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December
2001
HUD to Go Easy on Late Payments
HUD Secretary Mel Martinez is urging FHA servicers
to go easy on late payments because of disruptions in the delivery of the
U.S. mail. In response
to the events of Sept. 11, HUD issued Mortgagee Letter 2001-21, Relief
Options for Borrowers Affected by the Events of September 11, 2001. Included in that
mortgagee letter were specific servicing requirements to be followed for
those FHA borrowers who were identified as being affected by the
terrorist attacks. The initial response from the public has been favorable
in that lenders appear to have positively responded to borrowers who have
identified themselves as being directly affected. However, the Department
has also learned that hundreds of thousands of borrowers may be
indirectly affected because of the problems encountered by the US Postal
Service. Lenders are encouraged to give the benefit of the doubt to
borrowers whose September or October 2001,
installments arrive late, especially if the borrower has an established
pattern of remitting payments on time. This includes waiving or reversing
late charges already assessed as well as withholding the reporting of
late payments to the credit bureaus.
Court Defers to HUD YSP Policy
A U.S. district court in Seattle has ruled that lender payments of
yield-spread premiums to brokers do not violate a Federal Housing
Administration limit on origination fees said a story on National
Mortgage News Daily Thursday (Nov. 1). The ruling in Bjustrom
vs. Trust One Mortgage Corp. is being viewed as a major win for the
industry and the first test of the HUD's clarification of its YSP policy
statement. "Given the extensive litigation and clarification around
yield spread premiums, the court considers that HUD has elaborated a
policy that yield spread premiums do not fall under the 1% origination
fee cap," U.S. District Judge Marsha Pechman
says. Howard Glaser of the Mortgage Bankers Association of America, said there is a lot in the court's ruling
that is reassuring to the industry. "It states explicitly that the
policy statement cuts off class actions, and it gives deference to the
HUD decision," said Glaser. However, the judge expressed concerns
that HUD's policy statement effectively cuts off class action litigation
and leaves thousands of consumers who may have been overcharged by
brokers without a remedy. Although the judge deferred to HUD's
interpretation, she called for an expedited appeal to deal with the issue
of class action lawsuits. Glaser noted that the industry also wants an
appeals court ruling that upholds the HUD policy statement.
Sen. Allard and Rep. Roukema Introduce Ginnie Mae Choice Bills
On Nov. 1, Senator Wayne Allard (R-CO) introduced S 1620, the "Home
Ownership Expansion Act of 2001." Also known as the "Ginnie Mae Choice" bill, the legislation would
authorize Ginnie Mae to purchase and securitize
conventional, conforming loans backed by private mortgage insurance. S.
1620 would authorize Ginnie Mae to purchase
conventional loans insured by private mortgage insurers (PMIs), up to the loan limits established for Fannie
Mae and Freddie Mac. The PMIs would assume the
first risk on the loans. Ginnie Mae would
assume only a small portion of the risk. Lenders could utilize the
automated underwriting systems of the PMIs, or
their own systems, to approve and price the loans. The PMIs would insure only the loans themselves, not
guarantee the Ginnie Mae securities backed by
the loans. S. 1620 would give the Secretary of HUD the authority to
review and approve premiums for the PMI coverage, and to approve
participants in the program. Also on Nov. 1, Rep. Marge Roukema (R-NJ)
introduced legislation aimed at boosting the availability of affordable
home ownership. The Home Ownership Expansion and Opportunities Act of
2001, HR 3206 would allow Ginnie Mae to expand
into certain conventional mortgages, thereby injecting additional
liquidity into the home buying market. HR 3206 would allow Ginnie Mae to guarantee securities of certain
conventional mortgages above an 85 percent loan-to-value ratio, up to
conventional mortgage loan limits established by law. Mortgages would be
required to meet rigorous underwriting and insurance guidelines to ensure
that no undue or irresponsible risk is placed on the federal government.
www.house.gov/apps/list/press/nj05_roukema/110101_ginnie.htm. Rep.
Roukema chairs the House Financial Services subcommittee on housing. The
Mortgage Insurance Companies of America support the Ginnie Mae Choice bills introduced by Rep. Roukema
and Sen. Allard. However, Fannie Mae and Freddie Mac spokespersons
questioned whether consumers would really benefit and expressed concerns
that Ginnie Mae would be exposed to significant
credit risk for the first time.
VA Proposes First-time Homebuyers
Complete Homeownership Counseling
The Department of Veterans Affairs is proposing an amendment to VA
guaranteed loans that will make homeownership counseling a prerequisite
for first-time homebuyers. "We propose to require first-time
homebuyers to complete homeownership counseling," says the VA
proposal. "We also propose to add the completion of financial or
homeownership counseling as a compensating factor for certain veterans
who do not fully meet VA's underwriting standards. We believe these
changes are necessary to ensure that homebuyers are satisfactory credit
risks." VA loan data shows that the foreclosure rate for first-time
homebuyers is 4.23 percent, while the rates for
veterans with previous homeownership experience is 2.88 percent.
Public comments must be received by Dec.
10, 2001. Mail to: Director, Office of Regulations Management (02D),
Department of Veterans Affairs, 810 Vermont Ave.
NW, Room 1154, Washington, DC 20420, fax to (202)
273-9289 or e-mail to OGCRegulations@mail.va.gov. Comments should be made
in response to "RIN 2900-AK76.
Treasury Taking a Leadership Role on Subprime Standard
The Treasury Department is taking a leadership role in
developing a best-practices standard for subprime
lending that is enforceable according to National Mortgage News Daily
(Nov. 8). The department has been working with federal banking regulators
to develop a best-practices standard, according to Treasury Assistant
Secretary Sheila Bair. Later this year, private industry groups will be
asked to join in these discussions. "The federal government should
take a leadership role in encouraging private sector efforts to eliminate
[abusive] practices," Bair told a symposium on mortgage reform and
predatory lending. A national standard would promote "consistency
and uniformity among state and local predatory lending laws," she said.
It would also give consumers some assurance that their lender adheres to
a core standard that is enforceable. Bair told reporters after the Women
in Housing and Finance Symposium that the standard has to be "tough,
or it won't accomplish its purpose."
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