May 31, 2011: HUD addresses lower 10/1 loan amounts; state-level servicing law changes; FHA training
Rob Chrisman

Anyone lending in “higher loan amount areas” should read the latest from HUD on the probable/possible changes on 10/1. "Barring Congressional action, Federal Housing Administration (FHA) loan limits will revert back to loan limits determined under the Housing and Economic Recovery Act (HERA) for loans insured by FHA on or after October 1, 2011. As a result, FHA loan limits would likely decline in 669 of the 3,334 counties or county equivalents that are eligible for FHA insurance." http://portal.hud.gov/hudportal/documents/huddoc?idfhaloanlmhera.pdf
 
I guess if you're in the mortgage servicing business, you may-as-well have a dedicated team assigned to each state, and the latest court verdicts in each state. It is nearly impossible to keep up with the changes – just in the last 3-4 days, “Hawaii Significantly Alters the Landscape of its Mortgage Foreclosure Process.” “On the heels of South Carolina’s administrative order requiring parties to a foreclosure action to engage in loss mitigation efforts, Hawaii recently passed a Senate bill adopting similar dispute resolution provisions and even enacting a moratorium on certain types of foreclosures altogether…through July 1 on all new regular non-judicial foreclosure actions, which prevents foreclosures by power of sale to be initiated or recorded during the relevant period…In addition, Bill 651 amends Hawaii’s mortgage servicer law to declare void any action taken by a nonexempt person operating without a license in a foreclosure proceeding. The mortgage servicer law is further amended to require mortgage servicers to declare their affiliations in their annual report and, for the state’s more prolific servicers, to maintain an in-state office for the dual purpose of addressing consumer concerns and acting as an agent to accept service on behalf of the servicer company.”
 
Over in Oregon, a judge has made yet another ruling in foreclosures – “U.S. District Judge Owen Panner questioned whether big banks should be allowed to foreclose without court supervision -- as required in 23 states but not Oregon…Panner specifically warned of problems in cases involving the MERS… The "MERS system raises serious concerns regarding the appropriateness and validity of foreclosure by advertisement and sale outside of any judicial proceeding” although a MERS spokesman said it would appeal the ruling: http://www.oregonlive.com/business/index.ssf/2011/05/judge_blocks_oregon_foreclosur.html.
 
One state up, in Washington, the government there added provisions regarding lien holder requirements for certain foreclosures. Namely, it would require “a senior beneficiary of a deed of trust to respond to a seller's written offer that the senior beneficiary accept the entire net proceeds of the sale when those proceeds are insufficient to pay the full obligation owed within 120 days.  The statute applies only when the senior beneficiary receives the written offer from the seller prior to the issuance of a notice of default.  The seller must include a copy of the purchase and sale agreement with the offer, and the senior beneficiary's response must include either an acceptance, rejection, or counter-offer of the seller's offer.”
 
What has HUD and the FHA been up to lately? Everyone should know that a 90-day moratorium on foreclosures is automatically imposed on FHA-insured properties in Presidentially Declared Disaster Areas. You can see those at http://www.fema.gov/news/disasters.fema or by calling a local FEMA office. HUD also offers pre-purchase training for HUD Housing Counselors across the nation (one deadline is today for a session in Sacramento). To register please visit: http://www.rcac.org/events.aspx?700, but for training all over the nation go to http://portal.hud.gov/hudportal/HUD?src/program_offices/housing/sfh/nsc/training.
 
The FDIC only shuttered one institution Friday: First Heritage Bank, Snohomish, Washington, with Columbia State Bank in Tacoma stepping in.
 
In the day-to-day flow of e-mails that I receive, many of them are changes of e-mail address. Either someone has changed jobs, found a job, or is leaving a job. Most of these I keep to myself, although this one caught my eye: "The reason I had you change my email address the other day is after 28 years in the business, I quit and today is my last day.  I'm taking the summer off, and will spend some time trying to come up with something new to do that doesn't involve Dodd or Frank…..TIL, RESPA, HMDA or any of the other acronyms for government torture.  I am burnt out!"
 
Banks are sitting on huge amounts of cash. The reasons for this include reserves held for bad loans, the inability to find credit-worthy lending outlets, and the continued threat of mortgage buy-backs by government agencies. Late last week the American Banker reported that loan repurchase requests from Fannie Mae and Freddie Mac are finally tapering off – but that the FHA is stepping in to take up the slack. “In recent months the government agency has been denying claims and threatening lawsuits in unprecedented volume...the agency increasingly is forcing lenders to bear the risk on new loans with technical defects such as having a borrower's previous address listed incorrectly in a loan file. ‘HUD is acting like any insurance agency, if a loan goes bad and there is some deficiency, they are not going to pay the claim,’” said one source. According to the article, “FHA officials have blamed the decline on delays in the foreclosure process, and said their inventory of loans in foreclosure is at a historic high of nearly 176,000 loans.” HUD can bring criminal charges against executives responsible for overseeing compliance with FHA rules – don’t do the crime if you can’t do the time. If a lender falsely certifies that loans have satisfied FHA's requirements, it can be penalized for up to three times the amount of any FHA insurance claim. HUD typically does not review loan files before closing and instead relies on the certification from lenders that the loan is in compliance with rules and requirements – similar to what investors do with lender clients.
 
Lenders are still examining flipping rules. Out in California, Mountain West Financial “is pleased to expand its policy on VA transactions involving properties acquired and sold within 90 days of sellers’ acquisition. MWF will finance properties purchased within 90 days of sellers’ acquisition provided the new sales price does not exceed a 50% increase over sellers’ acquisition.” There are certain restrictions, such as a full conventional appraisal must be prepared by an approved MWF appraiser in addition to the VA appraisal, so it is best to look at the actual announcement.
 
Which way are rates going? (Perhaps more importantly, are any LO’s complaining about rates? And mortgage company owners continue to ask low-producing agents, “If you can’t originate loans with rates down here, do you really expect to originate them if & when rates move higher?”) The economy is best described as sputtering along, grinding higher in some areas but lagging in others. Just look at a few of the headlines late last week:  Consumer Sentiment Rises in May; Pending Home Sales Slump 11.6% in April; Consumer Spending Loses Momentum in April. (“Consumer spending rose by the smallest gain in three months during April, government data showed Friday, in a further sign of erosion in spending momentum due to higher prices at the gas pump. Consumers’ spending rose 0.4% last month, the Commerce Department estimated. Meanwhile, personal incomes rose 0.4% in April. Income has risen for seven straight months.”) So rates may just chop around these broad levels for quite some time.
 
Remember – today is Tuesday already! Today at 9AM EST we'll have the Case-Shiller Index, which never seems to go up... we'll also have the Chicago Purchasing Manager's Index, and Consumer Confidence. Wednesday we'll have some ADP private payroll numbers, an ISM number, and Construction Spending. Thursday is the usual Jobless Claims, and Friday is the 1st Friday of the month's set of employment data. Ahead of all that, the stock market is pointing to a higher opening, the 10-yr is sitting down at 3.10%, and MBS prices look similar to where they were Friday afternoon.


The Navy Chief noticed a new seaman on board and barked at him, 'Get over here! What's your name?"
"Paul," the new seaman replied.
"Look, I don't know what kind of bleeding-heart pansy junk they're teaching sailors in boot camp today, but I don't call anyone by their first name," the chief scowled.
"It breeds familiarity, and that leads to a breakdown in authority. I refer to my sailors by their last names only; Smith, Jones, Baker, like that. And I am to be referred to only as 'Chief.' Do I make myself clear?"
"Aye, Aye, Chief!"
"Now that we've got that straight, what's your last name?"
The seaman sighed. "Darling, My name is Paul Darling, Chief."
"Okay, Paul, here's what I want you to do..."


If you’re interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com . The current blog takes a look at the QRM proposal’s impact on our industry. If you have both the time and inclination make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.