Compliance & Regulation

Ginnie Mae has announced that Financial Freedom, a leading reverse mortgage lender and a subsidiary of IndyMac Bank FSB, has joined Ginnie Mae's Home Equity Conversion Mortgage Mortgage-Backed Securities program as an issuer. The HMBS program provides the only full-faith-and-credit vehicle and the only standardized structure for the securitization of Federal Housing Administration-insured reverse mortgages, according to Ginnie Mae. The HMBS, an accrual coupon pass-through bond, "simplifies the current structure of reverse mortgage securitizations and maximizes value for reverse mortgage lenders and borrowers," Ginnie said. The program allows issuers to securitize initial and subsequent loan draws, mortgage insurance premiums, and servicing and guarantee fees and to receive market pricing on the entire loan amount. Ginnie Mae, a government-owned corporation within the Department of Housing and Urban Development, can be found online at http://www.ginniemae.gov.

Interthinx Inc., Agoura Hills, Calif., has expanded its PredProtect product to allow for loan-level regulatory compliance in order to respond to regional differences in limits for "mini-jumbo" conforming loans. The tool handles loans between $417,000 and $729,000 in California, Colorado, Hawaii, Maryland, New Jersey, New York, Virginia, and Washington, D.C., without waiting for system enhancements or upgrades, the company said. "The new 'mini-jumbo category was introduced to allow consumers to qualify for loans that could be purchased by Fannie Mae and Freddie Mac," said Roger Fendelman, vice president of compliance for Interthinx. "However, since the limits can vary by county or metropolitan statistical abstract, lenders have been faced with challenges to make sure that this new class of loans complies with the maze of existing federal, state, and local consumer protection laws, including anti-predatory-lending laws." Interthinx can be found on the Web at http://www.interthinx.com.

The Office of Federal Housing Enterprise Oversight has reversed course and decided to keep the conforming loan limit at $417,000 in "2009 and subsequent years" in using final guidance on calculating the loan limits for Fannie Mae and Freddie Mac. OFHEO initially proposed to lower the conforming loan limit if house prices declined by more than 1% nationally. Mortgage industry groups opposed the change, and OFHEO backed off as house prices started to decline. OFHEO's index shows that house prices have declined by 3% since January 2007. "The revised guidance responds to the comments that we received and OFHEO's belief that stability in the mortgage market is very important," OFHEO Director James Lockhart said. OFHEO said it will not raise the conforming loan limit "until cumulative increases in house prices exceed cumulative decreases since the $417,000 limit was first reached." The agency can be found online at http://www.ofheo.gov.

Compliance Coach Inc., San Diego, has launched Web-based software that enables compliance with a federal regulation that imposes new responsibilities on businesses to prevent consumer identity theft. The new FACT Act Identity Theft Red Flags Rule requires affected entities to perform a risk assessment and take steps to implement a written Identity Theft Prevention Program by Nov. 1, 2008. Failure to comply can lead to a civil money penalty for each violation, regulatory enforcement action, or private plaintiff lawsuits. Companies are required, among other things, to identify all accounts covered by the rule; perform a risk assessment of each covered account; identify "red flags" that may indicate identity theft; develop a written program; provide training to appropriate employees; and provide a compliance status report at least annually. CompliancePal walks the user through a series of questions to help users meet the requirements. The company can be found on the Web at http://www.compliancecoach.com.

A coalition of reverse mortgage counseling agencies and experts on caring for the elderly has announced the formation of the National Housing Counseling Association. The NHCA will support 501(c)(3) housing counseling agencies approved by the Department of Housing and Urban Development in the delivery of reverse mortgage counseling services, the organization said. "With the near exhaustion of available HUD funds for [Home Equity Conversion Mortgage] counseling, and the delay in HUD's borrower pay regulation, many counseling agencies are being forced to cut back on counseling services," said NHCA spokesman Chuck Stanley. "NHCA has developed an industrywide approach to accessing additional grant funds without the perceived conflict of interest associated with direct contributions by individual reverse mortgage lenders."

When the Senate takes up a foreclosure prevention bill during the first week of April, the legislative package will not include a $300 billion Federal Housing Administration program to refinance distressed homeowners, according to Sen. Charles E. Schumer, D-N.Y. Before the Easter recess, Rep. Barney Frank, D-Mass., and Sen. Christopher J. Dodd, D-Conn., unveiled a legislative proposal that would help 1 million homeowners in "underwater" mortgages refinance into affordable FHA-insured mortgages. Sen. Dodd said he would like to include the FHA proposal in the foreclosure prevention bill. But it appears that Senate leaders have nixed it. Speaking on an ABC-TV news program, Sen. Schumer said the Frank-Dodd proposal has to be "done in a careful way, and we are not proposing that" as part of the foreclosure package. The New York senator stressed that the foreclosure bill will include "modest proposals" that provide for more housing counseling, increase mortgage revenue bonds, and create a net operating loss carry-back for homebuilders. Rep. Frank, the House Financial Services Committee chairman, has scheduled an April 9 hearing on the FHA refinancing proposal.

The 12 Federal Home Loan Banks have been given a green light by their regulator to purchase over $100 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac over the next two years to provide additional liquidity for the MBS market. The Federal Housing Finance Board agreed by notational vote to raise the cap on MBS investments from 300% to 600% of capital as part of the government's effort to help stabilize the housing market. The FHLBanks held $136.4 billion in MBS as of Sept. 30. Fannie and Freddie will be testing the market soon with the issuance of jumbo MBS for the first time. In addition, the Finance Board said the FHLBanks can purchase agency MBS that are secured by subprime and nontraditional mortgages that meet federal regulatory guidance. "Increasing the agency MBS investment authority for the banks is another way in which the FHLBank System can perform its traditional mission," said Finance Board Chairman Ronald Rosenfeld. Fannie's and Freddie's regulator recently relaxed their capital requirements so the two government-sponsored enterprises could expand their investment portfolios and purchase $200 billion in mortgage loans and MBS.

There are conflicts in the way the Federal Reserve Board's Home Owners Equity Protection Act regulatory proposal and the Department of Housing and Urban Development's Real Estate Settlement and Procedure Act regulatory proposal treat yield spread premiums, an official with the Mortgage Bankers Association pointed out. Speaking at the Regional Conference of Mortgage Bankers Associations here, Ken Markison, MBA senior director and regulatory counsel, said the two parties need to get together to work out the differences. From a mortgage banker point of view, it is important in terms of their liability. The Fed proposal prohibits the payment of a YSP unless the mortgage broker has a written agreement setting forth the terms of his or her compensation. But HUD's RESPA proposal calls the YSP "the charge or credit for the interest rate chosen." It is a real conflict in terms of clarity, Mr. Markison said. If it is not resolved, it could leave lenders and mortgage brokers holding the bag in trying to explain it to consumers.

House Financial Services Committee chairman Barney Frank, D., Mass., said he will push for stricter regulations and capital standards for investment banking firms in the wake of the nation's mortgage crisis. "These investment houses are going to have to be regulated so they are not able to get themselves into the kind of trouble that then causes a serious economic problem for the whole country or requires us to help them out," Rep. Frank said late Wednesday. His comments came a few days after the Federal Reserve arranged for the sale of Bear Stearns -- a major securitizer and investor in subprime loans -- to JPMorgan Chase for $2 a share. (A year ago Bear was trading at $160 a share.) "There should be some reserve requirements, yes," said Rep. Frank when asked whether investment banks should face similar requirements as commercial banks. Speaking after a town hall meeting in Boston, Frank said placing stricter regulations on Wall Street will be a top priority in the coming year.

OFHEO has formally agreed to loosen capital requirements on Fannie Mae and Freddie Mac in a move the agency expects to provide up to $200 billion in immediate liquidity to the MBS market. OFHEO estimates that combined with existing capabilities, the new initiative should allow the government-sponsored enterprises to purchase or guarantee about $2 trillion in mortgages this year. Under the plan, OFHEO is reducing its 30% capital surplus requirement on Fannie Mae and Freddie Mac to 20%. OFHEO said it will consider further reductions in the future. The deal requires the GSEs to raise additional capital as well.