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Category Archives: FHA/VA

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Navigating HUD’s New Single Family Housing Policy Handbook

Posted in FHA/VA, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs, Personal Property Financing

By: Phillip L. SchulmanHolly Spencer BuntingKrista CooleyEmily 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, … Continue Reading

Webinar: Navigating the New HUD Origination Handbook

Posted in FHA/VA

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 … Continue Reading

FHA Announces Annual Mortgage Insurance Premium Reductions

Posted in FHA/VA

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 … Continue Reading

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

Posted in FHA/VA, Mortgage Lending, Securitization

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.… Continue Reading

CFPB Issues Guidance to Mortgage Lenders on Verifying Disability Income

Posted in Bureau of Consumer Financial Protection (CFPB), Fair Lending/Anti-Discrimination, FHA/VA, Mortgage Lending

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 … Continue Reading

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

Posted in Bureau of Consumer Financial Protection (CFPB), FHA/VA, Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing

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 … Continue Reading

K&L Gates Consumer Financial Services Group to Present at MBA Legal Issues Conference in San Diego

Posted in Bureau of Consumer Financial Protection (CFPB), Fair Lending/Anti-Discrimination, FHA/VA, Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs

On May 4-7, 2014 the Mortgage Bankers Association will hold its annual Legal Issues and Regulatory Compliance Conference in San Diego, CA. Several K&L Gates partners from the Consumer Financial Services Group will be presenting at the conference.

Melanie Brody will address “A Look Ahead: HMDA and Fair Lending” on Sunday, May 4, at 4:35 pm.

Krista Cooley will participate on a panel on Tuesday, May 6, at 3:15 pm, entitled “False Claims, Indemnifications, Repurchases and Rescissions.” She will discuss how the False Claims Act is affecting participants in HUD’s Federal Housing Administration loan program.

Andrew Glass will speak on … Continue Reading

HUD Updates “How to Avoid Foreclosure” Brochure Requirement

Posted in FHA/VA, Mortgage Servicing

By: Krista Cooley, Kathryn M. Baugher

Out with the old, in with the “new”! The first Mortgagee Letter of 2014 has arrived, superseding the guidance contained in Mortgagee Letter 2002-14.

In Mortgagee Letter 2014-1, HUD clarifies what notice FHA-approved mortgagees must provide to delinquent mortgagors to satisfy the requirement found in 24 C.F.R. § 203.602. Under the new Mortgagee Letter, mortgagees must send delinquent borrowers the “Save Your Home: Tips to Avoid Foreclosure” brochure (HUD-2008-5-FHA) no earlier than the 32nd day of delinquency and no later than the 60th day of delinquency. This mandate replaces the previous requirement … Continue Reading

HUD Issues Self-Reporting Guidance

Posted in FHA/VA, Mortgage Lending

By: Krista Cooley

Last Thursday, HUD issued Mortgagee Letter 2013-41 to clarify its self-reporting requirements for FHA-approved lenders. The Mortgagee Letter updates HUD’s prior guidance regarding an FHA-approved lender’s obligation to self-report instances of fraud, material misrepresentations, and material findings identified in connection with the origination, underwriting, or servicing of FHA-insured loans. New guidance set forth in this Mortgagee Letter includes direction on the timeframes to which lenders must adhere in reporting findings to senior management and to HUD, as well as clarification regarding what constitutes a “mitigated” finding in connection with the self-reporting requirements.… Continue Reading

HUD Extends Foreclosure Timeframes with Mortgagee Letter 2013-38

Posted in FHA/VA

By: Krista Cooley, Kathryn M. Baugher

On October 28, 2013, with the publication of Mortgagee Letter 2013-38, HUD provided a much-needed update to the schedule of claimable attorney fees and reasonable diligence timeframes for prosecuting a foreclosure on loans insured by the FHA. These updates expressly apply to both forward mortgages and Home Equity Conversion Mortgages (“HECMs”).

As FHA servicers are aware, with respect to foreclosure on FHA-insured loans, HUD sets limits on the attorney fees that servicers can claim and requires servicers to prosecute foreclosure in a specific amount of time, referred to as the “reasonable diligence … Continue Reading

K&L Gates Legal Insight: Housing Finance Reform Efforts Heat Up in Summer Session

Posted in FHA/VA

By: Kristie D. Kully, Andrew L. Caplan

This summer has brought a wave of housing finance reform efforts in both chambers of Congress. To date, the House and Senate have proposed different approaches to housing finance reform. The leading House proposal, introduced by Republicans, leans heavily toward privatization and would eliminate the affordable housing responsibilities of Fannie Mae and Freddie Mac. In contrast, the Senate proposal, introduced in a bipartisan effort, would combine a government backstop (arguably through more transparent means than those GSEs currently provide) with a continued attempt to fund affordable housing programs. Notwithstanding those differences, there … Continue Reading

FHA Seeks Statutory Authority to Transfer Mortgage Servicing Rights

Posted in FHA/VA, Mortgage Servicing

By: Laurence E. Platt,  Kathryn M. Baugher

For at least the third time in recent months, the Federal Housing Administration (“FHA”) has asked Congress for legislative authority to force underperforming loan servicers to transfer the servicing of FHA-insured loans to another servicer.

FHA Requests for Authority to Transfer Servicing

FHA’s latest request came on June 4, 2013, when FHA Commissioner Carol Galante testified before the Senate Committee on Appropriations. In her written testimony, she proposed that Congress provide legislative authority for FHA to require the transfer of servicing “when a servicer is at or below a servicer tier … Continue Reading

HUD Renewal and Recertification

Posted in FHA/VA, Other Federal Agencies & GSEs
By: Stacey L. Riggin
*Ms. Riggin is not admitted to the practice of law.

The U.S. Department of Housing and Urban Development published notice in the Federal Register on June 18, 2013 that it is seeking public comments on the information used by FHA to verify that lenders meet all approval, renewal, update and compliance requirements. The notice solicits comments on ways to enhance the quality, utility, and clarity of the information and to minimize the burden of the collection of information on those who are to respond, such as electronic submission of responses.

Continue Reading

Consumer Financial Services Group Highlights Key Legal Issues at MBA Conference

Posted in FHA/VA, Mortgage Lending, Mortgage Servicing

Members of the K&L Gates Consumer Financial Services Group will speak on key topics at the upcoming MBA Legal Issues and Regulatory Compliance Conference in Boca Raton, FL (May 19-22).

Melanie Brody will discuss a topic on everyone’s radar — fair lending and disparate impact — on Tuesday morning (May 21) , with a repeat session on Tuesday afternoon . Melanie also will facilitate a fair lending roundtable discussion on Tuesday afternoon.

Paul Hancock will address major litigation and enforcement trends on Monday afternoon (May 20).

Philip Schulman will speak at the Government Housing round table on Monday afternoon (May … Continue Reading

HUD Clarifies Procedures for Demanding Indemnification from FHA Lenders Participating in the Lender Insurance Program

Posted in FHA/VA

By: Krista Cooley

On Wednesday, HUD issued Mortgagee Letter 2013-10 to implement the Lender Insurance (“LI”) regulation it finalized in January of 2012. As announced in the final regulation, FHA mortgagees participating in the LI program will be required, as a condition of approval for LI authority, to indemnify HUD for self-endorsed loans that HUD deems ineligible for FHA insurance. Mortgagee Letter 2013-10 provides additional guidance on the Department’s policy changes regarding indemnification, which are effective for all loans insured by LI mortgagees on or after April 9, 2013. The Mortgagee Letter and a revised Lender Insurance Guide released Wednesday … Continue Reading

FHA Investing Mortgagees No Longer Required to Provide Compliance Report

Posted in FHA/VA, Mortgage Servicing

By: Phillip L. Schulman, *Nathan Pysno
*Mr. Pysno is not admitted to the D.C. Bar; currently admitted to the Maryland Bar.

A recent change to the HUD Office of the Inspector General Audit Guide has removed the requirement that all FHA investing mortgagees submit reports on internal controls and compliance.

An investing mortgagee or lender may purchase, sell, and hold FHA-insured mortgages but cannot originate or fund FHA loans. An investing mortgagee may service FHA loans with approval of the HUD Secretary.… Continue Reading

FHA Announces Upcoming Changes to Strengthen the Mutual Mortgage Insurance Fund

Posted in FHA/VA, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs

By: Phillip L. Schulman, Krista Cooley

The U.S. Department of Housing and Urban Development’s recently announced that an independent actuarial review of the FHA Mutual Mortgage Insurance (MMI) Fund found that the Fund’s capital reserve ratio has fallen to -1.44%, which represents a negative economic value of $16.3 billion. In the wake of this announcement, HUD unveiled a series of aggressive steps it intends to take over the next several months. According to the Annual Report provided to Congress earlier this month, FHA lenders will have to contend with several policy changes to FHA origination and servicing requirements in … Continue Reading

FHA and RHS Respond to Hurricane Sandy

Posted in FHA/VA, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs

By: Holly Spencer Bunting , Kathryn M. Baugher

In the wake of Hurricane Sandy, both the U.S. Department of Housing and Urban Development (“HUD”) and the Rural Housing Service (“RHS”) have issued guidance intended to help homeowners with government insured or guaranteed loans who were affected by the storm. With regard to loans insured by the Federal Housing Administration (“FHA”), the guidance is a combination of reminders about existing relief or insurance programs available to assist disaster victims and new policies designed to aid borrowers in the process of obtaining FHA financing for properties impacted by natural disasters. With regard … Continue Reading

FHA Issues Annual Financial Report to Congress

Posted in FHA/VA, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs

By: Phillip L. Schulman, Krista Cooley

On Friday, November 16, 2012, the U.S. Department of Housing and Urban Development released its 2012 Annual Report to Congress and announced that the FHA Mutual Mortgage Insurance (MMI) Fund suffered a $16.3 billion deficit. In addition, for the fourth year in a row, the MMI Fund has failed to meet its 2% statutory reserve amount, an amount required under the National Housing Act to be held back to cover excess loss.… Continue Reading

Rural Housing Service Publishes Final Rule Regarding New Annual Fee

Posted in FHA/VA, Mortgage Servicing, Other Federal Agencies & GSEs

By: Kathryn M. Baugher

The U.S. Department of Agriculture’s Rural Housing Service (RHS) today published a final rule implementing the new annual fee that will be charged on all RHS-guaranteed single family housing loans obligated on or after October 1, 2011.

The Housing Act of 1949 was amended in July 2010 to authorize RHS to charge an annual fee. The purpose of the annual fee is to make the RHS loan guarantee program “subsidy neutral,” meaning that it will not require taxpayer funding to continue operating at its current size. While RHS acknowledges that the annual fee will increase the … Continue Reading

Conflicted Out: When Must a Servicer Follow FHA Guidelines over the Global Foreclosure Settlement Servicing Standards?

Posted in FHA/VA, Mortgage Servicing

By: Krista Cooley, Rebecca Lobenherz

The National Servicing Standards, outlined in the March 2012 Global Foreclosure Settlement, are difficult to reconcile with the already stringent servicing requirements in place for the Federal Housing Administration’s (“FHA”) single family loan insurance program. The National Servicing Standards are expressly subject to and must be interpreted in accordance with applicable federal, state and local laws, rules and regulations, and the terms and provisions of the requirements, binding directives and investor guidelines of the mortgage insurer, including FHA. In the event of a conflict between such requirements and the National Servicing Standards such that … Continue Reading

Refinancing Rural Housing Loans: Rural Housing Service Announces Pilot Program

Posted in FHA/VA, Other Federal Agencies & GSEs

By: Kathryn M. Baugher

On the heels of President Obama’s State of the Union address, the U.S. Department of Agriculture this month announced a two-year pilot program to help borrowers with USDA-guaranteed loans refinance their mortgages at lower rates without obtaining a new credit report, appraisal, or property inspection. The program will be offered only in Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee, states selected because they are among those hardest hit by the downturn in the housing market. The Department estimates … Continue Reading

Administration’s Proposed Refinancing Plan for Non-GSE Loans Is Illusory

Posted in FHA/VA, Mortgage Servicing, Other Federal Agencies & GSEs

By: Laurence E. Platt

The Administration’s newly announced plan to provide low cost refinancings to underwater, current borrowers whose residential mortgage loans are not owned or securitized by the GSEs is high on hope and low on likelihood of success. The plan creates a form of a “streamlined” refinancing on a stated income basis and without an appraisal. Eligibility criteria include that the loan to be refinanced has been current for the past six months, the borrower must meet a minimum credit score of 580 and be an owner-occupant and the new loan must fall within FHA loan limits and … Continue Reading