Origination

Comptroller of the Currency John Dugan is urging HUD to require escrow accounts for tax and insurance on FHA-insured reverse mortgages while the banking regulators work on consumer protection guidelines. The Federal Housing Administration-insured home equity conversion mortgage is the predominant reverse mortgage product, Mr. Dugan told an American Bankers Association compliance conference. It is expected to grow substantially in coming years, he said, and "it is a product fraught with consumer concerns." He noted that seniors can receive the loan proceeds in one lump-sum payment and failure to pay taxes and insurance during the life of the loan can lead to foreclosure. "I think it would be a major step forward for HUD to issue guidelines or requirements addressing the escrow issue for HECMs, and I would like to begin dialogue with them on the issue," the Comptroller said.

The seasonally adjusted annual rate of Canadian housing starts increased to 128,400 units in May from 117,600 units in April, in line with expectations that the market will see gradual improvement going forward. "Housing starts are expected to improve through 2009 and over the next several years to gradually become more closely aligned to demographic demand," the CMHC said. The corporation added that it currently estimates demographic demand to be at about 175,000 units per year. Bob Dugan, CMHC's chief economist, said the overall increase seen during May was "broadly based" and consisted of increases within both the single-family and multifamily markets. In urban areas, both multifamily and single-family starts increased by 11.1% on a seasonally adjusted basis during the month. Regionally, the seasonally adjusted annual rate of growth was greatest in Ontario, where it was 22.0%. It was slowest in Quebec, where starts increased only 3.3%.

Flagstar Bank, Troy, Mich., will no longer originate on a wholesale basis conventional products with a loan term longer than 30 years, according to a notice posted through the LendingArt messenger alert system. This goes into effect on June 12; all of the loan applications affected must be locked by June 11. According to the posting, the following product types which may have terms of 35 or 40 years are affected: Fannie Mae 40-year fixed rate; Fannie Mae MyCommunityMortgage; Fannie Mae 3/1, 5/1 & 7/1 LIBOR adjustable-rate mortgages; Freddie Mac Home Possible; and Fannie Mae High Balance.

National Asset Direct Inc., San Diego, has acquired United Residential Lending LLC, Scottsdale, Ariz., a Federal Housing Administration, agency and jumbo lender that does business in 18 states. Terms of the deal were not announced. NAD is a service provider to purchasers of performing and distressed residential mortgage loans and assets; among its subsidiaries are iServe Servicing Inc., iServe Real Estate Operations Inc. and iServe Mortgage Co. Inc. United Residential is being renamed iServe Residential Lending LLC, with its co-founder and chief executive Gary Willis remaining onboard as chief operating officer and co-founder Doug Wilson remaining as chief financial officer. A spokeswoman for NAD said United Residential is being integrated as a separate unit to maintain the FHA approvals and state licenses that it holds. Company executives at NAD said the deal takes it from its roots focused on loss mitigation and asset disposition strategies to being able to offer a full spectrum of lending, refinancing, servicing and real estate disposition services.

Servicers participating in the Obama Administration's loan modification program are required to collect "detailed" racial information to make sure the program is reaching minority communities that were targeted by subprime lenders. The 14 servicers participating in the Making Home Affordable program have agreed in their contracts to collect "very detailed information on race and other characteristics," HUD secretary Shaun Donavan told a the National Fair Housing Alliance. The information will allow "us to monitor and ensure that the solution is impacting the communities that were disparately targeted," the secretary said. The Department of Housing and Urban Development secretary noted that 60% of all loans in African-American communities were subprime in 2005.

New mortgage insurance policies written by the nation's seven MI firms fell by 66% in the first quarter to just $25.4 billion, according to figures compiled by National Mortgage News and the Quarterly Data Report. The poor showing, in part, reflects the huge demand for government insured loans, including FHA and VA-backed product. One MI, Triad Guaranty of Winston-Salem, N.C., did not write one new policy during the quarter, but that firm is in self liquidation mode. At the end of March the MI industry had outstanding policies on $1.04 trillion in home mortgages, or 12% of all outstanding mortgages in the U.S. Over the past 12 months there has been no growth in the policies-in-force number, according to NMN/QDR. The PMI Group, San Francisco, ranked first in policies written with $6.47 billion in 1Q.

Mortgage companies are scrambling to implement an over-looked Truth-in-Lending Act rule that goes into effect July 30 requiring timely delivery of the good faith estimate on home purchases, refinancings, and home equity loans. On applications taken after July 29, lenders must deliver the GFE to the borrower within three business days and they cannot collect any fees before delivery — except for the credit report. The TILA rule also requires lenders to "wait seven business days after they provide the early disclosures before closing the loan," according to the Federal Reserve Board. If the financing charges or annual percentage rate changes, the lender must provide a new disclosure with the revised APR "and wait another three business days before closing the loan," the Fed says. Consumers can waive this three-day waiting period in emergency situations such as a foreclosure. The Fed approved the rule on May 8. The FDIC recently reminded lenders about banks about the rule.

Mortgage companies are scrambling to implement an over-looked Truth-in-Lending Act rule that goes into effect July 30 requiring timely delivery of the good faith estimate on home purchases, refinancings, and home equity loans. On applications taken after July 29, lenders must deliver the GFE to the borrower within three business days and they cannot collect any fees before delivery — except for the credit report. The TILA rule also requires lenders to "wait seven business days after they provide the early disclosures before closing the loan," according to the Federal Reserve Board. If the financing charges or annual percentage rate changes, the lender must provide a new disclosure with the revised APR "and wait another three business days before closing the loan," the Fed says. Consumers can waive this three-day waiting period in emergency situations such as a foreclosure. The Fed approved the rule on May 8. The FDIC recently reminded lenders about banks about the rule.

The European Central Bank has released some details of its plan to purchase euro-denominated covered bonds, including those backed by mortgages. The ECB said that it plans to start the purchases in July and have the program "fully implemented" by the end of June 2010 at the latest. The central bank also said that the purchases would total 60 billion euros ($85 billion) and "will be distributed across the euro area and will be carried out by means of direct purchases" conducted in both the primary and secondary markets. Covered bonds eligible for purchase must, among other things, meet eligibility requirements for Eurosystem credit operations collateral. They also must have an issue volume of about 500 million euros ($708 million) or more or, in any case, a volume no lower than 100 million euros ($142 million). In addition, they must have a minimum rating of AA or an equivalent rating from Fitch, Moody's, Standard & Poor's or DBRS or, in any case, a rating no lower than the lowest investment grade ratings of BBB- or Baa3.

A Republican Congressman from New Jersey is working on legislation to facilitate the issuance of covered bonds in this country and create a market for these bonds that are collateralized by mortgages which remain in the issuing bank's portfolio. "This type of securitization is widely used in Europe to provide liquidity to their mortgage markets and I believe they could be very effective in increasing mortgage funding in the U.S.," Rep. Scott Garrett said at a House Financial Services Committee hearing. He noted that committee chairman Barney Frank, D-Mass., is planning to hold a hearing on covered bonds. The hearing has not been scheduled yet. The Treasury Department has issued guidance on covered bonds and the Federal Deposit Insurance Corp. issued a policy statement on covered bonds in August 2008. But Rep. Garrett contends that investors need more assurance that FDIC will not repudiate a covered bond if an issuing bank fails. A spokeswoman for Rep. Garrett noted that a covered bonds statute would provide more certainty than any regulatory change. "And the certainty could lower transaction costs because the investors and issuers aren't going to be pricing for the uncertainty," spokeswoman Erica Elliott said.