Jun
17
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Jun
14
Click the post title above to watch today’s show. Catch all your real estate news and mortgage news and commentary with Frank Garay and Brian Stevens right here at the National Real Estate Post!
Jun
13
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Jun
12
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Jun
11
http://thenationalrealestateclassifieds.com/hiring-now/residential-finance-corportation/
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Jun
11
http://thenationalrealestateclassifieds.com/hiring-now/residential-finance-corportation/
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Jun
10
FHA could stop charging extra interest on mortgage payoffs
Consumer protection regulators press the FHA to revise a policy of collecting a full month’s worth of interest even when borrowers pay off their loans earlier in the month.
By Kenneth R. HarneyJune 7, 2013, 7:35 p.m.
WASHINGTON — Pressured by consumer protection regulators, the Federal Housing Administration is expected to end one of its most controversial practices: charging borrowers interest on their home mortgages for weeks after they’ve paid off the entire principal balance.
FHA officials declined to discuss the agency’s long-standing policy of collecting a full month’s worth of interest — hundreds of dollars extra in many cases — even when borrowers terminate their loans earlier. For instance, if you pay off your FHA loan July 3 to buy a new house with a conventional mortgage, the FHA will demand interest charges on your mortgage through July 31, collecting it out of the settlement proceeds.
But under the Consumer Financial Protection Bureau‘s “qualified mortgage” rules, charging interest after a principal balance payoff “is the functional equivalent of a prepayment penalty,” according to the bureau. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the bureau, prohibits prepayment penalties on qualified mortgages — that is, residential loans that incorporate key consumer safeguards and are underwritten to limit risks for lenders and borrowers alike.
Qualified mortgages are expected to become the gold standard for home loans in the coming years and will offer the lowest rates and best terms available in the marketplace. The Dodd-Frank law designates the consumer bureau as the federal government’s drafter of rules spelling out what constitutes a qualified mortgage.
Among major players in the mortgage field, the FHA is the only one that requires full-month interest payoffs. Fannie Mae, Freddie Mac and the Department of Veterans Affairs all stop collecting interest on the day of payoff.
For more than a decade, the FHA’s practice has drawn congressional and real estate trade group criticism, most recently from Sen. Benjamin L. Cardin (D-Md.), who sponsored legislation during the last Congress that would have banned it. The National Assn. of Realtors also has been a vocal critic and has launched multiple efforts in recent years to persuade the agency to abandon its policy, all to no avail.
The realty group estimated that during one year alone — 2003 — the FHA collected $587 million in “excess interest fees.” With today’s lower interest rates, the sums involved probably would be lower, although the FHA’s loan portfolio and market share have increased.
Cardin, who typically is a strong supporter of the housing agency, complained in a statement introducing his legislation that “this is an issue of fairness. Homeowners should not have to pay interest on loans that they have fully repaid.”
The FHA’s policy, which is tied to a guarantee of a full month’s interest payments to investors in so-called Ginnie Mae mortgage-backed bonds, has had the side effect of encouraging many borrowers to seek to pay off their loans as close as possible to the final days in the month to avoid the hefty interest penalties.
However, when mortgage lenders, title companies and settlement firms are busy — as they have been lately — it’s often not possible to schedule an end-of-the-month settlement, causing some refinancers and sellers to pay more at the closing than they expected. Those extra payouts can be shocks to unwary sellers and refinancers who have modest incomes and resources, as many FHA borrowers do.
In its final qualified mortgage regulation, which goes into effect next January, the consumer bureau said it had “consulted extensively” with the FHA about its interest-charging practices and had agreed to allow the housing agency additional time — as much as a year extra — to implement the necessary changes.
The FHA is drafting a formal regulatory proposal aimed at bringing the agency into full compliance. At the end of that process, the FHA presumably will collect interest only through the date of payoff of a mortgage, rather than the full month.
That should be welcome news to critics, who say the FHA’s recent series of increases in monthly mortgage insurance premiums and its June 3 revocation of new borrowers’ rights to cancel premiums at any time during their loan terms are driving moderate-income borrowers away from the agency and making home-buying less affordable.
The take-away here: Until the FHA changes its policy, try to schedule any early mortgage payoff or closing on a refinancing as late in the month as possible to avoid punitive interest charges.
kenharney@earthlink.net.
Distributed by the Washington Post Writers Group.
Jun
10
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Jun
7
Big Opportunity in Non-QM Loans
WE’RE HEARING that lenders are only going to make qualified mortgages that meet the ability-to-repay underwriting standards mandated by the Consumer Financial Protection Bureau. It will be too risky do otherwise and originate non-QMs.
If that is true, it is going to create a huge opportunity for some lenders who are willing to take the risks, including three fellows from the CFPB who are starting a new mortgage company.
Former CFPB deputy director Raj Date left the bureau in late January to launch an investment advisory firm he calls Fenway Summer. The Red Sox fan located the office in the Georgetown section of Washington. Fenway Summer’s first venture is to launch a wholesale mortgage company.
This venture will table fund non-QM loans and assume all the risks from the lenders. This new channel will provide an outlet for regional banks as well as mortgage brokers.
While it may be difficult for existing lenders to take this approach, Date with his Wall Street experience doesn’t mind taking “smart risks.”
CFPB veterans Mitchell Hochberg and Christopher Haspel have joined Fenway Summer to start up the mortgage company. They intend to build an underwriting engine that will identify good non-QM loans to fund.
Hochberg is the general counsel and Haspel will run the mortgage company. Haspel has experience in structured finance, servicing and capital markets. He has worked at Fannie Mae, BlackRock and GE Capital.
“It is way too hard for good customers to get credit,” Date told NMN.
The managing partner of Fenway Summer noted that 10% to 15% loans of originated today have debt-to-income ratios greater than 43% and fall into the non-QM bucket. The mortgage company might also focus in interest-only loans, which are classified as non-QM loans.
CFPB director Richard Cordray has repeatedly told community bankers and credit union officials that they have nothing to fear if they stick to their traditional underwriting. He has encouraged them to continue to make non-QM loans that have a history of good performance.
But the industry is so shell-shocked by the mortgage debacle and onslaught of mortgage laws and regulations—they just don’t believe it.
When asked if Fenway Summer is trying to prove that Cordray is right about non-QM loans, Date replied with a quick no.
“I am not trying to prove anything one way or another. We are a commercial enterprise,” he said.
But he stressed that non-QM loans present an attractive opportunity.
“When we see an opportunity that is big, that is attractive, we are not going to be shy,” Date said.
Jun
7
Today, we are publishing Small Entity Compliance Guides for the Loan Originator Rule and the Mortgage Servicing Rules.
Find the guides here:
Our goal with these guides is to provide an overview of the rules in a plain language and FAQ format which makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff. Although the guides give an overview of the rules, they are not substitutes for the underlying rules.
With today’s postings, compliance guides are now available for all of the new mortgage rules originally issued by the CFPB in January. We plan to update these guides periodically as rule clarifications are finalized as part of our ongoing commitment to supporting implementation of the new mortgage rules.
We hope you’ll familiarize yourself with the rules we’ve issued and the related available resources. When additional resources become available for the new mortgage rules, we will continue to keep you updated through these emails.
Thank you,
The Consumer Financial Protection Bureau
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