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The Department of Housing and Urban Development has issued a press release indicating the agency allocated approximately $4 billion under its Neighborhood Stabilization Program.

HUD intends the program to provide emergency assistance to state and local governments to acquire and redevelop foreclosed properties. 

HUD will host a summit in Washington, DC on October 7-8, 2008, and a series of regional conferences, to explain details of the program to governors, mayors and other State and local leaders.

HUD’s press release states, in part:

State and local governments can use their neighborhood stabilization grants to acquire land and property; to demolish or rehabilitate abandoned properties; and/or to offer downpayment and closing cost assistance to low- to moderate-income homebuyers (household incomes not exceed 120 percent of area median income). In addition, these grantees can create “land banks” to assemble, temporarily manage, and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of urban property.

HUD is providing the funding through its Community Development Block Grant under the Housing and Economic Recovery Act of 2008. 

For a full copy of the press release, including the methodology HUD used for allocation, please click here.

Tags: Bailouts, Distressed Assets, Economic Stimulus, Foreclosure, HUD & FHA, Loss Mitigation, Mortgage Banking - General, Regulations by the Editor
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The Department of Housing and Urban Development has issued Mortgagee Letter 08-25, “Converting Existing Homes to Rentals - Underwriting Guidance.”

In the Mortgagee Letter, HUD states in part:

Recently, FHA and others in the mortgage industry have observed an increasing number of homeowners who have chosen to vacate their existing principal residence and purchase a new residence.  This has been occurring as some homeowners, given the rising price of fuel, are relocating to homes nearer their employment, or are taking advantage of other home buying opportunities arising in the marketplace.

Due to FHA’s concern that some homebuyers in these transactions may attempt to provide misleading information regarding the rental income of the property being vacated to qualify for the new mortgage, FHA is instituting underwriting guidance designed to assure that the homebuyer can make payments on the full debt service of both mortgages.  Consequently, beginning with case number assignments on or after the date of this Mortgagee Letter and until further notice, the underwriting analysis may not consider any rental income from the property being vacated except under circumstances described in this Mortgagee Letter.

The Mortgagee Letter also indicates it is partially directed at “buy and bail” schemes, where a homeowner buys a new primary residence, and then allows a former primary residence to go into foreclosure.

The Mortgagee Letter provides for certain exceptions to the new temporary rules.

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

Tags: Buy and Bail Schemes, Distressed Assets, FHA Insurance, HUD & FHA, 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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The Department of Housing and Urban Development has issued Mortgagee Letter 2008-24, entitled Home Equity Conversion Mortgage (HECM) Program - Requirements on Mortgage Originators.

The Mortgagee Letter responds to recent changes to the law governing the Federal Housing Administration’s HECM (Reverse Mortgage) program.  The changes were set forth in the Housing and Economic Recovery Act of 2008 enacted July 30, 2008.

The Mortgagee Letter notes Section 255(n)(1) of the National Housing Act now provides that the:

HECM mortgage originator or any other party that participates in the origination of a FHA insured HECM mortgage shall (1) not participate in, or be associated with, or employ any party that participates in or is associated with, any other financial or insurance activity; or (2) demonstrate to the Secretary of HUD that the mortgagee or other party maintains, or will maintain, firewalls and other safeguards designed to ensure that (i) individuals participating in the origination of a HECM mortgage have no involvement with, or incentive to provide the mortgagor with, any other financial or insurance product; and (ii) the mortgagor shall not be required, directly or indirectly, as a condition of obtaining a mortgage under this section, to purchase any other financial or insurance product. 

The Mortgagee Letter states that HUD will solicit public comment on these issues prior to issuing fuller guidance.  Until that time, HUD generally admonishes compliance.

The Mortgagee Letter also notes that Section 255(n)(2) of the National Housing Act now provides:

all parties that participate in the origination of a mortgage to be insured under FHA’s HECM program must be approved by the Secretary.  This requirement means that loan origination must be performed by FHA approved entities including: (1) a FHA-approved loan correspondent and sponsor; (2) a FHA approved mortgagee through its retail channel; or (3) a FHA-approved mortgagee working with another FHA-approved mortgagee.   

For this reason, the Mortgagee Letter rescinds prior Mortgagee Letter 2008-14 as inconsistent with this statutory standard effective October 1, 2008.

For a full copy of Mortgagee Letter 2008-24, click here.

Tags: Consumer Protection, FHA Insurance, HUD & FHA, Mortgage Banking - General, Regulations, Reverse Mortgages by the Editor
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The struggle between the Executive and Legislative branches regarding the Real Estate Settlement Procedures Act of 1974 has recently become heated.

As previously noted on Mortgage Law Blog, the House Financial Services Committee held hearings earlier this week on the Department of Housing and Urban Development’s proposed RESPA reform rules.  The Secretary of HUD, Steve Preston, was invited to give comments but he declined.  A number of attendees at the hearing were reportedly highly critical of the proposed rule and HUD.

In response, Mr. Preston was highly critical of the hearings when speaking in Washington.  The end of Mr. Preston’s prepared remarks included the following:

Let me make one more comment about the path forward before I take questions. Yesterday there was a hearing on the Hill where we heard numerous legislators assail proposed reforms to the Real Estate Settlement Procedures Act (RESPA). The unnecessary complexity of mortgages has significantly contributed to our housing crisis. We must do something to make mortgages more understandable and the process more transparent. That’s why we have been seeking new regulations to require all mortgage lenders and brokers to clearly display an estimate of all settlement services, fees, and charges. They must not be hidden in the fine print. Borrowers would know their closing costs, interest rate and monthly payment amount. They would know whether or not the rate or principle balance would increase over time. They would know if there are prepayment penalties or any balloon payments. The rule would require a clear statement that would itemize closing costs and lock in certain charges at settlement. This would offer greater transparency and certainty, allowing Americans to shop and compare.

We have gone through a lengthy public comment period. We are committed to striking a balance between the needs of consumers and those in business of homeownership. But, I believe it is absolutely reprehensible that so many people in Congress today are fighting to stall progress, especially when they know so many families are in trouble because they didn’t understand the terms of their mortgage. Our goal is to get RESPA completed by the end of this year and then provide the industry with a full year to implement that the rule. I firmly believe this will be a big step forward for restoring trust and transparency between the industry and the homeowner.

To see Mr. Preston’s full remarks, please click here.  A large number of members of Congress have asked HUD and the Office of Management and Budget to delay implementation of any final rule. 

Stay tuned . . .

Tags: Consumer Protection, HUD & FHA, Mortgage Banking - General, RESPA, Regulations by the Editor
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The Chairman-Elect of the Mortgage Bankers Association, David G. Kittle, testified yesterday on RESPA Reform before the House Financial Services Committee.

The hearing was entitled “HUD’s Proposed Real Estate Settlement Procedures Act Reform.”  Mr. Kittle reiterated MBA’s general support for RESPA reform, but encouraged the Department of Housing and Urban Development to work closely with the Board of Governors of the Federal Reserve to truly improve consumer disclosures that would allow borrowers to better shop and understand their loan.  Mr. Kittle noted a number of weaknesses in the proposed rule by the HUD.

In his prepared remarks, Mr. Kittle highlighted the following:

• MBA and he have long been committed to improving the mortgage process for both industry and consumers.
• Reforms should give consumers the information they need to effectively shop for loans, inform themselves about the true cost of closing on a mortgage and protect themselves from unscrupulous actors .  These needs require a comprehensive approach to the loan application and closing process, involving both HUD’s RESPA forms and the Truth in Lending Act forms from the Federal Reserve.
• HUD’s proposed RESPA reforms do not even come close to achieving simplification.  Accordingly, HUD’s final rule should be delayed and officials at HUD should work with the Federal Reserve on a joint and comprehensive effort to simplify and improve forms and disclosures.

Mr. Kittle further detailed a number of problems with the proposed HUD rule, including that HUD:

1. took what should be a one page form and made it four pages;
2. would require a 45 minute script be read to the consumer, stretching an already long closing process, with no benefit to the borrower; and
3. continues to have a series of forms where lines don’t match and consumers cannot discern what happens from one part of the process to the next.

For a copy of Mr. Kittle’s prepared comments, please click here.

Tags: Consumer Protection, Federal Reserve, HUD & FHA, Industry Involvement, Mortgage Banking - General, RESPA, Regulations 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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Today, the Federal Housing Finance Agency published formal announcement of its establishment in the Federal Register.

The FHFA is an independent Federal agency established July 30, 2008, which will integrate certain functions of the Office of Federal Housing Enterprise Oversight and Federal Housing Finance Board.

Meanwhile, the firestorm of discussions surrounding the Department of Treasury’s conservatorship of Fannie Mae and Freddie Mac continue.  The popular press continues to issue in-depth articles on a variety of details of that conservatorship, and the events leading up to and after the conservatorship.

Mortgage Law Blog notes for readers that various agencies also have issued statements regarding the conservatorship.  Links to a number of these releases appears below.

For a copy of the FHFA announcement, click here.

For FHFA press releases on the conservatorship, click here.

For an FHFA Fact Sheet on the conservatorship, click here.

For a press release from the Department of Treasury, click here.

The following releases are also of interest, in some ways due to their reserved nature:

• Board of Governors of the Federal Reserve System.
• Department of Housing and Urban Development.
• House Committee on Financial Services; also here.
• Senate Committee on Banking, Housing and Urban Affairs; also, here.

Tags: Bailouts, Bankruptcy, FDIC, Fannie Mae/Freddie Mac, Federal Bank Regulators, Federal Reserve, HUD & FHA, Mortgage Banking - General, NCUA, OCC, OTS, U.S. Treasury by the Editor
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