Compliance & Regulation

The temporary loan limits contained in the recently passed economic stimulus bill should increase FHA mortgage endorsements by 154,000 loans this year, according to HUD estimates. John Garvin, deputy assistant secretary of the Department of Housing and Urban Development, told homebuilders at their annual convention that 85,000 will be purchase loans and 69,000 will be refinancings. The Federal Housing Administration expects to begin processing these higher-balance loans 30 days after President Bush signs the bill. He noted that HUD is calculating the loan limits for metropolitan statistical areas, which should be completed within 30 days. Once HUD publishes the MSAs and issues its mortgage letter, "FHA systems will be ready," Mr. Garvin said. Fannie Mae and Freddie Mac executives said they are working to be ready in 30 days as well. But a lot will depend on HUD's getting the MSA list out and getting its models and controls in place to satisfy the Office of Federal Housing Enterprise Oversight. National Association of Home Builders officials pressed OFHEO Deputy Director Edward DeMarco not to put hurdles in the GSEs' way. He stressed that OFHEO is working cooperatively with Fannie and Freddie. "We understand the importance of getting this moving," Mr. DeMarco said.

Congress will have to appropriate $1.4 billion to keep the Federal Housing Administration operating after Sept. 30 if House and Senate conferees don't agree to allow the FHA to implement risk-based premiums and stop downpayment assistance on FHA loans, according to Housing Secretary Alphonso Jackson. The secretary says in a letter that the Department of Housing and Urban Development "strongly supports" a provision in the Senate's FHA reform bill that prohibits seller-financed downpayment assistance on FHA loans. He also stresses the need for the FHA to price its loans by risk and opposes the restrictions on risk pricing in the House FHA bill and the 12-month moratorium on charging risk premiums in the Senate bill. Regarding loan limits, the secretary says he prefers raising the FHA ceiling from $362,790 to $417,000. HUD does not support raising the maximum to $729,750 on a permanent basis, as provided in the House bill and temporarily in the economic stimulus bill that Congress just passed. The Feb. 11 letter stakes out HUD's position in advance of a conference where House and Senate banking committee members will iron out the final FHA reform bill.

The National Association of Home Builders has frozen all political contributions out of frustration with what it deems feeble efforts by the Bush administration and Congress to stabilize the housing market and stimulate homebuying. "More needs to be done to jump-start housing and ensure the economy does not fall into recession," NAHB president Brian Catalde said. "This action [to cease all NAHB Build-Pac contributions] will remain in effect until further notice." Congress recently rebuffed the builders' request to include a tax credit for homebuyers in the recently passed economic stimulus bill. "We need something powerful to stimulate homebuying," NAHB chief economist David Seiders said, particularly for buyers of new homes and inventory. "We've got to get this inventory knocked down or the chances of getting a housing recovery are really tenuous," he said at the builders' annual convention in Orlando, Fla. Mr. Seiders voiced optimism that the housing market will stabilize later this year, which would help the credit markets and the overall economy. But he warned that all bets are off if housing prices continue to drop. "We already have an unprecedented decline in house values," he said.

Six of the nation's largest servicers -- which control nearly 60% of the $9 trillion residential receivables market -- have agreed to participate in a new Bush administration plan to freeze foreclosures for at least 30 days. Dubbed "Project Lifeline," the program affects both subprime and prime borrowers who are in danger of losing their homes. (The effort was actually created by the servicers, but with the blessing of the Treasury Department.) The servicers in charge of these delinquent loans -- including Countrywide Financial, Wells Fargo, Citigroup, and others -- will contact homeowners who are more than 90 days late, freeze the foreclosure process, and then try to work out a solution for the borrower. According to the Quarterly Data Report, the nationwide foreclosure rate on subprime loans is almost 8%.

AllRegs, an information provider for the mortgage lending industry, has announced that its Ask the Expert--Legal Content Support Services will be offered through Smith Dollar PC, a mortgage banking law firm based in Santa Rosa, Calif. Eligible AllRegs subscribers will have unlimited access to Smith Dollar attorneys who can offer clarification on federal and state laws and regulations that reside in AllRegs' Information Service, AllRegs said. Smith Dollar is a California law firm that represents lenders and secondary-market investors in matters relating to mortgage fraud, lender liability, and regulatory compliance. AllRegs said Legal Content Support Service was created to help mortgage companies clarify the numerous changes in federal, state, and other regulations that affect the mortgage business.

Only 15 counties in California will qualify for the maximum $729,750 loan limit under the economic stimulus bill that temporarily increases loan limits for Fannie Mae, Freddie Mac, and the Federal Housing Administration, according to an FHA official. This translates into six to nine metropolitan statistical areas in the lower 48 states where Fannie, Freddie, and FHA lenders will be able to make a $729,750 jumbo loan, one expert said. FHA Director Joanne Kuczma said HUD should be ready to issue guidance on the MSAs affected by the stimulus bill in a few weeks. The mortgagee letter has been crafted, and now it needs to be cleared by the Department of Housing and Urban Development, she told the finance committee of the National Association of Home Builders. The stimulus bill increases the Fannie and Freddie loan limit from a floor of $417,000 to 125% of median home prices in high-cost areas, with a cap of $729,750. The NAHB said it expects this to increase the GSE loan limit in 29 MSAs. Meanwhile, the floor for FHA loans rises from $200,160 to $271,050. Nearly 85% of counties will have a 125% median house price that falls between $271,050 and $729,750, the FHA director said. HUD generally sets the MSA loan limit based on the highest-priced county.

The Mortgage Bankers Association has promoted John Mechem to senior director of public affairs. In this capacity, Mr. Mechem will be responsible for developing and implementing MBA public affairs campaigns, serving as a primary spokesperson for the association and acting as a liaison between MBA and other industry communications representatives. "John's strategic vision and excellent communications skills have made him an invaluable asset to the MBA," said Jonathan Kempner, MBA's president and chief executive officer. "As the mortgage industry continues to evolve, we are very fortunate to have John communicating on behalf of MBA and our members." Mr. Mechem joined MBA in 2006 from the American Forest & Paper Association after serving as director of communications. He has over 12 years of experience in public and legislative affairs. His background includes serving as press secretary for Sen. Jim Bunning, R-Ky., and previously as deputy press secretary for Sen. Mitch McConnell, R-Ky. He began his career as a legislative assistant for Rep. Jay Kim, R-Calif.

In an effort to warn more delinquent borrowers about a widespread form of foreclosure fraud, Freddie Mac has re-edited the custom-made video it posted to YouTube for Spanish-speaking homeowners. The new Spanish language version of Freddie Mac's anti- fraud video can be found at http://www.youtube.com/AvoidFraud. Like the English-language Internet video Freddie Mac produced and posted in 2007, the Spanish language version uses professional actors to demonstrate how con artists can get copies of foreclosure notices at City Hall or a county courthouse, persuade distressed borrowers to give up the deeds in exchange for suspicious promises to solve their financial problems, use the deeds to secure new loans for themselves and let the new loans go into foreclosure, which means the homeowners looking for help end up losing their house. Freddie Mac decided to produce the anti-fraud videos when a new survey of delinquent borrowers found 25% going to the Internet first for information about managing their mortgages and avoiding foreclosure.

The Office of Management and Budget is expected to complete its review of HUD's RESPA Rule in a "few days" so it can be issued for public comment by the end of February, according to a Housing and Urban Development official. HUD deputy assistant secretary Gary Cunningham said the Real Estate Settlement Procedures Act proposal will enhance the Good Faith Estimate so mortgage applicants receive a clear disclosure of the loan terms and settlement costs. The new GFE will also provide a better disclosure of the mortgage broker fee. Once OMB clears the RESPA proposal, HUD will submit it to Congress for a 15-day review before it is published for a 60-day comment period.

Home sales will remain flat until Congress passes the economic stimulus bill that allows Fannie Mae and Freddie Mac to purchase jumbo mortgages, according to the National Association of Realtors. The Realtors are concerned that homebuyers in high-cost markets are sitting on the sidelines and waiting for Congress to increase the GSE loan limits to 125% of median home prices with a cap of $729,750. NAR also is concerned that operational problems could delay implementation and Fannie and Freddie will not be ready to stimulate sales during the spring home buying season. It would be "cleaner and faster" for the two government-sponsored enterprises to implement a $625,000 nationwide loan limit, NAR spokesman Walter Maloney said. Separately, GSE regulator James Lockhart told a Senate panel it will take Fannie and Freddie two months to set up the systems and models to purchase higher balance loans.