given bankruptcy court judges the authority to reduce the interest rate and principal amount of a mortgage secured by a borrower's principal residence. Citigroup was the only bank to support Sen. Durbin's amendment after months of intense negotiations. Sen. Durbin complained the other banks and industry groups refused to compromise and negotiate in good faith. Sen. Tom Carper, D- Del., noted, however, that he might have voted for the amendment if Sen. Durbin had restricted cramdowns to subprime and nontraditional mortgages and made other changes.

The Georgia Department of Banking and Finance issued Cease and Desist Orders to two mortgage companies that were unlicensed to do business in the state. The first order was issued to Kalle Kivinen, doing business as Loan Restructuring Solutions in Chandler, Ariz. The second order went to Atlanta Loan Modifications Inc. of Alpharetta, Ga. Both of these orders were issued after the Department obtained evidence that both Atlanta Loan Modifications and Mr. Kivinen through Loan Restructuring Solutions were engaged in mortgage broker/lending activities without a license. According to Rod Carnes, deputy commissioner for non-depository financial institutions, these orders "only indicate that they were not licensed in the state. This action is just for Georgia." Mr. Carnes would not comment on how investigations of these two companies came about, nor would he comment on whether the entities were engaged in fraudulent activity. Mr. Kivinen, who is still doing business through Loan Restructuring Solutions — though not in Georgia — did not return calls seeking comment.

Department of Housing and Urban Development secretary Shaun Donovan wants to "rethink" every aspect of the nation's housing finance system so it can serve consumers better and make the regulatory structure less burdensome for lenders. "I fundamentally believe that the system we have today does not adequately serve consumers, but also makes the lending process more complex, more onerous and gets in the way of you doing your business," the secretary told a Mortgage Bankers Association conference held in Washington. He specifically noted that the Real Estate Settlement Procedures Act and the Truth in Lending Act regulatory structures needed to be reviewed. "We have an opportunity to simplify the regulatory system in a way that benefits consumers and benefits lenders at the same time," Mr. Donovan said. He also said HUD must focus on ensuring the Federal Housing Administration single-family program is free from fraud and abuse. And he wants FHA to look ahead and consider pool insurance and promoting energy-efficient and location-efficient mortgages.

The mortgage reform bill approved by the House Financial Services Committee directs the Department of Housing and Urban Development to withdraw the Real Estate Settlement Procedures Act rule that was issued by the previous administration shortly after the November elections. The committee approved an amendment by Rep. Judy Biggert, R-Ill., that directs HUD to work with the Federal Reserve Board in issuing mortgage disclosures that are "complementary" and don't confuse consumers that are applying for a mortgage. HUD is responsible for designing mortgage disclosures under RESPA and the Fed has similar responsibilities under the Truth in Lending Act. Ideally lenders would like to see a single RESPA/TILA disclosure. Nine industry groups backed the Biggert amendment. Meanwhile, the committee narrowly defeated an amendment by Rep. Gary Miller, R- Calif., to postpone for 12 months the implementation of the Home Valuation Code of Conduct. HVCC affects appraisals on all loans sold to Fannie Mae and Freddie Mac. Starting May 1, lenders must comply with HVCC that the government-sponsored enterprises agreed to implement as part of a settlement with New York Attorney General Andrew Cuomo.

The House Financial Services Committee has passed by a 49-21 vote a mortgage reform bill that favors the origination of prime fixed-rate mortgages and discourages subprime and nontraditional lending. The basic premise of the bill (H.R. 1728) is to require lenders to retain 5% of the credit risk on "nonqualified" mortgages that are sold or securitized. However, the committee expanded the definition of "qualified mortgages" to include government insured mortgages, such as Federal Housing Administration loans, and loans purchased or securitized by Fannie Mae and Freddie Mac. Lenders don't have to retain capital against qualified mortgages. The committee also approved an amendment by Rep. Leonard Lance, R -N.J., that would ensure all jumbo loans aren't considered subprime because of their high interest rates. In addition, the bill gives federal regulators the discretion to make exceptions to the 5% credit risk retention requirement. The full House of Representatives is expected to vote on the bill on May 7.

Housing Secretary Shaun Donavan is urging quick confirmation of David Stevens, whose nomination to be the new Federal Housing Administration commissioner is being held up in the Senate. "There is no one better qualified to lead FHA at this time than Dave Stevens. He is someone who has broad experience ranging from mortgage origination to secondary markets to managing a national real estate firm," the secretary told a Mortgage Bankers Association conference in Washington. "We will work closely together — should he be confirmed — to diagnose and address the challenges now facing FHA," the secretary said. Mr. Stevens is a former Freddie Mac and Wells Fargo Home Mortgage executive who most recently served as president and chief executive of Long & Foster's mortgage, insurance and title affiliates. The Senate Banking Committee is looking into allegations raised in a Real Estate Settlement Procedures Act-related lawsuit that cites a memo Mr. Stevens authored urging Long & Foster's Realty agents to refer their clients to the company's mortgage affiliate. HUD reviewed the memo 18 months ago, according to HUD spokeswoman Melanie Roussell. "At that time, HUD determined the memo did not violate RESPA and there was no basis for legal action," she said.

U.S. District Judge James S. Moody has sentenced a St. Petersburg, Fla. mortgage broker who pled guilty to fraud charges to five years in federal prison. The broker, Victor Thomas Clavizzao, also was sentenced to pay more than $2 million in restitution, as well as to forfeit an additional $6 million. According to court documents, Clavizzao acted as mortgage broker in the purchase of 13 different properties and conspired with Mark Lepzinski, a property flipper from Clearwater, Fla., to submit false and fraudulent information to various lenders in order to induce the lenders to fund bad loans. U.S. District Judge James D. Whittemore previously sentenced Lepzinski to 13 months in prison for his role in the conspiracy.