Trends in FHA, VA, and Ginnie Issuance

Ira Kaplan hadn't returned to the old neighborhood since he went off to fight in Vietnam. During a business trip to New York he visits his old neighborhood on Kotler Avenue in the Bronx.

Everything has changed over the years. Where once there was Edelstein's Delicatessen, there is now a McDonald's; where Fleischman's Dry Cleaning (One-Hour Martinizing) used to be, a Korean nail salon and spa now is; where Ginsberg's Department Store was, there is now a Gap.

Nothing is the same, except for the narrow storefront of Klonsky's Shoe Repair, which, dimly lit as ever, is still in business.

As Kaplan passes the shop, he recalls (such are the quirks of memory that he does not know how) that just before he was drafted to go off to Vietnam, he had left a pair of shoes with Mr. Klonsky that he never bothered to pick up.  Could they, he wonders, possibly still be there?

A small bell tinkles as he enters the dark shop.

Mr. Klonsky, who seemed old 40 years ago, shuffles out from the back. He is hunched over, wearing a leather apron, one eye all but closed.

"Excuse me, Mr. Klonsky," Kaplan says, "but I used to live in this neighborhood, and 40 years ago I left a pair of shoes with you for repair that I never picked up. Is there any chance you might still have them?"

Klonsky stares at him and, in his strong Eastern European accent, asks, "Vas dey black vingtips?"

"They were indeed," Kaplan only now recalls.

"And you vanted a halv sole, mit leather heels?"

"Yes," says Kaplan. "That's exactly what I wanted."

"And you vanted taps on the heels?"

"Yes, yes," says Kaplan. "Amazing! Do you still have them?"

Mr. Klonsky looks up at him, his good eye asquint, and says, "Dey'll be ready Vendsday."

 

To put some perspective on things, a trillion seconds is roughly 31,710 years. The Fed indicates that household housing debt is about $8.8 trillion and non-housing debt is about $3.3 trillion. Of the non-housing portion, student loans are $1.2 trillion, auto loans are $1 trillion, credit cards are $0.7 trillion, and "other" is $0.4 trillion. In fact most Americans owe somebody something. According to a recent Pew Charitable Trust report, 80% of households are in debt.

There seems to be a large number of FHA & VA loans heading down the refi barrel, obviously a concern to holders of Ginnie Mae securities who thought they were going to have their asset for years and years. In fact refi application volume has been up about 16% for two weeks in a row. Let's take a look at recent FHA & VA news.

 Ginnie Mae posted a Multiclass Participants Memorandum (MPM) to notify Real Estate Mortgage Investment Conduit (REMIC) Sponsors that Ginnie Mae will no longer review collateral modifications of multifamily and healthcare loans in Ginnie Mae mortgage-backed securities (MBS) that back Ginnie Mae REMIC Trusts. MPM is available for review.

 Ginnie made some news recently during the government's budget process. Namely it requested a $4 million budget increase from the Office of Management and Budget to increase its monitoring of mortgage-backed securities issuers. But the fiscal 2017 budget released by the White House's Office of Management and Budget provides Ginnie Mae with $23 million, unchanged from the current fiscal year. Ginnie Mae's President, the Honorable Ted Tozer, wasn't pleased, and probably the industry shouldn't be either given the numbers we're talking about here. Ginnie guaranteed $432.4 billion in Ginnie Mae mortgage backed securities in fiscal 2015, which ended Sept. 30, up from $302.1 billion in the prior fiscal year. In the first quarter of fiscal 2016, Ginnie Mae issuance totaled $109.5 billion - all with barely over 100 employees.

 Did someone say QC audits? There has been some relatively recent news regarding FNMA and FHA's guidelines as they relate to the timeliness of QC audits. The FHA changed its policy recently causing concern for lenders who are behind in the auditing of their post close audits.

 The House Financial Services Committee had a hearing on FHA's MIP. Democrats, of course, would like another cut and Republicans are against it. The Democrats are in a strange position with the base continuing to push for even tougher regulations for the industry and the affordable housing coalition doesn't like the tight credit that results.

 I received this note from an authoritative anonymous source. "As to the down payment program cessation, I can't say I know these programs specifically but we've been waiting for official word from HUD on whether or not premium pricing can be used to fund down-payment assistance. If you read the FHA guidelines, it appears that practice is verboten but there is a letter that was issued which seems to trump the guide and make the use of premium pricing permissible. However, I think HUD's Inspector General has raised concerns and that HUD has been studying the issue for some time. It seems as if US Bank may have an inkling that the ultimate decision is going to re-instate the prohibition on using premium pricing if, in fact, the Sapphire program relies on the use of premium pricing.  Bigger picture, I think that many state and local down-payment assistance programs also rely on the use of premium pricing to fund the down-payment assistance so this could be a precursor of bigger things to come."

 Freddie Mac had updated its servicer success scorecard, mortgage modifications and other servicing topics. Freddie Mac has removed and revised the criteria that for investor reporting, the weights, ranks and percentiles from all of the criteria because the number of loans measured is too small. Performance results will still be calculated. Regarding the default management category, the 5 percent weight of the "accuracy of due date of last paid installment reporting" is being redistributed within the "data integrity" subset of criteria. Freddie Mac will also be providing more detail related to requesting reimbursement on mortgages insured by the FHA or guaranteed by the VA or RHS.

 Kinect Federal Credit Union has reduced the minimum credit score from 620 to 600 on FHA loans.

 AmeriHome's VA and VA IRRRL Program Guide and Government Overlay Matrix are updated to clarify mortgage payment history requirements for VA IRRRL transactions

 Freedom Mortgage's newest product allows borrowers with FICO's as low as 500 a buying opportunity. Its Freedom First Program is an FHA/VA offering to help give low/moderate income individuals the opportunity to buy a home.

 NewLeaf has added clarification to its matrices regarding LTVs for FHA standard Limited Cash Out/Rate & Term Refinance as well as max loan amount clarification on FHA Streamlines.

 Due to regulatory changes in our industry, LHFS will be increasing the Admin fee by $50, for all states. The new Admin Fee will be effective with Forward Locks or the Loan Estimate (LE) dated on or after Tuesday February 16, 2016. In addition, LHFS will be reducing the FHA Streamline Admin Fee to $595- nationwide, beginning on 2/1/2016 for all new loans or Forward Locks.

 In addition to conventional and VA product availability to non-delegated, Stearns just released FHA and USDA products as well.

 Global DMS has officially integrated its Global Kinex application with the Federal Housing Administration's (FHA) new Electronic Appraisal Delivery (EAD) portal, providing its clients with direct access to the administration's new appraisal submission tool. The EAD portal will allow up to 10 appraisal files per submission, and also allows the submission of up to 3 appraisal files per loan. All EAD submissions through Global Kinex are searchable, and the app will also upload the EAD SSR file as an attachment to the appraisal order when applicable. In addition, EAD submission automation is available via eTrac's Workflow Engine app to help streamline the process even further. Appraisals submitted through the EAD are always subject to an FHA compliance review, and the new portal will return both overridable and non-overridable hard stop messages when appraisal data falls outside FHA requirements.

 SunWest clients should note updates have been made to the following matrices: Conventional Loans Self-Employment Income Analysis, HUD manual underwriting guidelines specifically for the review of a borrower's credit as well as additional information on how various risk factors associated with a borrower's credit are analyzed during a manual underwriting review, VA IRRRLs payment history requirements and additional Clarification on HECM Financial Assessments.

 Rates slide a little higher Tuesday - but not by much. The general feeling among traders that I know is that rates fell far and fast, and it is natural to see a little bounce back - regardless of news like a weak Empire State Manufacturing survey missing estimates. We also had the NAHB Housing Market Index which fell to 58 in February from 61 in January (revised up from 60).

 But all that was yesterday. Today we've had the MBA confirm what lock desks around the nation knew. The Index rose 8.2% for the week ending February 12th, after rising by 9.3 % the week prior. The average 30 year mortgage rate was lowered to 3.83% from 3.91%. Purchases were down by 3.7%. Refinance applications index increased 16.0%, after rising 15.8% the previous week. Refinance applications as a percentage of total applications rose to 64.3% vs 61.2% the week prior.

 We've also had the January PPI and Core PPI (+.1%, +.4% respectively) and January Housing Starts and Building Permits (-3.8% due to weather, permits -.2%). Coming up is the January Industrial Production and Capacity Utilization couplet at 9:15 EST, and in the afternoon we'll see the January 27 FOMC Minutes. We closed Tuesday with the 10-year at 1.78% and this morning it is at 1.81% with agency MBS prices worse about .125.