Treasury Secretary Unveils Small Steps to Augment Loan Modification Program

The Obama administration will extend its Making Home Affordable initiative for at least one additional year, through 2016. The suite of federal programs was a key part of the White House's plan to help homeowners in the wake of the financial meltdown. The cornerstone of Making Home Affordable is a mortgage modification program known as HAMP, which has led to more than 1.3 million loan restructurings. However, the number of workouts is far fewer than anticipated. The administration also will takes steps to improve mortgage availability and address rising rents. Treasury Secretary Jacob Lew announced the new measures at a conference observing the fifth anniversary of Making Home Affordable, and housing advocates applauded the extension primarily because there is no replacement for it. Lew also urged Congress to extend the Mortgage Debt Relief Act but did not breach the topic of principal reduction.

From "Treasury Secretary Unveils Small Steps to Augment Loan Modification Program"
New York Times (06/27/14) P. B3 Dewan, Shaila

Keating Talks Housing Market on Fox Business


It’s harder for younger Americans to get mortgages, ABA President and CEO Frank Keating told host Maria Bartiromo yesterday on Fox Business’ “Opening Bell” program.

“I bought my first house when I was 27,” Keating said. “Now our estimates are that the average young person today will be 37 or even 40 the first time they have an opportunity to buy a home.” He attributed this to high prices as a percentage of income, a soft job market and heavy student loan debt.

Regulatory burden is also inhibiting the market, Keating explained. “We also face 4,000 pages of existing mortgage rules, 2,000 more pages of mortgage rules going forward in 2015,” he explained. “It’s not a friendly market."

--ABA Daily Newsbytes

Risky Form of Reverse Mortgage Nipped in the Bud by HUD

The FHA announced that it will no longer insure fixed-rate, line of credit reverse mortgages due to interest rate risk to lenders. This variation of the product commits lenders to funding additional draws at a fixed rate even if their own borrowing costs rise and ultimately threatens the FHA's insurance fund if lenders are unable to honor their commitment, according to a June 18 letter to originators. The product also raised concerns soon after its debut because many Home Equity Conversion Mortgage borrowers mistakenly assume that a fixed-rate reverse product is the better and more conservative option for them. Ginnie Mae banned fixed-rate, line of credit reverse mortgages from its securitizations this year due to similar concerns. Lenders started making the loans in October, and most stopped after the Ginnie Mae policy change.

From "Risky Form of Reverse Mortgage Nipped in the Bud by HUD"
American Banker (06/24/14) Sinnock, Bonnie

Keating Discusses Barriers to Homeownership on CNBC

"With a combination of rising house prices, a modest recovery, young people with a lot of student loan debt and very rigid mortgage rules, we've seen less [housing] activity than we'd like to see," ABA President and CEO Frank Keating told the hosts of CNBC's Nightly Business Report last night.

Keating noted that new regulations like the Qualified Mortgage rule pose a particular problem for younger borrowers who may not be able to meet the more stringent QM criteria.

"A home is a great investment long term. And I would hope that we would get some rationality in these regulations so young people can have a shot at [homeownership]," he said.

Existing Home Sales Jump in May


Existing home sales jumped 4.9 percent in May to a seasonally adjusted annual rate of 4.89 million, the National Association of Realtors said yesterday. The increase was the biggest month-on-month gain since August 2011. Sales remained 5 percent below their rate a year before. At $213,400, the median sales price for May was 5.1 percent higher than the year before.

--ABA Daily Newsbytes

Housing Starts Slip in May

Housing starts fell 6.5 percent in May to a seasonally adjusted annual rate of 1 million units, the Commerce Department reported yesterday. Starts were 9.4 percent above their rate a year ago. Permits for new construction, which are considered a gauge of future demand, fell 6.4 percent to an annual rate of 991,000.

---ABA Daily Newsbytes

Why Mortgage Down Payment Requirement Is So Hard to Relax

Even as Washington explores strategies to improve access to credit, lowering down-payment criteria for mortgages continues to be ignored as a potential solution. March data, for instance, show that purchase mortgages with loan-to-value ratios between 96 percent and 100 percent made up the smallest slice of the origination market since at least 2000. Fannie Mae and Freddie Mac now require a minimum 5 percent contribution from most buyers, and while the FHA will insure loans with equity as low as 3.5 percent, rising premiums are making its products more costly. The industry is worried about losses from defaults, which are much greater on low-down payment mortgages. But National Association of Hispanic Real Estate Professionals President Jason Madiedo says even a slight drop in the requirement could be a huge help to borrowers -- especially in the Latino community. Moreover, he adds, "I don't think down payment amount has been as big a factor as income and credit portfolio in the performance of a mortgage."

From "Why Mortgage Down Payment Requirement Is So Hard to Relax"
American Banker (06/13/14) Sinnock, Bonnie

Underused VA Mortgage Program Makes Inroads as FHA Costs Rise

More active-duty service members, as well as veterans, are seeking out home loans guaranteed by the Department of Veterans Affairs. Participation in the VA mortgage program is rising because specialists in the niche are promoting it more and because other low-down-payment products have become more costly. A spike in FHA mortgage insurance premiums is making VA more attractive, according to Megan Booth, senior policy representative at the National Association of Realtors. "There is not a Realtor alive today that thinks FHA is a better deal" for veterans, she says. "That is helping the VA grow and it will continue to help the VA grow." VA lenders originated a record 629,300 single-family loans in fiscal 2013, which ended Sept. 30. The agency endorsed 90,820 single-family loans in the fiscal second quarter, totaling $20.1 billion, down 10.5 percent from the prior quarter. Sixty-three percent of VA loans are going to home buyers rather than for refinancing, agency officials add.

From "Underused VA Mortgage Program Makes Inroads as FHA Costs Rise"
American Banker (06/12/14) Collins, Brian

House Passes Tweak to Loosen QM Rule

The Mortgage Choice Act won U.S. House approval by way of a late June 9 voice vote. The measure would count neither insurance and taxes held in escrow nor fees paid to affiliated companies as "points and fees," which are limited to 3 percent of the total loan cost under the Consumer Financial Protection Bureau's qualified mortgage rule. The act aims "to promote access to affordable mortgage credit without overturning the important consumer protections and sound underwriting required under Dodd-Frank's 'ability to repay' provisions," said Rep. Bill Huizenga (R-Mich.), who co-sponsored the bill with Rep. Gregory Meeks (D-N.Y.) "These common-sense changes will promote access to affordable mortgage credit for low and moderate income families and first-time homeowners by ensuring that safer, properly underwritten mortgages pass the QM test."

From "House Passes Tweak to Loosen QM Rule"
American Banker (06/11/14) Finkle, Victoria

Mortgage Rates Edge Back Up

The average rate for a 30-year fixed-rate mortgage rose very slightly to 4.14 percent from the previous week’s 4.12 percent, Freddie Mac said yesterday. At this time in 2013, the 30-year FRM rate averaged 3.91 percent.

House to Vote on ABA-Backed Mortgage Reform Bill

The House will vote today on the ABA-backed H.R. 3211 -- introduced by Rep. Bill Huizenga (R-Mich.) -- which would clarify the Qualified Mortgage points and fees test to exclude lender-paid compensation to a bank in a wholesale transaction.

As ABA explained in a May 5 memo to House Financial Services Committee members, inclusion of this payment, as required under current law, can cause a loan to exceed the 3 percent cap on points and fees, while a loan with the same interest rate and out-of-pocket costs made by a retail lender would not.

Meanwhile, the House Financial Services Committee will meet at 10 a.m. tomorrow to consider several Consumer Financial Protection Bureau reform bills. The markup was rescheduled from two weeks prior.

The bills include measures to create a separate CFPB inspector general, apply sunshine rules to CFPB advisory board meetings, create a small business advisory board within the bureau, require the CFPB to disclose data underlying its findings, create an opt-out mechanism for consumers who do not want the bureau to collect their data and require a notice-and-comment process for CFPB guidance.

CFPB Director Richard Cordray will deliver his semiannual report to the Senate Banking Committee tomorrow at 10 a.m., and a House Financial Services subcommittee will discuss coins and currency on Wednesday at 11:30 a.m.


---ABA Daily Newsbytes

The Flip Side of Weak Lending: Higher Pull-Through Rates

Weak demand for home loans is helping lenders become more proficient, improving their ability to close loan applications in a shorter period of time. Lenders are spending fewer man-hours processing loans that do not result in a home sale. Mark Fleming, chief economist at the data and analytics firm CoreLogic, says, "We're not doing a lot of sales and those (borrowers) that do apply appear to be pulling through." Although 45 percent of loan applications were not funded or approved in April, Ellie Mae reports the average pull-through rate fell from 58 percent in March to 55 percent in April. Meanwhile, it took 39 days on average to close a loan in April, compared with 40 days in March and a high of 55 days in December 2012. Closed loans had an average FICO score of 726, a loan-to-value ratio of 82 percent, and a total debt-to-income ratio of 37 percent, compared with an average FICO score of 680, an LTV ratio of 82 percent, and a total debt-to-income ratio of 44 percent for denied loans.

From "The Flip Side of Weak Lending: Higher Pull-Through Rates"
American Banker (06/03/14) Berry, Kate

Borrowers Show No Rush to Grab U.S. Rate Break

U.S. mortgage rates were forecast to escalate this year but instead are dropping. Interest rates unexpectedly declined after the Federal Reserve began scaling back its stimulus plan that had kept borrowing costs near historic lows since 2011. Rates on 30-year fixed loans dipped to 4.12 percent this week -- the lowest level in seven months, according to Freddie Mac -- and have now declined for five straight weeks. Still, the decline in borrowing costs has so far done little to boost sales, which have been hindered by tight credit and low inventories. The National Association of Realtors and Moody's Analytics have lowered their 2014 outlooks for 30-year loan rates but still expect the benchmark to move closer to 5 percent by the end of the year. "It's a temporary window of opportunity for buyers in that a year from now rates will be higher," says Moody's chief economist Mark Zandi.

From "Borrowers Show No Rush to Grab U.S. Rate Break"
Bloomberg (05/30/14) Gopal, Prashant; Leondis, Alexis