FHA/VA – Page 2 – Consumer Financial Services Watch

HUD’s Proposal to Terminate FHA Insurance Policies Could Terminate the FHA Program

Sep 01 2015

If there is anything that galls servicers of government-insured loans, it is the forfeiture or curtailment of all accrued interest from mortgage insurance claims resulting from the failure to foreclose fast enough within artificially created state time lines. At first glance, the U.S. Department of Housing and Urban Development (“HUD” or the “Department”) listened to the complaints of servicers who argued that they should not be penalized for pursuing foreclosure avoidance options or experiencing delays in the legal system beyond their control. HUD’s proposed regulation regarding changes to the Federal Housing Administration’s (“FHA”) single-family mortgage insurance claim filing process includes proposals that pro rate the curtailment of interest based on actual delays caused by the servicer, proposing to eliminate the complete forfeiture of accrued interest for only one day of delay. So far, so good, but HUD did not stop there. HUD also proposed the complete extinguishment of an FHA insurance policy if the servicer does not complete foreclosure within a new set of artificial time lines. Read together, HUD’s reform is to provide servicers with more accrued interest if they do not foreclose fast enough, unless, of course, HUD invalidates the whole insurance policy—the loss of both principal and interest—by virtue of HUD’s subjective definition of unreasonable delays. Few servicers think that is progress.

This proposal raises significant questions and concerns for FHA mortgagees that hold and service FHA-insured loans, many of which could have a chilling effect on FHA lending and servicing activities if HUD were to implement the proposed claim filing deadline as proposed and without significant changes to HUD’s claim filing guidelines and procedures.

STATEMENT OF PAUL F. HANCOCK, K&L GATES LLP, ON DECISION OF U.S. SUPREME COURT UPHOLDING ‘DISPARATE-IMPACT LIABILITY’ UNDER THE FAIR HOUSING ACT

Jun 25 2015

By: Paul F. Hancock

The Court’s decision today resolves an important legal issue about which there has been principled disagreement among White House administrations, as well as among advocacy and industry groups, for decades. While the Court, by a razor thin margin, upheld the application of disparate impact under the Fair Housing Act, the Court also imposed important limitations on the application of the legal theory. For example, the Court held that a racial imbalance, without more, does not establish a case of discrimination, and directed lower courts to “examine with care” the claims presented at the pleading stage. The Court further directed that remedial orders in disparate impact cases must “concentrate on the elimination of the offending practice” and employ “race-neutral [remedial] means.” The limitations that were announced were believed necessary by the Court to “avoid serious constitutional questions that might arise” and “to protect potential defendants against abusive disparate-impact claims.”

HUD Reached Record-Breaking Settlement in Redlining Case

Jun 01 2015

By: Melanie Brody, Tori Shinohara, Christa Bieker

On May 26, 2015, the Department of Housing and Urban Development (“HUD” or the “Department”) announced an approximately $200 million settlement with Associated Bank resolving allegations that the bank engaged in racial redlining in violation of the Fair Housing Act.

Navigating HUD’s New Single Family Housing Policy Handbook

Feb 17 2015

By: Phillip L. Schulman, Holly Spencer Bunting, Krista Cooley, Emily J. Booth-Dornfeld, Christa Bieker

Last fall the Department of Housing and Urban Development (“HUD”) issued the first section of its new Single Family Housing Policy Handbook (“Single Family Handbook” or “Handbook”). The Single Family Handbook is designed to achieve a consolidated, authoritative source of single-family housing policy. In addition to consolidating all policy into a single document, the Handbook makes numerous substantive changes to Federal Housing Administration (“FHA”) requirements. The Handbook will be effective for FHA-insured loans with case numbers assigned on and after June 15, 2015. This client alert analyzes key changes introduced by the Handbook.

To read the full alert, click here.

Webinar: Navigating the New HUD Origination Handbook

Jan 15 2015

27 January 2015

2:00 – 3:30 p.m. EST

With the New Year comes impending changes to FHA origination, underwriting, and closing guidelines in the form of HUD’s updated FHA’s Single Family Housing Policy Handbook 4000.1. As announced on September 30, 2014, FHA’s origination through post-closing and endorsement sections of its new Single Family Housing Policy Handbook will be effective for FHA-insured loans with FHA Case Numbers assigned on and after June 15, 2015. With less than six months until these new requirements go into effect, mortgagees need to focus on these important requirements that will govern origination through post-closing and endorsement. It is imperative that mortgagees familiarize themselves with the new lending guidelines and ensure that their systems, procedures, underwriting practices, and personnel will be ready to go by June 15, 2015. Quality Control departments would also benefit from a review of these requirements, as they may need to amend their review processes to identify and resolve any findings of noncompliance with the amended guidelines.

On Tuesday, January 27, 2015, from 2 p.m. to 3:30 p.m. EST K&L Gates will sponsor a webinar in which we will discuss the most significant changes to HUD origination and underwriting requirements included in the new Handbook. We will leave time at the end of the webinar to answer your questions. We hope you will be able to join us.

Presenters:

• Phillip L. Schulman, Partner, Washington, D.C.

• Krista Cooley, Partner, Washington, D.C.

• Holly Spencer Bunting, Partner, Washington, D.C.

• Emily J. Booth-Dornfeld, Counsel, Washington, D.C.

To RSVP, click here.

FHA Announces Annual Mortgage Insurance Premium Reductions

Jan 14 2015

By: Krista Cooley, Kara M. Ward

Last week, President Barack Obama announced that, at the end of this month, the U.S. Department of Housing and Urban Development (“HUD” or “Department”) will implement a 50-basis-point reduction in the annual mortgage insurance premium (“MIP”) borrowers pay to obtain a Federal Housing Administration (“FHA”) insured loan. On Friday, HUD released Mortgagee Letter 2015-01, as well as instructions on FHA Case Number assignments, which include details about the timing and scope of the annual MIP reduction. Below, we summarize these events.

FHA Annual Premium Reduction

In Mortgagee Letter 2015-01, HUD announced revised annual MIP rates for most FHA-insured, Title II forward mortgages. Specifically, for FHA-insured loans with terms greater than 15 years, the Department will reduce the annual MIP rate by 50 basis points. Depending on the loan amount and loan-to-value (“LTV”) ratio, the new annual MIP rates will range from 80–105 basis points. For example, for an FHA-insured loan with a term greater than 15 years, a base loan amount less than or equal to $625,500, and an LTV ratio greater than 95%, the annual MIP rate will be reduced from 135 to 85 basis points. The reduced annual MIP rates will apply to FHA-insured purchase-money loans, as well as FHA-insured refinance loans with loan terms greater than 15 years. The annual MIP rates for FHA-insured loans with terms of 15 years or less remain unchanged. HUD also did not make any changes to the upfront MIP paid by borrowers at the closing of FHA-insured loans at this time.

Mortgagee Letter 2015-01 contains a notable exclusion from the annual MIP rate reduction announcement. Pursuant to a policy implemented in 2012 that was designed to encourage borrowers with existing FHA-insured loans to refinance into a lower rate loan without incurring a higher annual MIP rate, the annual MIP rate for single-family streamlined refinance transactions that refinance existing FHA-insured loans that were endorsed on or before May 31, 2009, has remained at 55 basis points. When HUD increased annual MIP rates in 2013, it excluded this specific subset of FHA streamlined refinance transactions from those increases. Similarly, Mortgagee Letter 2015-01 excludes this limited subset of streamlined refinance transactions from the Department’s most recent announcement, to provide borrowers with existing FHA-insured loans endorsed on or before May 31, 2009, the continued opportunity to refinance into another FHA-insured loan while maintaining an annual MIP rate of 55 basis points. Mortgagee Letter 2015-01 also excludes loans insured under Section 247 of the National Housing Act from the most recent annual MIP reduction announcement.

Eminent Enabler: Congress Prohibits HUD and Ginnie Mae from Facilitating Local Government Seizure of Mortgage Loans

Dec 22 2014

By: Laurence E. Platt

At least for the next year, Congress has materially impaired the ability of local governments to seize underwater residential mortgage loans through eminent domain by cutting off federal insurance or guarantees to refinance the seized mortgages and then securitize the refinancings. Without this federal “take out” through mortgage insurance provided by the Federal Housing Administration (“FHA”), and guarantees of mortgage-backed securities by the Government National Mortgage Association (“Ginnie Mae”), local governments will have to find private sources of long-term funding to pay for loans that they attempt to seize.

CFPB Issues Guidance to Mortgage Lenders on Verifying Disability Income

Nov 20 2014

By: Melanie Brody, Stephanie C. Robinson, Jay M. Willis

On Tuesday, the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) issued a compliance bulletin, CFPB Bulletin 2014-03, to help lenders avoid discrimination against recipients of Social Security Administration (“SSA”) disability income in violation of the Equal Credit Opportunity Act and its implementing regulation, Regulation B.

Creditors may occasionally feel stuck between a rock and a hard place when underwriting mortgage loans for disability income recipients. On the one hand, creditors have a legal obligation to ensure that applicants are able to repay any credit extended. When an applicant receives public assistance, Regulation B expressly allows creditors to consider the length of time that such assistance is likely to continue. On the other hand, while SSA provides recipients with disability benefits documentation, that documentation generally does not detail how long benefits will last. Creditors seeking to responsibly underwrite mortgage loans must somehow make that determination on their own.

A Hard Rain Has Started to Fall A Product-by-Product Review of the CFPB’S First 60 Enforcement Actions

Nov 12 2014

By: Jon Eisenberg

Between July 17, 2012 and October 9, 2014, the Consumer Financial Protection Bureau brought 60 enforcement actions. According to our unofficial tally, they resulted in settlements requiring the payment of $2.2 billion in restitution, $174 million in CFPB civil money penalties, and, in a few cases, other forms of consumer relief. In this alert, we discuss the products and alleged practices that led to those recoveries. Our purpose is simple—what’s past is likely prologue when it comes to CFPB enforcement actions. Understanding the conduct that produced the first 60 enforcement actions will help companies avoid becoming one of the next 60 enforcement actions.

To read the full alert, click here.

VA Issues Interim Final Rule Defining Qualified Mortgages

May 12 2014

By: Jonathan D. Jaffe, Eric Mitzenmacher

On May 9, the United States Department of Veterans Affairs (“VA”) issued an interim final rule defining which VA-guaranteed and VA-originated loans will have qualified mortgage (“QM”) status under the Truth-in-Lending Act’s (“TILA’s”) Ability to Repay (“ATR”) rule. Read More

Catagory:FHA/VA