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U.K. Lending Could Show Year-to-Year Improvement
November 20, 2009
The United Kingdom's year-to-year gross mortgage lending could slow down a bit on a monthly basis in coming months but it might start to look a little better on a year-to-year basis. "The sharp drop in lending volumes at end of 2008 and beginning of 2009 should lead to a relative improvement in year-to-year comparisons, according to the Council of Mortgage Lenders, London. But on a monthly basis lending could see its usual seasonal declines. In the latest month, October, U.K. gross mortgage lending was 13.5 billion pounds ($22.3 billion). This was up the usual seasonal 5% from the previous month but down 27% from the same month a year ago. The CML said this is in line with its most recent forecast of about 141 billion pounds ($233 billion) in gross mortgage lending for 2009 as a whole. "There has been a significant change in the type of lending taking place from the start of the year. House purchase activity has picked up significantly," said CML economist Paul Samter. He added that, in contrast, refinancing has dropped to record lows. However, he said the coming months "are likely to be dominated by seasonal factors rather than underlying change."
NRMLA Close to Naming Firm Alleged to Be Violating Its Policies
November 20, 2009
The National Reverse Mortgage Lenders Association is in the final stages of "publicly naming" an overly aggressive third-party lead generation company which has consistently violated the group's ethics and standards policies. A public naming is the last of six different sanctions that NRMLA can place against its members. The company, which still has the opportunity to appeal, already has been placed on probation, then suspended and finally expelled from the group, according to President Peter Bell, who declined to reveal the identity of the rogue company. "Now we're ready to report (the company) to the authorities and alert our members," he said. Four to six cases a month come before NRMLA's ethics panel, 70% because of problems with their advertising, the NRMLA leader told the conference.
Misleading Reverse Mortgage Ads Draw Scrutiny
November 20, 2009
False and misleading advertising was described at the National Reverse Mortgage Lenders Association's annual conference in San Diego as a "cancer" on the reverse lending business. "Even legal is not a high-enough standard, not in the eyes of the people looking over our shoulders," said NRMLA president Peter Bell during a session which covered many of the words, phrases and other come-ons that have attracted the ire of consumer advocates and policy makers. "Bad advertising is a poor reflection on each and every one of us," agreed moderator Jean Noble of Senior Lending Network, Melville, N.Y., a reverse mortgage servicer. Misleading advertising is "a huge liability for everybody in this room," Richard Peters, a direct marketing expert and a consultant to MetLife Bank's Reverse Mortgage Division, told the 650 attendees. "It takes 20 good ads to overcome one bad one." Poorly worded direct mail pieces, many of which are designed to look like they came from a government agency, "have policy makers hopping mad," Mr. Bell said. "Most of the regulatory issues we face are triggered by this kind of stuff." Noting that reverse mortgage lenders are working with a vulnerable population that is a protected class, the NRMLA president said the industry "has a duty to do more than use effective advertising."
Bank of America Planning "Non-Government" CMBS Deal
November 20, 2009
Bank of America plans to sell $460 million of mortgage securities backed by commercial real estate loans without relying on a Treasury program to aid lending in that market. According to Bloomberg, the security is backed by mortgages on office and industrial properties in Florida. The bonds are split into four portions, the largest of which is $350 million of top-rated debt. Fortress Investment Group LLC is the sponsor of the transaction.
House OKs Amendment to Reduce Risk Retention Requirement
November 20, 2009
The House Financial Services Committee has approved an amendment that cuts a 10% risk retention requirement on sales and securitizations of mortgages down to 5%. Industry groups supported the amendment by Rep. Walt Minnick, D-Idaho, that was approved by a voice vote and attached to a regulatory reform bill. The Mortgage Bankers Association and others are disappointed, however, that the amendment does not exempt Federal Housing Administration, Fannie Mae and Freddie Mac eligible loans from the 5% risk retention requirement. "It is a step in the right direction. But we would like them to go further," said MBA senior vice president Steve O'Connor. The Minnick amendment gives regulators the discretion to set the risk retention requirement between zero and 5%, depending on the quality of the loans. But industry groups really wanted a total exemption for FHA, Fannie and Freddie loans that was included in a subprime lending bill (H.R. 1728) the House passed in May. Only loans guaranteed by the Department of Veterans Affairs and the Rural Housing Service are totally exempt under the Minnick amendment.
FHA Insuring Higher Quality Loans
November 20, 2009
Credit scores on FHA single-family loans have risen steadily over the past three years with the average score reaching 689 at the end of September, a 10% improvement from a year ago. Lenders originated a record $328.1 billion in Federal Housing Administration loans in FY 2009 and 44% of the loans have FICO scores above 680. Only 13% have FICO scores below 620, which is generally considered subprime. In FY 2007, when FHA endorsements totaled $55.5 billion, only 19% of the loans had FICO scores above 680 and 47% of the loans had FICO scores below 620. (FICO stands for Fair Isaac & Co., which compiles credit scores on consumers.) "The improved credit quality of FHA's recent originations debunks the myths that FHA is being overrun by subprime loans," said Brian Chappelle, a partner in Potomac Partners of Washington. Mr. Chappelle is basing his beliefs on a recent audit of FHA's single-family portfolio and a FHA report to Congress. He noted that loans with FICO scores above 680 perform four-times better than loans with FICOs below 620.
HUD-IG Investigating Dozens of Reverse Cases
November 20, 2009
"Several dozen" of the 1,200 to 1,500 fraud investigations currently underway within the Department of Housing and Urban Development's Inspector General's Office involve home equity conversion mortgages, a group of reverse mortgage specialists meeting in San Diego were told. Some cases involve a single loan; others, hundreds of loans, and they run the gamut of industry practitioners - from single loan officers to big companies, according to Michael Stolworthy, the assistant special agent in charge of mortgage crime investigations in the IG's office, which is the law enforcement arm of HUD. "I'm not saying fraud is widespread, but some of these are not just fly-by-night outfits," Mr. Stolworthy told the National Reverse Mortgage Lenders Conference. "This is not an industry permeated with fraud, but it's not perfect either." The mortgage cop didn't name names, but he said one miscreant's name has popped up on straw buyer cases involving more than 300 properties. In another investigation that involved the well-known Crips gang of street thugs, 25 seniors were sold highly inflated properties using the popular HECM for purchase program. Despite these ongoing investigations, Mr. Stolworthy extolled the virtues of reverse mortgages. "I'm a big supporter; HECM is an excellent product," he said. "But an industry that's often on the defensive doesn't need this kind of black eye."
HUD to Pose Pointed Questions on Reverse
November 19, 2009
The Department of Housing and Urban Development will soon publish an advance notice of rule making concerning reverse mortgages that the agency's official who oversees the Home Equity Conversion Mortgage program says "a lot of people may find disconcerting." The notice, which is awaiting approval from the Office of Management and Budget, "asks some very serious questions," Meg Burns, the director of the office of single-family program development at the Federal Housing Administration, said at the National Reverse Mortgage Lenders Association's annual conference in San Diego. One "straight out" question that will be asked is whether borrowers should be allowed to pocket the proceeds of a reverse loan and use the money as the basis of an annuity against falling prices. Another question is whether or not a limit should be placed on how the proceeds are used by the borrower, and a third is whether draws should be limited unless the borrower has an immediate need. "We think it's appropriate to ask these questions because these are the issues the come up all the time with lawmakers," Ms. Burns told the conference. She added HUD would soon publish a proposed regulation that would require all reverse mortgage lenders to determine if the income of a would-be borrower is enough to meet his and/or her current obligations. If so, HUD may place restrictions on how much of the loan proceeds a borrower can draw. Yet another idea on the table at HUD is what's called a "HECM Mini" in which borrowers whose equity in their homes was more than needed would tell the lender what percentage of the value they wanted and the maximum claim limits would be adjusted accordingly.
Freddie Survey Finds 30-Year Rate Approaching Record Low
November 19, 2009
The average 30-year primary market mortgage rate tracked by Freddie Mac is nearing a record low not seen since April. The average rate for a 30-year fixed-rate mortgage in the company's Primary Mortgage Market Survey for the week ending Nov. 19 was 4.83%, down from 4.91% the previous week and 6.04% a year ago. This is not far from the record low of 4.78% seen earlier this year. Even more favorable than the average 30-year FRM rate in the latest week was the average 15-year FRM rate, which hit a new record low during the period of 4.32%. This was slightly below the previous record low of 4.33% hit the week of Oct. 8 and was down from 4.36% a week ago and 5.73% a year ago. The average rate for a five-year Treasury indexed hybrid adjustable-rate mortgage in the latest week was 4.25%, down from 4.29% a week ago and 5.87% a year ago. The average rate for a one-year Treasury ARM was 4.35%, down from 4.46% a week ago and 5.29% a year ago. Average points were as follows: 0.7 for 30-year FRMs and 0.6 for all the other aforementioned types of loans.
Reverse Lenders Face Another Haircut
November 19, 2009
Still bristling from the Federal Housing Administration's decision in late September to cut "principal list factors" by roughly 10% across the board as of Oct. 1, reverse mortgage lenders are now bracing for another haircut, this one probably around Jan. 1. After meeting with FHA Commissioner David Stevens before the start of the National Reverse Mortgage Lenders Association's annual conference in San Diego, NRMLA President Peter Bell seemed resigned to the reality that the FHA would lower the two factors - the borrower's age and the current mortgage rate - that form the matrix used to determine what percentage of the property's value is available to the borrower. But at the same time, he told MortgageWire that his members would not be pleased. "This whole thing with risk management has ruffled a lot of feathers," Mr. Bell said. Changes in the matrix are dictated by the Office of Management and Budget's reading of house prices, which have been falling in most locations. An announcement is expected shortly after the Thanksgiving holiday. "It's really a new day in Washington," he said. "Evidence-based decision making drives the process now." According to a rump survey by the group of the loans booked year-to-date by the three largest portfolio lenders of reverse mortgages, had the Oct. 1 changes been in effect for the entire year, one out of five borrowers would not have qualified for their loans because the amount of equity available to them would have been less than what was still owed on the property.
