Industry Briefs Mar. 6, 2023: Fitch Ratings Says FHA Premium Cuts ‘Credit Neutral’ for Private Mortgage Insurers

Fitch Ratings: FHA Premium Cuts ‘Credit Neutral’ for Private Mortgage Insurers

Fitch Ratings, New York, said recently announced reductions in the Federal Housing Authority mortgage insurance premium rates are not expected to have a meaningful credit impact on private U.S. mortgage insurance carriers. Rate improvement on FHA loans could lead to a shift of business towards the government sponsored insurer, but the overall impact to MI carrier top lines is likely modest.

Fitch said private mortgage insurers continue to report strong borrower characteristics on new insurance written through 2022, including relatively high average FICO scores. These mortgages are likely to find favorable execution in the private MI market compared to FHA loans. MI carriers reported an average FICO score of 748 on NIW in 2022. Less than 5% of NIW in 2022 was attributed to borrowers with a sub-680 FICO score, which is the range where Fitch believes mortgage insurance pricing may be more favorable for FHA loans.

Fitch said factors that remain favorable for the private MI market, relative to FHA loans, include lack of an upfront fee on new loan originations. The upfront MIP premium of 1.75% of the loan was maintained on FHA loans. Additionally, for borrowers with an LTV greater than 90% at loan origination, FHA MIP payments will still continue for the life of the mortgage. Borrower paid private MI can eventually be cancelled, subject to certain LTV and loan seasoning requirements. Average LTVs on NIW in the private MI market were 92.6% in 2022.

HUD Awards $5.6B in Affordable Housing, Other Grants

HUD announced $5.6 billion in funding will go to 1,200 communities through more than 2,400 grants to states, urban counties, insular areas, D.C., Puerto Rico, and local organizations to provide funding for a wide range of activities including affordable housing, community development, and homeless assistance.

The grants include $1.5 billion to 664 participating jurisdictions to produce affordable housing through the HOME Investment Partnerships Program, the primary federal tool of states and local governments to produce affordable rental and owner-occupied housing for low-income families. HOME projects leverage non-federal funds including, in many cases, tax credits for affordable rental housing. In 2022 the program helped create more than 15,000 units of housing and nearly 17,000 households were assisted with tenant based rental assistance through the HOME program.

Fitch: Affordability Loans Drive Non-QM RMBS Higher Expected Losses

Fitch Ratings, New York, said mortgage rates, coupled with high home prices, are reducing home affordability, prompting originators to increase production of affordability product non-QM mortgages. However, Fitch said it did not expect ratings to be affected as a result of the growth of non-QM mortgage products, given robust credit enhancement for Fitch-rated RMBS transactions.

“Fitch does not believe that the resurgence of affordability products akin to those seen in the run up to the 2008 financial crisis will result in a similar extensive deterioration in performance, as a number of safeguards are now in place to prevent a repeat of the implosion of the private label US RMBS market,” the report said. “Lenders are subject to more stringent lending and disclosure laws, including the ATR Rule and TRID. Issuers have skin in the game under risk retention requirements that encourage the alignment of issuer and RMBS noteholder interests. Furthermore, third party review firms conduct credit, compliance, valuation, and data integrity reviews on the loans in new US RMBS transactions to ensure they are being underwritten to the originator’s guidelines, citing any exceptions that they find.”

FHFA Announces 2023 Roundtable Discussions, Wrap-Up Listening Session for FHLBank System at 100 Series

The Federal Housing Finance Agency announced upcoming roundtable discussions and a three-day wrap-up listening session as part of its review of the Federal Home Loan Bank System.

Launched last summer, FHLBank System at 100: Focusing on the Future is an initiative for FHFA to ensure that the FHLBanks continue to be well-positioned to serve the needs of homeowners, renters, and their communities today and in the years ahead. The FHLBanks provide a source of liquidity for their members, a function they have performed for the past 90 years, while also fulfilling their mission to support affordable housing and community development.

Roundtables will run through March; the three-day listening session will take place March 22-24 at FHFA headquarters in Washington, D.C.

CFPB Shuts Down Mortgage Loan Business of RMK Financial for Repeat Offenses Against Military Families

The Consumer Financial Protection Bureau permanently banned RMK Financial Corp., Ontario, Calif., which does business as Majestic Home Loans, from the mortgage lending industry by prohibiting RMK from engaging in any mortgage lending activities or receiving remuneration from mortgage lending.

In 2015, the CFPB issued an agency order against RMK for, among other things, sending advertisements to military families that led the recipients to believe the company was affiliated with the United States government. Despite the 2015 order’s prohibition on these and other actions, the company engaged in a series of repeat offenses, including disseminating millions of mortgage advertisements to military families that deceptively used fake U.S. Department of Veterans Affairs seals, the Federal Housing Administration logo and other language or design elements to falsely imply that RMK was affiliated with the government. In addition to the ban, RMK will also pay a $1 million penalty that will be deposited into the CFPB’s victims’ relief fund.

The CFPB found RMK disseminated millions of mortgage advertisements to military families that made deceptive representations or contained inadequate or impermissible disclosures in violation of the 2015 order, the Consumer Financial Protection Act, the Mortgage Acts and Practices Advertising Rule, and the Truth in Lending Act.

FHFA Announces $545 Million for Affordable Housing Programs

The Federal Housing Finance Agency announced Housing Trust Fund and Capital Magnet Fund will receive $545 million for affordable housing initiatives from Fannie Mae and Freddie Mac.

The Housing Trust Fund, overseen by HUD, will receive $354 million. The Housing Trust Fund allocates funding annually to states and state-designated entities for the production or preservation of affordable housing through the acquisition, new construction, reconstruction and/or rehabilitation of non-luxury housing.

The Capital Magnet Fund, overseen by the U.S. Department of the Treasury, will receive $191 million. The Capital Magnet Fund competitively awards money to finance affordable housing activities, as well as related economic development activities and community service facilities.

HomeScout Partners with Down Payment Resource

Down Payment Resource, Atlanta, partnered with HomeScout LLC to help mortgage lenders generate and convert more leads by meeting heightened consumer demand for information about affordable pathways to homeownership.

HomeScout has embedded Down Payment Resource’s down payment assistance finder in its partner-branded property search sites, thereby flagging listings that are eligible for homebuyer assistance programs including down payment and closing cost assistance, Mortgage Credit Certificates and affordable first mortgages. Each eligible listing invites consumers to discover which programs and how much funding they may be eligible for by supplying basic qualification information such as household size and income. Loan originators are notified when consumers engage with the DPA tool, enabling them to reach out with financial guidance at the earliest signs of homebuyer intent.

OptifiNow Launches OptifiNow Flex Multi-Channel CRM Platform for Mortgage Lenders

OptifiNow, Seal Beach, Calif., launched OptifiNow Flex, a version of its CRM platform, to support multi-channel mortgage teams.

OptifiNow Flex consolidates the functionality of multiple CRMs into a single platform. All sales channels log into a single site but the CRM experience is customized for each user. OptifiNow has built omni-channel CRMs to support many different lender configurations, including simultaneous forward and reverse lending environments, multiple DBAs with different workflows, or the inclusion of a recruiting CRM within the overall platform.

Experian Offers Income/Employment Verification through Freddie Mac LPA

Experian, Costa Mesa, Calif., announced Experian Verify can now be accessed through Freddie Mac’s Loan Product Advisor asset and income modeler. The move gives mortgage lenders the opportunity to leverage employer payroll data to verify income and employment information while delivering a frictionless experience for borrowers.

AIM provides lenders with a simpler and more efficient loan origination process by leveraging third-party service providers such as Experian to automate traditionally manual processes for assessing borrower income and employment. The addition of Experian Verify provides lenders with new options while adding an additional layer of flexibility and ease to the verification process.

Fitch: U.S. RMBS Originators/Aggregators Continue to Focus on Non-QM

Fitch Ratings, Chicago, said residential mortgage originators and aggregators continue to focus on alternative product – especially Non-Qualified Mortgage — amidst a challenging interest rate environment impacting standard Prime mortgage production.

Although rates have increased across all mortgage products this year, Non-QM borrowers are slightly less interest-rate sensitive than traditional borrowers – and this is driving more originators/aggregators to focus on this sector. The majority of recent additions to Fitch’s coverage has come from Non-QM participants, including Ares Management Corporation, Change Home Mortgage, Excelerate Capital and Quontic Bank.

Equifax Expands U.S. Mortgage Credit Reports

Equifax, Atlanta, said it is supporting financially inclusive lending with the availability of expanded U.S. mortgage credit reports by making certain telecommunications, pay TV and utilities attributes available to the mortgage industry to provide a fuller picture of consumers’ financial profiles – potentially enabling more than 191 million American consumers, 80 percent of whom have traditional credit files but may benefit from additional insights into their financial profile, to have greater opportunities for homeownership.

Anonymized Equifax research into the potential benefits of telco, pay TV and utilities attributes found that among 255 million U.S. consumers, 30 percent could potentially increase their traditional credit score if the attributes are included – helping to increase access to credit. Millions of subprime consumers could also see an average increase of approximately 30 points from use of the additional data, moving them into the near-prime score band and potentially enabling them to receive more favorable offers or rates.

First American FraudGuard Integrates with ICE Mortgage Technology Encompass

First American Data & Analytics, Santa Ana, Calif., announced that its recently enhanced FraudGuard is accessible through, and built on, the latest Encompass Partner Connect API platform, which is now available through ICE Mortgage Technology.

The Encompass Partner Connect API platform enables lenders to access products and services from data and analytics providers. With the new integration, lenders can leverage automation to systematically trigger the ordering of FraudGuard reports and analysis based on a lender’s customizable business rules. FraudGuard leverages public, private and proprietary data sources to help lenders identify risk and assess overall loan quality. The latest version of FraudGuard includes analytics that simplify the review process by streamlining the data collected from the loan application. This update will allow the platform to, over time, produce even deeper insights into the risks associated with the borrowers, subject property and all participants in the transaction.

Clear Capital Universal Data Collection Supports Fannie Mae Appraisal Modernization Policy Changes

Clear Capital, Reno, Nev., launched Universal Data Collection, the latest in the Company’s suite of products designed to support appraisal modernization. UDC supports Fannie Mae’s newly announced Value Acceptance + Property Data program, as well as Freddie Mac’s ACE+ PDR solution, empowering lenders with immediate national scalability and coverage.

When a lender receives loan eligibility for agency loan programs that allow for an inspection-based appraisal waiver, UDC ensures fast and accurate collection and submission that meets both Freddie Mac and Fannie Mae data standards.

Redwood Trust Selects LoanLogics IDEA to Ensure Mortgage Loan Quality 

LoanLogics, Jacksonville, Fla., announced Redwood Trust Inc. will implement LoanLogics IDEA, a document processing and data extraction technology, to support the completeness of its loan files and data purification for its loan quality needs.

Redwood Trust will benefit from a recent integration between LoanLogics and LauraMac’s cloud-based Loan Acquisition System, a configurable transaction management platform used to buy loans in the secondary market. After LoanLogics IDEA transforms digital documents into classified, versioned loan documents and extracts data from them, the results are sent to Loan Review, where they are incorporated into a lender’s or investor’s workflow and processed by the lender’s or investor’s configurable rules.

FormFree Divests AccountChek

FormFree, Athens, Ga., announced its divestiture of asset-verification service AccountChek. Moving forward, the fintech will focus on products that advance its mission to decentralize and democratize the way consumers understand their financial data and access credit opportunities. Eric Lapin, who joined FormFree in 2022 as chief strategy officer, will guide the company’s next chapter as president.

Lapin says the company’s new direction will include an increased focus on blockchain and other decentralized Web3 technologies that give users greater control over their data and privacy. For example, the Qualified Borrower token Lapin helped conceptualize and bring to market last year enables FormFree to share consumers’ validated Financial DNA and indicators of homebuying interest with best-fit lenders and service providers while keeping consumers’ identities anonymous.

FHA Publishes Final Rule: Transitioning from LIBOR to Alternate Indices for HUD’s Adjustable-Rate Mortgages

The Federal Housing Administration published the Adjustable-Rate Mortgages: Transitioning from LIBOR to Alternate Indices final rule (Docket No. FR-6151-F-03) in the Federal Register. In the final rule, FHA establishes the spread-adjusted Secured Overnight Financing Rate as a Secretary-approved index for the transition of existing FHA-insured adjustable-rate mortgages from the London Interbank Offered Rate index after the one-year and one-month LIBOR indices cease to be published after June 30.

The final rule updates the regulations by removing LIBOR and approving SOFR as a Secretary-approved index for newly originated forward ARMs; codifying the same changes made for newly originated reverse Home Equity Conversion Mortgages ARMs that were published in Mortgagee Letter 2021-08; making clarifying regulatory changes to the requirements for monthly adjustable HECM ARMs; and establishing a ten percentage points maximum lifetime adjustment cap for monthly adjustable HECM ARMs.

The final rule can be found here.