Site Currently Being Restored

Mortgage Law Blog is currently being restored to a functional state, following attack by an unknown intruder.  Just one more reminder of the e-vulnerabilities of the modern world.

Fortunately, the damage was relatively slight. 

The site will be active again soon.

Apologies for any inconvenience.

Back from the Hack

After battling with a hacking since last month, Mortgage Law Blog appears to be back in the Editor’s control. 

Hopefully, this period ends here.  Not all functions are fully repaired yet, but MLB can now restart postings.

HUD Settles Alleged Sham ABA Case

The Department of Housing and Urban Development has posted a new settlement on its website, alleging violations of the Real Estate Settlement Procedures Act of 1974. 

The settlement is between HUD, Grand Texas Home, Inc., its owners and officers, and Grand Title Company.

As its core allegations under the settlement, HUD generally states:

  • Grand Title did not operate as a bona fide independent title agency,
  • Grand Homes failed to provide consumers with the required ABA disclosures, and
  • Grand Homes required consumers to use its affiliate, Grand Title.

The defendants agreed to pay HUD $200,000.

Certain language from the settlement is of particular note.  For example, the agreement expressly permits Grand Homes to select the title insurer so long as Grand Homes “pays the title costs.”  While this language appears in the pertinent regulatory provisions, certain persons at HUD sometimes argue that payment of the title costs is not sufficient, because the costs generally are baked into the home prices.

The agreement also sets forth a laundry list of items that HUD presumably views as undermining the bona fides of a affiliated title company.

For a complete copy of the settlement agreement, click here.

FDIC Announces “Mod-in-a-Box” Program

The Federal Deposit Insurance Corporation has issued guidance that the agency says provides comprehensive information to give servicers and financial institutions “all of the tools necessary to implement a systematic and streamlined approach to modifying loans.”  The guidance is said to be based on the agency’s loan modification program initiated at IndyMac Federal Bank.

The press release states in part:

The Program is designed to achieve affordable and sustainable mortgage payments for borrowers and increase the value of distressed mortgages by rehabilitating them into performing loans. Under the terms of the Program, borrowers receive a loan modification with a maximum 38% down to 31% housing-to-income ratio through the use of interest rate reduction, amortization term extension, and in some cases, principal deferment. This loan modification process improves the value of the troubled mortgages for investors while helping many borrowers experiencing financial difficulties remain in their homes.

The FDIC implemented this approach to loan modifications on August 20th after IndyMac Bank, FSB failed on July 11, 2008. As of November 20th, 2008 IndyMac has sent out more than 23,000 modification letters to eligible borrowers and has completed more than 5,300 modifications after verifying the borrowers’ income. Thousands more are in the pipeline.

Although foreclosures are costly to lenders, borrowers and communities, the number of foreclosures continues to rise while the pace of modifications remains too slow. Currently, 1.6 million total loans are over 60 days delinquent. Through the end of 2009, the FDIC estimates that there will an additional 3.8 million new loans over 60 days past due. Today’s release of the FDIC’s “Mod in a Box” guide will provide the industry with the necessary tools to facilitate streamlined and systematic loan modifications to help stem foreclosures, halt the decline in home prices and provide needed stability to the broader economy.

The guidance includes a Summary of the Loan Modification program, a substantial appendix containing various additional information, and certain related materials.

For a full copy of the press release, click here.

RESPA Reform Rule Officially Published

After delay and anticipation, the Department of Housing and Urban Development officially published the new final rule under the Real Estate Settlement Procedures Act of 1974.

The Summary to the new rule states:

This final rule amends HUD’s regulations to further RESPA’s purposes by requiring more timely and effective disclosures related to mortgage settlement costs for federally related mortgage loans to consumers.  The changes made by this final rule are designed to protect consumers from unnecessarily high settlement costs by taking steps to: improve and standardize the Good Faith Estimate (GFE) form to make it easier to use for shopping among settlement service providers; ensure that page 1 of the GFE provides a clear summary of the loan terms and total settlement charges so that borrowers will be able to use the GFE to identify a particular loan product and comparison shop among loan originators; provide more accurate estimates of costs of settlement services shown on the GFE; improve disclosure of yield spread premiums (YSPs) to help borrowers understand how YSPs can affect borrowers’ settlement charges; facilitate comparison of the GFE and the HUD-1/HUD-1A Settlement Statements; ensure that at settlement borrowers are aware of final costs as they relate to their particular mortgage loan and settlement transaction; clarify HUD-1 instructions; expressly state that RESPA permits the listing of an average charge on the HUD-1; and strengthen the prohibition against requiring the use of affiliated businesses.

This final rule follows a March 14, 2008, proposed rule and makes changes in response to public comment and further consideration of certain issues by HUD.  In addition, this rule provides for an appropriate transition period.  Compliance with the new requirements pertaining to the GFE and settlement statements is not required until January 1, 2010. However, certain provisions are to be implemented upon the effective date of the final rule.

HUD notes the rule is a “major rule” under the Congressional Review Act, 5 U.S.C. Chapter 8, therefore having a 60-day delayed effective date and being submitted to Congress for review.

The rule is effective January 16, 2009

To obtain a copy of the rule, please click here.

HUD Announces New FHA Loan Limits

The Department of Housing and Urban Development has issued new permanent loan limits for single family home loans insured by the Federal Housing Administration.

Beginning January 1, 2009, the FHA limits for single-family home mortgages will be $271,050 in low cost areas and up to $625,500 in high cost areas.  The new rule results in a reduction from $729,750 that was established in February 2008. 

The press release states:

For several years, FHA’s loan levels were below the cost of the average home in communities across the nation. As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process. In some cases, borrowers turned to exotic subprime loans.

FHA mortgage insurance makes home financing more available to low-income and first time homebuyers. This is because the mortgage is backed by the full faith and credit of the government, freeing lenders from assuming the risk of default.

Higher FHA loan limits do not cost the government any money because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA-insured mortgage loans.

The Housing and Economic Recovery Act pegs the national conforming mortgage loan limit to a house price index chosen by the new Federal Housing Finance Agency (FHFA). For 2009, the national conforming limit will remain at the current level of $417,000.

The Act says that the new FHA loan limits will be set at 115 percent of the median house price in a given area, as determined by HUD, but can not be lower than 65 percent of the conforming loan limit (the national floor). Also, the FHA mortgage limit cannot exceed 150 percent of the national conforming loan limit (the national ceiling).

The Act also pegs the national mortgage limit for FHA-insured reverse mortgages to the national conforming loan limit. The FHA product known as the Home Equity Conversion Mortgage (HECM) will therefore have a national mortgage limit of $417,000. Unlike the new forward mortgage loan limits, the new HECM loans limits are effective on loans insured or after November 6, 2008. This is the first time that a single limit applies to these mortgages nationwide. As in previous years, the special exception areas of Alaska, Hawaii, Guam, and the Virgin Islands may have higher loan limits. Starting in January 2009 counties in those areas may have loan limits of 115 percent of area median prices, where that amount is above $417,000, up to a ceiling of $625,500.

For a copy of the full press release, please click here.

Link to HUD Final Rule

Yesterday, Mortgage Law Blog reported that the Department of Housing and Urban Development had sent the new RESPA rule to the Federal Register for printing. 

Readers bombarded the site with requests for a link to the Final Rule.  Here it is, but MLB reminds everyone that until published the rule is not the final rule.

HUD Sends RESPA Reform Rule to Print

The Department of Housing and Urban Development has sent to the Federal Register for publication on November 14 the revised regulations under the Real Estate Settlement Procedures Act of 1974.

The new rule, which consists of nearly 300 pages of double-spaced text, includes a revised Good Faith Estimate and HUD-1.

HUD’s original proposal had included a so-called closing script, which had been sharply criticized by a number of industry participants.  The agency discarded this proposed change.

The proposed rule’s change to the definition of “required use” had also been the focus of substantial criticism.  HUD rejected this criticism, and includes language that would prevent companies from providing an incentive to consumers for using an affiliate.  This language appears to be targeted at homebuilder affiliates.

Considering the significant opposition to the rule, and the nature of the rule in its final form, there is a good chance the rule will be challenged.

For a copy of the HUD press release, please click here.

FDIC Extends Opt-Out Period in Temporary Liquidity Program

The Federal Deposit Insurance Corporation has extended the deadline for participation in the Temporary Liquidity Guarantee Program. 

The program permits the FDIC to provide a 100 percent guarantee for newly-issued senior unsecured debt and non-interest bearing transaction deposit accounts at FDIC insured institutions subject to certain terms.

The FDIC issued an interim rule on the program October 29, 2008, providing a 15-day period for comment.  The FDIC indicated the extension of time would give institutions an opportunity to fully consider the interim rules prior to deciding whether to participate.

Any institution that opts out will avoid any assessment under the program.  Other institutions will pay program fees. 

For a copy of the full press release, please click here.

For a copy of the amendment extending the deadline, click here.

For a copy of the October 29 Interim Final Rule, click here.

For a Fact Sheet regarding the program, click here.

The new deadline is December 5, 2008.

HUD Issues Hope for Homeowners Origination Guidance

The Department of Housing and Urban Development has issued Mortgagee Letter 08-29, “Hope for Homeowners Origination Guidance.”

In the Mortgagee Letter, HUD states: 

The Housing and Economic Recovery Act of 2008 amends the National Housing Act to authorize a new temporary FHA mortgage insurance program called the HOPE for Homeowners (H4H) Program. Under this Program, certain borrowers facing difficulty in paying their mortgages will be eligible to refinance into affordable FHA-insured mortgages.  The H4H Program is effective for endorsements on or after October 1, 2008 through September 30, 2011.

While underwriting mortgages for the H4H Program presents unique challenges for the industry, FHA has confidence in its approved mortgagees to exercise their ingenuity in meeting these challenges, while adhering fully to this mortgagee letter, without compromising their ability to make and support sound underwriting decisions.  The information, directions, and guidance provided in this mortgagee letter reflect statutory requirements as well as the standards, policies and regulations adopted by the Board of Directors (Board) for the H4H Program.

The Mortgagee Letter then discusses the following 12 topics:

  1. Eligibility of borrowers, mortgages and properties
  2. Consumer protection and disclosure requirements
  3. Appraisal requirements
  4. Terms and interest rates
  5. MIP
  6. Calculating the maximum mortgage amount
  7. Underwriting and qualifying borrowers
  8. Documentation requirements
  9. Prohibitions on subordinate financing
  10. Equity and appreciation sharing
  11. Extinguishment of subordinate liens
  12. Monitoring and program compliance

For a copy of the full Mortgagee Letter, please click here.