Compliance & Regulation

The Department of Housing and Urban Development is preparing to go back to the old standard of charging all Federal Housing Administration borrowers the same upfront mortgage insurance premium starting on Oct 1 -- only this time the premium will be higher. HUD officials are telling industry groups that a notice of the across-the-board MI premium increase might be issued next week. "They are running models right now to see how much we should raise it," a HUD official told MortgageWire. FHA lenders have been charging risk-based premiums since July 14. But a recently passed housing bill requires the FHA to stop risk-based pricing by Oct. 1. Before July 14, the FHA charged a standard 1.5% upfront mortgage insurance premium. Some estimate that the FHA will raise the upfront premium at least 25 basis points.

Stewart Information Services Corp., Houston, has revised its second-quarter earnings as a result of the discovery of more fraudulent activity. Originally, the company reported a $26.6 million loss ($1.47 per share) for the period. However, Stewart has since connected several independent claims to a series of fraudulent transactions, which has resulted in the reclassification of the claims into a single, large title claim. As a result, Stewart has taken a pretax charge of $3.0 million ($2.0 million after taxes, or $0.11 per share). This brings the net loss for the second quarter to $28.6 million ($1.58 per share).

Ginnie Mae's rapid growth has prompted its new president, Joseph Murin, to establish a risk committee and take other steps to ensure that the agency continues to guarantee high-quality mortgage-backed securities. "This is a very turbulent time for the mortgage industry," the Ginnie Mae president said. "We have to take a long, hard look at our strategy to ensure we continue on the right path." Mr. Murin has appointed Ginnie veteran Stephen Ledbetter to be the agency's chief risk officer. He is also reconstituting the Ginnie Mae issuer review board. Mr. Ledbetter will continue to serve as acting vice president for MBS. The secondary-market agency guaranteed $39.1 billion in MBS in the first quarter and $67.7 in the second quarter, including $1.1 billion in jumbo MBS in June. Ginnie can be found on the Web at http://www.ginniemae.gov.

AllRegs, an Eagan, Minn.-based information provider for the mortgage industry, has announced the creation of the FHA Hotline to support the growth of Federal Housing Administration loan programs. The company said the hotline will answer questions about the FHA program, how to become an FHA lender, and the interpretation of regulations and of the housing law signed recently by the president. AllRegs said there are two service-level options: an individual level suggested for mortgage brokers or companies with one or two questions, and a corporate level suggested for branches, regions, or organizations that are moving into the FHA business and need assurance that they will have someone to answer questions. "This new FHA Hotline will provide peace of mind for all those mortgage companies trying to increase their origination volume using the FHA program," said Dan Thoms, senior vice president of AllRegs. To support the hotline, AllRegs said it has entered into an agreement with Mortgage Dynamics Inc., a management consulting firm. AllRegs can be found online at http://www.allregs.com.

Seller-funded downpayment assistance on Federal Housing Administration loans could get a second life under a bill introduced by Rep. Al Green, D-Texas, that also authorizes the FHA to charge risk-based premiums. The Green bill would repeal sections of the recently passed housing bill that bans seller-funded downpayment assistance and institutes a 12-month moratorium on risk-based pricing starting Oct 1. The bill (H.R. 6694) would require the FHA to charge higher mortgage insurance premiums for homebuyers with credit scores below 680 that receive seller-funded downpayment assistance from nonprofit groups, such as Nehemiah Corporation of America and AmeriDream. Borrowers with credit scores below 620 would be charged risk-based premiums. "I have introduced this bipartisan bill to revive this critical program under new standards that will effectively balance the risk of potential foreclosures with the goal of increasing homeownership," Rep. Green said. The Texas congressman introduced the bill on July 30 just before the House adjourned for the August recess.

The Mortgage Asset Research Institute, Reston, Va., has announced the release of the MARI Loan Fraud Alert Service Pro, which helps lenders discover fraudulent loan applications before funding via comparative loan application analysis and identity risk management tools. MARI said its original LFAS is a comparative loan tool that helps uncover patterns of common mortgage fraud schemes. LFAS Pro, with patent-pending technology, takes the process a step further, providing insight into the identity of applicants and information about professionals involved in the transaction, such as mortgage brokers, appraisers, and closing attorneys. LFAS combines the Midex credentialing database with ChoicePoint's identity verification tools and adds the capabilities of a comparative analysis loan tool. "Lenders now have a tool that helps them ensure the loans they are about to make are not tainted by fraudulent activity and detect patterns indicative of fraud within their loan pipeline and other contributed lender pipelines," said Tom Chmielewski, vice president of ChoicePoint Financial Services. MARI can be found online at http://www.marisolutions.com, and ChoicePoint can be found at http://www.choicepoint.com.

Thanks to the recently passed housing bill, veterans can now get zero-downpayment loans through the Department of Veterans Affairs home loan program with a maximum loan amount of $729,750 for the rest of this year. The housing bill (H.R. 3221) puts the VA on par with the Federal Housing Administration, according to VA home loan director Judy Caden. On Jan. 1, the maximum VA and FHA loan limit will adjust to $625,000. The VA has seen a 31% increase in loan originations in fiscal year 2008 and has already surpassed the $25 billion in loans guaranteed by the department in fiscal 2007. Ms. Caden told MortgageWire that veterans are turning to VA mortgages because of tighter underwriting on conventional loans. "They are much tighter, and the no-downpayment feature has dried up," she said. The VA is hoping Congress will extend its authority to make hybrid adjustable-rate mortgages, which expires Sept. 30, and that lawmakers will make it easier for veterans with subprime loans to refinance into a VA loan. Currently, the VA cannot refinance a conventional loan with a loan amount above $144,000, and the veteran has to have 10% equity. The VA could help a lot more veterans if Congress fixes the $144,000 limit and raises it to $625,000. Ms. Caden said.

The Department of Housing and Urban Development should reconsider its approach to RESPA reform and withdraw its current proposal, according to a letter to HUD Secretary Steve Preston signed by 10 industry trade groups. "We have serious concerns about HUD's current Real Estate Settlement Procedures Act proposal, and we oppose its finalization in anywhere near its current form," the July 31 letter says. The trade groups want HUD to work with the Federal Reserve Board and harmonize the RESPA and Truth in Lending Act mortgage disclosures. "If HUD adopts a final rule now, without coordinating with the [Fed] board, it will be to the detriment of consumers, forcing them to confront a baffling host of disclosures, and forcing the mortgage industry to comply with inconsistent rules," the industry groups say in the letter, which was also sent to the White House budget office. The Fed is working on TILA disclosures that provide borrowers with a better understanding of financing costs and mortgage broker fees. The American Bankers Association, the Mortgage Bankers Association, and the National Association of Realtors are among the signers. The associations can be found online at http://www.aba.com, http://www.mortgagebankers.org, and http://www.realtor.org.

Florida regulators have closed First Priority Bank, Bradenton, Fla., after losses on commercial real estate loans crippled the $260 million bank. The Federal Deposit Insurance Corp. will end up selling most of the assets. SunTrust Bank, Atlanta, has assumed all the insured deposits, but purchased none of the real estate assets. A subsidiary of Beal Bank Nevada, Las Vegas, purchased only $42 million of the failed bank's assets. As of March 31, First Priority had $34.9 million in nonperforming real estate loans on its books, up from $4.6 million in the first quarter of 2007. The FDIC estimates that First Priority will cost the deposit insurance fund $72 million. It is the eighth bank to fail this year.

IndyMac Bancorp Inc., Pasadena, Calif., has filed for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Central District of California. The company made the announcement in a Securities and Exchange Commission filing. John Bovenzi, chief executive of IndyMac Federal Bank FSB, the conservatorship created when the Federal Deposit Insurance Corp. seized the thrift, put out a statement saying, "The announcement by the former holding company of IndyMac Bank has no impact on IndyMac Federal Bank or its customers. Our customers will continue to receive the same value and personal service they have come to expect from IndyMac, which, due to its FDIC backing is one of the safest banks in America and a great place for our customers to keep their funds." Fitch Ratings downgraded IndyMac Bancorp's Issuer Default Rating to D and said it would withdraw its ratings of the company in 30 days. IndyMac can be found online at http://www.indymacbank.com.