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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.

Tags: Appraisals, Consumer Protection, Distressed Assets, Economic Stimulus, FHA Insurance, Foreclosure, HUD & FHA, Loan Modifications/Workouts, Loan Servicing, Loss Mitigation, Mortgage Banking - General, Regulations by the Editor
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The Department of Housing and Urban Development has issued Mortgagee Letter 08-27, Treble Damages for Failure to Engage in Loss Mitigation.

The Mortgagee Letter reminds the public that HUD on April 26, 2005 published a final rule entitled “Treble Damages for failure to Engage in Loss Mitigation.” 

The Mortgagee Letter notes:

HUD’s National Servicing Center (NSC) is available to assist mortgagees in complying with FHA servicing requirements, including loss mitigation evaluation.  The NSC offers Loss Mitigation training to lenders via scheduled classes throughout the year and participates in joint training with regional and national industry groups such as the Mortgage Bankers Association (MBA). 

The NSC provides a toll-free telephone line (1-888-297-8685) to provide assistance regarding FHA’s Servicing requirements, including HUD’s Loss Mitigation Program.  This assistance is available to mortgagors and mortgage industry professionals.  Information from HUD’s National Servicing Center (NSC) is available via the following website: http://www.hud.gov/offices/hsg/sfh/nschome.cfm.

The Mortgagee Letter also provides three key actions mortgagees must take to help avoid treble damages:  (i) ensuring that loss mitigation evaluations are completed before four full monthly installments are due and unpaid, (ii) ensuring that the appropriate actions are taken based on these evaluations, and (iii) maintaining documentation of initial and subsequent loss mitigation evaluations and actions taken. 

HUD defined a failure to engage in required loss mitigation as: 

1. A mortgagee’s failure to evaluate a loan for loss mitigation before four full monthly mortgage installments are due and unpaid to determine which, if any, loss mitigation techniques are appropriate (see 24 CFR § 203.605); and/or
2. A subsequent failure to take appropriate loss mitigation action(s).

Mortgagees must be able to provide documentation of their loss mitigation evaluations and actions.  Mortgagees will be considered to be in compliance with 24 CFR § 203.501 where plausible loss mitigation options were offered to eligible borrowers.  The Department will not consider a mortgagee to have “failed to engage in loss mitigation” where the mortgagee can demonstrate that a borrower was uncooperative or ineligible.

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

For a full copy of the 2005 Final Rule, please click here.

Tags: FHA Insurance, Foreclosure, HUD & FHA, Loan Modifications/Workouts, Loan Servicing, Loss Mitigation, Mortgage Banking - General, Regulations by the Editor
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The Board of Governors of the Federal Reserve announced that its eRulemaking Portal failed to receive certain comments submitted in four proceedings.

The announcement states in part:

The Board of Governors of the Federal Reserve System recently received notice that 83 comment letters submitted between March 22, 2008, and September 8, 2008, via the Federal eRulemaking Portal (http://www.regulations.gov) on four of the Board’s rulemaking proposals [Docket No. R-1286, Regulation Z, Truth in Lending (73 FR 28867, May 19, 2008); Docket No. R-1314, Regulation AA, Unfair or Deceptive Acts or Practices (73 FR 28905, May 19, 2008); Docket No. R-1315, Regulation DD, Truth in Savings (73 FR 28739, May 19, 2008); and Docket No. R-1316, Regulation V, Fair Credit Reporting (73 FR 28966, May 19, 2008)] that have not been acted on were not forwarded to the Board, due to a software problem at that portal.  The problem affects comments that were sent only to the eRulemaking Portal.  Comments sent by other means (by e-mail to the Board’s comments mailbox, by facsimile, or by mail) are not affected. Because the identities of the commenters affected by this software problem are not retrievable, the Board requests that before resubmitting a comment, you review the Board’s Web site at: http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm to determine if your comment has been posted.  If the comment that you submitted has not been posted, you may re-submit your comment by using this link:  http://pubdev.frb.gov/generalinfo/foia/LostComments.cfm.

For a complete copy of the notice, please click here.

Tags: FCRA, Federal Bank Regulators, Federal Reserve, Mortgage Banking - General, Regulations, Truth in Lending Act, Truth in Savings, Unfair or Deceptive Acts 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 Housing and Urban Development has posted a new settlement agreement entered into between HUD and an Arizona developer for alleged violations of the Interstate Land Sales Act.

This ILSA settlement is the third this year.  There was only one settlement per year posted during the period 2005-2007. 

Under the terms of the settlement, the developer agreed to pay the government $45,000, and also to send offers of rescission to all persons who purchased lots from the developer.  The offer must include a full refund of all monies paid in connection with the purchase in exchange for a return of the deed.

The last lot sold in this matter was in 2005.  Recent Arizona market conditions could make this remedy particularly unappealing for the developer.

For a copy of the settlement, please click here.

Tags: Consumer Protection, Fraud, HUD & FHA, Interstate Land Sales, Regulations, Unfair or Deceptive Acts 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 Office of Comptroller of Currency is issuing additional Fair Credit Reporting Act examination procedures regarding affiliate marketing, identity-theft red flags, and address discrepancies.  The procedures are additions to existing FCRA procedures in OCC Bulletin 2006-49.  The procedures address three sections of the FCRA.

The OCC’s press release states in part:

Section 624 has been added to Module 2 of the existing examination procedures. This section pertains to affiliate marketing and opt-out notices to limit solicitations (12 CFR 41.20 – 41.28). The mandatory compliance date for these rules is October 1, 2008.

Section 605(h) has been added to Module 4 of the existing procedures, and section 615(e) has been added to Module 5. Section 605(h) pertains to duties of users of credit reports regarding address discrepancies (12 CFR 41.82), and section 615(e) pertains to duties regarding the detection, prevention, and mitigation of identity theft and duties of card issuers regarding changes of address (12 CFR 41.90 and 41.91 respectively). The mandatory compliance date for these rules is November 1, 2008.

The OCC will incorporate the new procedures in an updated Comptroller’s Handbook series when all FCRA exam procedures are completed.  Until the revised handbook is issued, examiners will use a supplemental attachment.  The new OCC issuance rescinds OCC Bulletin 2006-49. 

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

Tags: Consumer Reports/Credit Reports, FCRA, Mortgage Banking - General, OCC, Regulations 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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The Department of Housing and Urban Development has announced that $50 million will be granted among various housing counseling agencies.

HUD indicated that the grants assist families in becoming first-time homeowners and remaining homeowners after their purchase.   HUD stated that the counselors provide homeownership counseling, and also offer financial literacy training to renters and homeless individuals and families.

HUD’s press release states, in part:

Since 2001, HUD has increased funding to 2,300 approved housing counseling agencies by 150 percent. More than $47 million will support 21 national and regional organizations and 376 state and local housing counseling agencies. In addition, HUD is awarding $3 million to two national organizations to train approximately 2,600 counselors who will receive the instruction and certification necessary to effectively assist families with their housing needs.

National and regional agencies distribute much of HUD’s housing counseling grant funding to community-based grassroots organizations that provide advice and guidance to low- and moderate-income families seeking to improve their housing conditions. In addition, these larger organizations help improve the quality of housing counseling services and enhance coordination among other counseling providers.

Counseling agencies will use $4 million to help assist senior citizens seeking reverse mortgages or Home Equity Conversion Mortgages (HECM). These agencies will provide counseling for the rapidly growing number of elderly homeowners who seek to convert equity in their homes into income that can be used to pay for home improvements, medical costs, and other living expenses.

The organizations that provide housing counseling services help people become or remain homeowners or find rental housing, and assist homeless persons in finding the transitional housing they need to move toward a permanent place to live. Grant recipients also help homebuyers and homeowners realistically evaluate their readiness for a home purchase, understand their financing and downpayment options, and navigate what can be an extremely confusing and difficult process.

In addition, grantees help combat predatory lending by helping unwary borrowers avoid unreasonably high interest rates, inflated appraisals, unaffordable repayment terms, and other conditions that can result in a loss of equity, increased debt, default, and even foreclosure. Likewise, foreclosure prevention counseling helps homeowners facing delinquency or default employ strategies, including expense reduction, negotiation with lenders and loan servicers, and loss mitigation, to avoid foreclosure. With foreclosures on the rise nationwide, these services are more important than ever.

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

Tags: Consumer Protection, Financial Literacy, HUD & FHA, Mortgage Banking - General by the Editor
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