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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.

Tags: Consumer Protection, Economic Stimulus, FHA Insurance, HUD & FHA, Legislation, Mortgage Banking - General, Regulations, Reverse Mortgages by the Editor
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The Department of Housing and Urban Development has issued Mortgagee Letter 08-30, “Hope for Homeowners Servicing 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 Federal Housing Administration (FHA) mortgage insurance program called the HOPE for Homeowners Program (also referred to as the H4H Program).  Under the Program, a borrower facing difficulty paying his or her mortgage will be eligible to refinance into an affordable FHA-insured mortgage.  The H4H Program is effective for endorsements on or after October 1, 2008, through September 30, 2011.

This mortgagee letter provides HUD-approved servicing mortgagees with servicing and loss mitigation guidance on the new H4H Program.  The information, directions and guidance provided in the mortgagee letter reflect statutory requirements and the standards, policies and regulations adopted for the H4H Program by the Board of Directors of the H4H Program.

HUD then addresses the following topics:

• Background;
• Prohibition against subordinate financing;
• Refinancing;
• Capital Improvements;
• Defaults and loss mitigation;
• Impact of first payment defaults; and
• Sale and payoff.

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

Tags: Bailouts, Consumer Protection, Distressed Assets, Economic Stimulus, FHA Insurance, Foreclosure, HUD & FHA, Legislation, Loan Modifications/Workouts, Loss Mitigation, Mortgage Banking - General, Regulations by the Editor
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The Department of Treasury has issued an interim final rule under the Emergency Economic Stabilization Act of 2008 governing executive compensation for companies participating in the Troubled Asset Relief Program, Capital Purchase Program. 

Among other features, the rule limits compensation that incentivizes senior executives of financial institutions to take unnecessary and excessive risks that threaten the value of the institution; requires recovery of bonus and incentive payments to executives based on materially inaccurate statements of earnings, gains or other criteria; prohibits golden parachute payments; and requires agreement to limit a claim to a federal income tax deduction for certain remuneration.

For a full copy of the interim rule, please click here.

Tags: Bailouts, Economic Stimulus, Legislation, Mortgage Banking - General, Regulations, U.S. Treasury by the Editor
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The Department of the Treasury has requested public comment on seven general topics regarding an insurance program for distressed assets provided under the Emergency Economic Stabilization Act of 2008.  The program is designed to restore liquidity and stability to financial markets while minimizing long term adverse consequences for taxpayers.

Treasury’s press release states in part:

Under the EESA the Secretary is charged with establishing a program that will guarantee principal of, and interest on, troubled assets originated or issued prior to March 14, 2008. The program may take any form and may vary by asset class, but it must be voluntary and self-funding. The Secretary has the authority to set premiums to reflect the credit risk characteristics of the insured assets so as to ensure that taxpayers are fully protected.

Treasury invites comment on how the program should be structured to minimize adverse selection, including how premiums should be calculated, what events should trigger insurance payout, what form that payout should take, and which institutions and assets should be eligible.  The Department also asks for public comment on technical considerations, including what legal, accounting, or regulatory issues would arise and what administrative challenges the program will create.

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

For a copy of the Federal Register notice requesting comments, please click here.

Comments are due October 28, 2008.

Tags: Bailouts, Distressed Assets, Economic Stimulus, Legislation, Mortgage Banking - General, Regulations, U.S. Treasury by the Editor
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The Department of Housing and Urban Development has issued Mortgagee Letter 2008-28, entitled Prohibition on Mortgagee Funded Home Equity Conversion Mortgage (HECM) Counseling.

The Housing and Economic Recovery Act of 2008 requires that the HECM mortgage must be executed by a borrower who received adequate counseling from an independent third party that is not directly or indirectly associated or compensated by a party involved in (i) originating or servicing the mortgage, (ii) funding the loan, or (iii) the sale of annuities, investments, long-term care insurance or any other type of financial or insurance product.

The Mortgagee Letter states:

Lenders can no longer pay HUD-approved counseling agencies, directly or indirectly, for counseling services through either a lump-sum payment or on a case-by-case basis.  An example of prohibited indirect funding is Lenders funneling payment for HECM counseling through a nonprofit, foundation, association or any other entity or organization that is a branch of,  affiliated with or associated with a lending institution.

Lenders may continue to pay for other types of housing counseling not associated with the HECM program, including pre-purchase and foreclosure prevention counseling, under certain conditions, as addressed in 24 CFR Part 214, regulations for HUD’s Housing Counseling Program. 

This Mortgagee Letter rescinds paragraph 2 of the section entitled Payment of Counseling Fee in Mortgagee Letter 08-12.

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

Tags: Consumer Protection, Downpayment Assistance, HECM, HUD & FHA, Legislation, Mortgage Banking - General, Regulations by the Editor
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California has enacted SB 133, a law further restricting title insurers from providing rebates in exchange for referrals.  The law primarily addresses “title marketing representatives” and appears to be aimed at rebates to real estate agents and brokers.

The preamble to the bill provides in part:

This bill would prohibit a person from being employed as a title
marketing representative unless he or she holds a valid certificate
of registration as a title marketing representative issued by the
commissioner for a 3-year period. This bill would exempt specified
activities from its scope. Violation of these provisions would be a
misdemeanor, pursuant to provisions of existing law.

The California Department of Insurance issued a press release regarding the new law stating in part:

SB 133 is the culmination of several years of effort by the Department of Insurance to address the growing problem of title marketing representatives using illegal rebates. While such practices are illegal, the Department of Insurance currently has no enforcement authority over the individuals who are using them. Enticing agents and brokers to promote a specific title insurer may result in persons paying higher title insurance costs.

The bill clearly identifies the marketing activities that are illegal for title marketing representatives to use for title insurance business inducement purposes. Additionally, it provides the Department of Insurance regulatory oversight of title marketing representatives by establishing a process for registering them and disciplining those who fail to abide by the law.

Mortgage Law Blog readers will recall that the California DOI, along with a number of other states’ regulators, have aggressively pursued title insurers over the past several years, often alleging illegal kickbacks under state insurance laws and the Real Estate Settlement Procedures Act of 1974. 

Title insurers and others in recent years have paid many millions of dollars to various state regulators and the Department of Housing and Urban Development to settle illegal kickback allegations in the title reinsurance area.

To access the text of the new law, please click here.

To read the California DOI’s press release, click here.

Tags: Consumer Protection, HUD & FHA, Legislation, RESPA, Regulations, State Enforcement, Title Insurance by the Editor
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Mortgage Law Blog reminds readers that the Mortgage Bankers Association will hold its annual Regulatory Compliance Conference September 14 - 16, 2008. 

The conference will be held at the JW Marriott in Washington, DC.

The MBA’s website describes the conference as the “the premier forum for you to attain the most comprehensive, up-to-date information on significant regulatory and compliance issues facing the mortgage banking industry at the federal and state levels.”

The conference includes “an in-depth discussion of the Housing and Economic Recovery Act of 2008, the most sweeping real estate finance and housing legislation in a generation. Attendees of this conference learn about the contents of this law, how its provisions will be implemented and what changes your business needs to make to comply with the new regulations.”

Speakers will cover a variety of topics, including:

• Home Owners Equity Protection Act/Truth in lending Act
• Real Estate Settlement Procedures Act
• Anti-predatory lending requirements
• Home Mortgage Disclosure Act/Fair lending
• Fair Credit Reporting Act/Fair and Accurate Credit Transactions Act
• Federal Housing Administration loans
• Mortgage fraud against lenders
• Servicing
• Secondary market issues

There will also be legislative and litigation updates. 

The final day will include a visit to Capitol Hill to meet with legislators.

To learn more, visit the conference website here.

Tags: Association Activities, Conferences & Events, Consumer Protection, Economic Stimulus, FACT Act, FCRA, FHA Insurance, Fair Lending, Foreclosure, Fraud, HUD & FHA, High Cost Loans, Industry Involvement, Legislation, Loan Servicing, Lobbying, Mortgage Banking - General, RESPA, Regulations, State Regulation, Unfair or Deceptive Acts by the Editor
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The Department of Housing and Urban Development has issued Mortgagee Letter 2008-23, Revised Downpayment and Maximum Mortgage Requirements. 

The Mortgagee Letter directly results from the passage of the Housing and Economic Recovery Act of 2008, which became law on July 30, 2008.

The Mortgagee Letter states in part that HERA revised the National Housing Act to:

• require the mortgagor to have paid in cash or its equivalent at least 3.5 percent of the appraised value of the property,
• eliminate the variable LTV limits that were based on the combination of the property value and the average closing costs of the state where the property is located, and
• limit the total of the FHA-insured first mortgage to 100 percent of the appraised value, and require inclusion of the up-front mortgage insurance premium within that limit.

The Mortgagee Letter then goes on to provide guidance on these issues.

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

Tags: Economic Stimulus, FHA Insurance, HUD & FHA, Legislation, Mortgage Banking - General, Regulations by the Editor
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The American Association of Residential Mortgage Regulators and Conference of State Bank Supervisors have issued model legislation for guidance to state regulators under the SAFE Act.

AARMR’s website states in part:

The S.A.F.E. Act, signed into law by President Bush on July 30, 2008, requires state action in your next legislative session to avoid HUD intervention in the licensing of mortgage loan originators (see Section 1508 of Title V). A CSBS/AARMR ten state working group has been meeting since July 31st to establish the minimum requirements for state adoption of the S.A.F.E. Act requirements and to provide states with a Model State Law (MSL) for uniform implementation.

AARMR has provided a side-by-side comparison between the SAFE Act and the model proposed state legislation.

For the side-by-side comparison, click here.

For a copy of the model law, click here.

Tags: Association Activities, Consumer Protection, Legislation, Mortgage Banking - General, State Licensing by the Editor
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Mortgage Law Blog reminds readers that the Mortgage Bankers Association’s annual Regulatory Compliance Conference will be held at the JW Marriott in Washington, DC September 14-16.

The MBA’s announcement describes the conference as follows:

MBA’s Regulatory Compliance Conference 2008 provides the most up-to-date information on all of the regulatory changes affecting the mortgage industry. These include changes under the Housing and Economic Recovery Act (HERA) as they affect FHA, Hope for Homeowners, licensing and Fannie Mae and Freddie Mac; the new Homeownership and Equity Protection Act (HOEPA) regulations; the Fair Credit Reporting Act (FCRA) regulations; and the Real Estate Settlement Procedures Act (RESPA), to name a few.

For a copy of the conference brochure, please click here.

To visit the conference website, click here.

Tags: Association Activities, Conferences & Events, Legislation, Mortgage Banking - General, Regulations by the Editor
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