FHA Revamps Its Loss Mitigation Processes
The Federal Housing Administration (FHA) is proposing significant changes to the requirements mortgage servicers must adhere to when servicing FHA-backed mortgages that have gone into default.
The FHA says it is streamlining its loss mitigation processes by reducing the number of steps servicers must take in order to evaluate delinquent borrowers for foreclosure alternatives.
These changes will reduce the number of steps that a servicer and borrower must take to resolve a delinquency and enter into a loss mitigation home retention product, the FHA says in a release.
In addition, the FHA is removing certain obstacles that will allow servicers greater flexibility for evaluating an unemployed borrower for a special forbearance agreement.
Most of the changes are geared toward accelerating the loss mitigation process. Under the revised rules, servicers would be required to convert successful three-month trial modifications into permanent modifications within 60 days instead of the average four to six months.
In addition, servicers are to allow borrowers with three missed mortgage payments to qualify for a partial claim to bring their arrearages current versus the previous requirement for a minimum of four missed payments.
The FHA is also ending the traditional stand-alone loan modification option, so struggling borrowers can access the FHA’s Home Affordable Mortgage Program option, with its greater payment relief, sooner.
Finally, the FHA is eliminating the required 12-month term for its special forbearance option. This will allow servicers to offer this option to more unemployed households.
HARP Extended Again, This Time As A ‘Bridge’ To A New Program
Turns out the Home Affordable Refinance Program (HARP) isn’t sunsetting just yet.
The program has been extended for a third time – this time to September 2017 – the Federal Housing Finance Agency (FHFA) has announced.
However, this time around, the program is being extended in order to create a “bridge” to a new high loan-to-value (LTV) streamlined refinance offering that will essentially replace HARP.
In order to qualify for the new offering, borrowers must not have missed any mortgage payments in the previous six months; must not have missed more than one payment in the previous 12 months; must have a source of income; and must receive a benefit from the refinance, such as a reduction in their monthly mortgage payments, the FHFA says in a release.
As with HARP, eligible borrowers are not subject to a minimum credit score, there is no maximum debt-to-income ratio or maximum LTV, and an appraisal often will not be required.
However, unlike HARP, there are no eligibility cutoff dates connected with the new offering, and borrowers will be able to use it more than once to refinance their mortgages.
Borrowers with existing HARP loans are not eligible for the new offering unless they have refinanced out of HARP using one of Fannie Mae or Freddie Mac’s traditional refinance products.
“Providing a sustainable refinance opportunity for high-LTV borrowers who have demonstrated responsibility by remaining current on their mortgage makes financial sense both for borrowers and for the enterprises,” says Melvin L. Watt, director of the FHFA, in a press release. “This new offering will give borrowers the opportunity to refinance when rates are low, making their mortgages more affordable and thus reducing credit risk exposure for Fannie Mae and Freddie Mac.”
HARP and the Home Affordable Modification Program were originally launched in 2009 and were set to expire on Dec. 31, 2013; however, in 2013, they were extended through 2015. The two programs were later extended again, albeit separately, through 2016.
The decision to extend the program comes as participation is waning. The FHFA reports that 18,310 borrowers refinanced their mortgages through the program from Jan. 1 through June 30 of this year – the lowest participation rate since the second quarter of 2009, when the program was first launched.
The FHFA’s second-quarter Refinance Report shows that although total refinance volume increased in June, as mortgage interest rates edged lower, HARP refinances represented only 4% of total refinances.
The program has helped more than 3.4 million struggling homeowners retain their homes in the aftermath of the Great Recession, the FHFA says.
More than 323,000 U.S. borrowers are still eligible for the program and have a financial incentive to refinance as of the first quarter of this year, the FHFA reports.
PHH Loses Another Major MSR Contract
PHH Corp. has reportedly lost another major mortgage servicing rights (MSR) contract.
According to a recent article in the Philadelphia Business Journal, HSBC has decided to sell about 139,000 mortgages currently serviced by PHH to a buyer that does not intend to retain PHH as a subservicer.
This will eliminate about 29% of PHH’s mortgage subservicing portfolio, according to the report.
In a filing with the Securities and Exchange Commission, Mount Laurel, N.J.-based PHH said the loss of business would reduce its pre-tax earnings by approximately $10 million on an annualized basis.
This is the second major contract that PHH has lost so far this year. In April, Merrill Lynch Home Loans, a division of Bank of America Corp., decided to insource its subservicing, resulting in PHH’s servicing volume decreasing 26%.
Earlier this month, PHH reported a $12 million second-quarter loss; however, this was an improvement compared with the $30 million loss suffered in the first quarter.
PHH is currently fighting a $109 million penalty in federal court imposed last year by the Consumer Financial Protection Bureau for allegedly taking illegal kickbacks from mortgage insurers.
According to the article in the Philadelphia Business Journal, a federal appeals court is expected to soon render an opinion in that case.
Incenter Hires Al Qureshi As Managing Director
Al Qureshi has joined Incenter, a Blackstone portfolio company that provides clients with access to capital, secondary markets solutions and fulfillment services, as managing director in charge of the company’s mortgage servicing rights, securities, and whole loan analytics and risk management platform.
Qureshi has nearly 20 years of mortgage and capital markets experience. Most recently, he was head of mortgage servicing hedging and hedging analytics at U.S. Bank, the company says in a release.
Incenter was previously known as Interactive Mortgage Advisors, offering best-in-class asset valuation, analytics, risk management and advisory services.
Fannie Mae Selling Off Five More Pools Of NPLs
Fannie Mae continues to sell off its nonperforming loans (NPLs).
The government-sponsored enterprise (GSE) announced in August that it was auctioning four larger pools of approximately 6,900 loans totaling $1.08 billion in unpaid principal balance (UPB), as well as a Community Impact Pool of approximately 120 loans, focused in the Miami area, totaling $20.7 million in UPB.
Bids for the four larger pools were due on Aug. 30, and bids for the Community Impact Pool were due on Sept. 15.
Wells Fargo Securities and The Williams Capital Group were the acting advisors.
The Community Impact Pool is the fifth that the company has offered. This smaller pool of loans is geographically focused and high occupancy. These pools are marketed in such a way so as to encourage participation by smaller investors, nonprofit organizations, and minority- and women-owned businesses.
“We continue to strive to help struggling homeowners and neighborhoods recover,” says Joy Cianci, senior vice president of single-family credit portfolio management for Fannie Mae. “Today’s announcement of our nonperforming loan sale furthers this commitment by expanding the opportunities available for borrowers to avoid foreclosure.”
Fannie Mae previously offered Community Impact Pool sales in 2015 and early 2016. These transactions require the owner of the loan to market the property to owner-occupants and nonprofits exclusively before offering it to investors when a foreclosure cannot be prevented – similar to Fannie Mae’s FirstLook program.
Earlier in August, it was announced that Corona Asset Management XVIII was the winning bidder on a pool of NPLs auctioned by the GSE.
Fannie Mae’s fourth Community Impact Pool of loans included 80 loans with an aggregate UPB of $18,467,573; an average loan size of $230,845; a weighted average note rate of 4.86%; a weighted average delinquency of 38 months; and a weighted average broker’s price opinion loan-to-value ratio of 98%, Fannie Mae says in a release.
The cover bid price for the pool was 62.4% of the UPB, or 60.9% of the broker price opinion value of the assets.