Tag Archives: FHA

How the FHA May Impact the Supreme Court Foreclosure Ruling

In a 5-3 decision on Monday, the U.S. Supreme Court determined that cities can sue banks over lost tax revenue on foreclosed properties from urban blight. Law360 reported that Miami has the standing to sue Bank of America Corp. and Wells Fargo & Co. under the Fair Housing Act, stating that the banks’ discriminatory and predatory lending practices led to a major shortfall in city tax revenues.

The final ruling is not up to the high court, however, as the Supreme court sent the case back to the Eleventh District, in order to determine whether the banks’ lending practices were “proximate cause” for the damages. Law360 reported that all eight justices rejected the probable cause argument.

“The ruling is clearly a concern for lenders who believed cities did not have sufficient standing in order to assert claims that are more appropriate to be brought by the ultimate aggrieved parties, which should be the borrowers, assuming of course the allegations are true,” said Shaun K. Ramey, Shareholder, Sirote and Permutt, P.C. “That being said, although the Court granted cities the right to file suit, they set a high bar for proving proximate causation so the impact of the Supreme Court’s decision may not be as broad as it appears at first blush.”

Read on.

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Watchdog: HUD lacks sufficient oversight for borrower-financed down payment programs

Report finds HUD “failed to adequately oversee” more than $16 billion in FHA loans

The Department of Housing and Urban Development’s lack of oversight into borrower-financed down payment assistance programs for Federal Housing Administration-insured loans puts borrowers and the FHA’s flagship insurance fund at “unnecessary risk,” HUD’s watchdog said in a new report.

According to the report from the Office of Inspector General for the U.S. Department of Housing and Urban Development, HUD “failed to adequately oversee” billions of dollars in loans that may have “questionable down payment assistance,” thereby putting the FHA’s Mutual Mortgage Insurance Fund at risk because of borrowers with higher than market interest rates.

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Quicken Loans begins long journey with DOJ over FHA violation charges

Monday marked the first of what will likely be many hearings between Quicken Loansand the Department of Justice before U.S. District Judge Mark A. Goldsmith over FHA lending violation charges.

The two parties are first meeting for a hearing on Quicken Loans’ request to have the case dismissed, but if denied, the trial will begin in April 11, 2019.

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Nonbanks dominate FHA-backed mortgages

Housingwire:

Nonbank’s share of Federal Housing Administration-backed mortgages crossed $1 trillion for the first time in November 2016, according to an article in The Wall Street Journal by Annamaria Andriotis.

From the article:

Ginnie Mae head Ted Tozer, who is leaving his position Friday, has said nonbank lenders may lack the financial wherewithal to withstand future stress in housing. In the worst-case scenario, problems could saddle taxpayers with losses.

“This is the biggest shift in mortgage lending since the savings-and-loans debacle in the 1980s,” Tozer said in a recent interview with The Wall Street Journal. The biggest nonbank FHA lenders include companies such as Quicken Loans Inc., Freedom Mortgage Corp. and Guild Mortgage Co.

However, not everyone agrees with Tozer.

From the article:

Mortgage bankers say Tozer’s concerns, while well meaning, are overblown. “It would take a significant rise in delinquencies to get to the place he’s talking about,” said Pete Mills, senior vice president of residential policy and member engagement at the Mortgage Bankers Association.

Tozer’s “concerns are valid in general because banks do have deeper pockets than nonbanks,” said David Battany, executive vice president of capital markets at Guild Mortgage. But he added, “We view that we are adequately capitalized to make advances in high-default scenarios.”

Source: WSJ

Borrowers: This is how the FHA mortgage insurance premium suspension impacts you

Housingwire:

For borrowers looking to buy a home now or soon, Tim Manni, mortgage expert atNerdWallet, helped explain how this news impact their situation.

“With the annual premium now remaining at 0.85% for most FHA borrowers, it renews the debate among first-time buyers whether an FHA or conventional loan makes the most sense,” said Manni.

Manni stated that the impact depends on a borrower’s credit situation.

Here’s what is means for borrowers with good credit:

If you’re a borrower with good credit, today’s announcement should motivate you to consider multiple home loan options, not just an FHA loan, even if you don’t have much saved for a down payment. It’s important to remember that while FHA interest rates tend to be lower than some conventional mortgages, the insurance premiums could cost you more over the life of the loan. With both an upfront premium, as well as an annual premium that never goes away, comparing the insurance costs alone between an FHA and conventional loan could make your decision a lot easier.

Here’s what is means for borrowers with poor credit:

“On the other hand, if you’re a borrower with poor credit, an FHA loan is likely to be your only option. Since Obama’s reduction hadn’t yet gone into effect, it simply means it’s back to business as usual in terms of what an FHA loan will cost you. The reduction was slated to save new FHA borrowers about $42 a month in the first year. That amount should not be a make-or-break number for any homebuyer. If you’re in the process of applying for a mortgage and your housing costs leave you little financial wiggle room each month, you need to adjust the amount of income you’re dedicating to your home loan and shop for cheaper homes.”

Making FHA more expensive gives competitive advantage to other loans

Reversing a .25% cut in FHA insurance rates = $500 a year on a $200,000 home. And certainly states like New York, Florida (especially the beach areas), and New Jersey (especially coastal areas) will be affected…

The Intercept:

January 20 2017, 1:02 p.m.

Ben Carson, who Trump has nominated to replace Castro, said at his confirmation hearing that he would “really examine” the FHA insurance cut, and that he wasn’t consulted about it. Conservatives have warned for yearsthat the MMIF is dangerously insolvent, despite the recent robust balance sheet.

In addition, by making FHA loans more expensive, traditional bank mortgages become more competitive. Banks typically earn more in profit from of their own products than from FHA loans. So this initial Trump policy also generates a competitive advantage for mortgage lenders to make more money for their business.

Based on analysis by Attom Data Solutions, the reversal means an extra $446 million for the MMIF, and concurrently that much less in the pocketbooks of an estimated 1 million homebuyers projected to take out FHA loans in 2017.

Trump’s inaugural rhetoric on “transferring power from Washington, D.C., and giving it back to you, the people” is at odds with the specific action of increasing fees on middle-class homebuyers to bolster a government insurance fund.

Because more expensive home markets would be more affected by the increase, the reversal certainly hits liberal America harder. Counties like Santa Clara, Alameda, and Santa Cruz, California, and Honolulu and Maui, Hawaii, would see the biggest increases, from $1,253 to $1,448 annually.

Day 1 for President Trump: HUD suspends FHA mortgage insurance premium cut

And yes, the FHA insurance will go up and will hurt low income and middle class homeowners…

The Department of Housing and Urban Development announced it suspended the reduction of Mortgage Insurance Premiums, effective immediately.

HUD sent out an announcement just an hour after President Trump was sworn in on Friday, stating that the cuts have been suspended indefinitely.

The letter, found here, stated that the FHA will issue a subsequent Mortgagee Letter at a later date should this policy change.

“FHA is committed to ensuring its mortgage insurance programs remains viable and effective in the long term for all parties involved, especially our taxpayers,” the letter stated. “As such, more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.”

Right before leaving office, the Obama administration cut FHA mortgage insurance premiums, marking the second time it reduced premiums in two years.
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