October 5, 2014

EverBank FHA Short Sales

Filed under: FHA Loan,Short Sale
Looks like FHA caught up with EverBank and their short sale shenanigans recently.  HUD OIG reports:

“EverBank did not ensure that the mortgagors’ default on the FHA-insured mortgages was due to an adverse and unavoidable financial situation….Also, EverBank did not conduct a thorough and independent verification of the mortgagors’ income, claimed expenses and personal resources to properly determine if they had the ability to pay their mortgage payments. Lastly, EverBank did not substantiate that mortgagors’ need to vacate the FHA-insured property was due to the cause of the default.”

But is anyone really surprised?  I mean, this is EverBank after all.

August 7, 2010

FHA Short Refinance

Filed under: FHA Loan,Mortgage

HUD.gov – In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.

The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth – or ‘underwater’ – because their local markets saw large declines in home values. Originally announced in March, these changes and other programs that have been put in place will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012.

“We’re throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined,” said FHA Commissioner David H. Stevens. “This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product.”

Today, FHA published a mortgagee letter to provide guidance to lenders on how to implement this new enhancement. Participation in FHA’s refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner’s primary residence. And the borrower’s existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower’s combined loan-to-value ratio to no greater than 115%.

In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent. Interested homeowners should contact their lenders to determine if they are eligible and whether the lender agrees the write down a portion of the unpaid principal.

To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010.

January 15, 2010

FHA Waives 90 Day Flip Rule!

Filed under: FHA Loan

Measure to help bring stability to home values and accelerate sale of vacant properties

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.  The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.  To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.  
  • In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
  • The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on: FHA 90 Day Waiver

January 11, 2010

Mortgage Tetrameter

Hi Paul,

My soon to be Ex-Husband and I bought a home in December of 2008.  We are currently going through a divorce.  I chose to stay in the home with our children, after our seperation.  Now, several months later, I am unable to make the $2,200.00 Mortgage Payment on my own.  We have only owned the home for 1 year and our principal has only decreased by about $6,000 since we purchased it.  This leaves no room to pay a realator’s comission and the closing costs, even if we could get it to sell for the original purchase price.  To make matters worse, our neighborhood builder went bankrupt.  We now have a new builder.  The new homes that are being built are smaller, but also much cheaper.

I have almost maxed out my credit card, taken a loan out against my 401K and borrowed money from my parents, just to pay the mortgage by the end of each month.  I have not yet fallen behind by 30 days, but I am creaping much closer. 

My real estate agent suggested a short sale.  My credit is not super and I am very concerned that by doing a short sale, it will drop my score considerably.  I have three children to support and need to be able to find somewhere else to live.  I want to make sure that my decision is a sound one. 

My lender (Citi Mortgage)offered to lower my payments to $1,450 for twelve months and submit a loan modification request to FHA (I have a FHA Loan – 30 yrs fixed @ 6.25%).  However, Citi Mortgage would expect a baloon payment of $10,000 at the end of the 12 months.  I can’t afford to pay that kind of money.  If I was to request the Loan Modification, would I be allowed to put my home on the market? 

I am having a very hard time figuring out what to do.  I can’t afford to pay the Mortgage and am starting to drown in debt because of it.  Which of these options would you suggest, given my circumstances?  Loan Modification or a Short Sale?  Any advice that you can offer would be great!!

Thanks,
Renee (more…)

November 17, 2009

Deficiency Judgments FHA Loans

Filed under: FHA Loan,Judgment

The Department has already begun requesting or requiring mortgagees to obtain deficiency judgments in instances where the mortgagors are non-occupant owners; have previously defaulted on one or more FHA-insured mortgages resulting in the payment of claim(s); or are “walkaways,” having abandoned their mortgage payment obligations despite their apparent continued ability to pay.  This will continue to occur where the pursuit of deficiency judgments is consistent with State law.

HUD ML 89-14

October 19, 2009

28 Year Old

Filed under: Collections,FHA Loan

CAN HUD COME AFTER A PERSON 28 YEARS LATER ON A CLAIM THAT SHE NEVER KNEW ABOUT,EVEN IF THE FILES WERE DESTROYED BY HUD?

MARIE (more…)

October 10, 2009

FHA In Over Its Head

Filed under: FHA Loan

New York Times – A year after Fannie Mae and Freddie Mac teetered, industry executives and Washington policy makers are worrying that another government mortgage giant could be the next housing domino.

Problems at the Federal Housing Administration, which guarantees mortgages with low down payments, are becoming so acute that some experts warn the agency might need a federal bailout.

Running questions about the F.H.A.’s future — underscored by interviews with policy makers, analysts and home buyers — came to the fore on Thursday on Capitol Hill. In testimony before a House subcommittee, the F.H.A. commissioner, David H. Stevens, assured lawmakers that his agency would not need a bailout and that it was managing its risks.

But he acknowledged that some 20 percent of F.H.A. loans insured last year — and as many as 24 percent of those from 2007 — faced serious problems including foreclosure, offering a preview of a forthcoming audit of the agency’s finances.

“Let me simply state at the outset that based on current projections, absent any catastrophic home price decline, F.H.A. will not need to ask Congress and the American taxpayer for extraordinary assistance — we will not need a bailout,” Mr. Stevens said in his testimony.

But to its critics, the F.H.A. looks like another Fannie Mae. The hearings on Thursday came on the same day that the federal agency charged with overseeing Fannie Mae and Freddie Mac provided a somber assessment of those giants’ health. In the year since the government stepped in to rescue them, the companies have taken $96 billion from the Treasury, and may need more.

Since the bottom fell out of the mortgage market, the F.H.A. has assumed a crucial role in the nation’s housing market. Created in 1934 to help lower-income and first-time buyers purchase homes, the agency now insures roughly 5.4 million single-family home mortgages, with a combined value of $675 billion.

In addition, these loans are bundled into mortgage-backed securities and guaranteed through the Government National Mortgage Association, known as Ginnie Mae. That means the taxpayer is responsible for paying investors who own Ginnie Mae bonds when F.H.A.-backed mortgages hit trouble.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” Edward Pinto, a former Fannie Mae executive, said in testimony prepared for the hearing. Mr. Pinto, who was the chief credit officer from 1987 to 1989 for Fannie Mae, went further than most housing analysts and predicted that F.H.A. losses would more than wipe out the agency’s $30 billion of cash reserves.

The issue has polarized Congress. Republicans, who led efforts to rein in Fannie Mae and Freddie Mac before those companies ran into trouble, are now seeking to bridle the F.H.A. Many Democrats insist the F.H.A. is playing a vital role in the housing market, which is only just starting to stabilize.

“F.H.A. has stepped into the void left by the private market,” Representative Maxine Waters, Democrat from California, said at the hearing. “Let’s be clear; without F.H.A., there would be no mortgage market right now.”

That was the case for Bernadine Shimon. Like many Americans, Ms. Shimon has recently been through some rough times. She lost a house to foreclosure, declared bankruptcy, got divorced and is now a single mother, teaching high school English in a Denver suburb.

She wanted a house but no lender would touch her. The Federal Housing Administration was more obliging. With the F.H.A. insuring her mortgage, Ms. Shimon was able to buy a $134,000 fixer-upper in August.

“The government gave me another chance,” she said.

The government is giving as many people as it possibly can the chance to buy a house or, if they are in financial difficulty, refinance it. The F.H.A. is insuring about 6,000 loans a day, four times the amount in 2006. Its portfolio is growing so fast that even F.H.A. backers express amazement.

For decades it was an article of faith that helping people of limited means like Ms. Shimon get a house was good for the new owner, good for the neighborhood and good for American capitalism. Then came the housing bust, which demonstrated that when lenders allowed people to buy houses they ultimately could not afford, it hurt the parties — while putting the economy itself in a tailspin.

In the aftermath of the crash, there is wide divergence on how easy, or how hard, it should be to become a homeowner. Skittish lenders are asking for 20 percent down, which few prospective borrowers have to spare. As a result, private lending has dwindled.

The government has stepped into the breach, facilitating loans with down payments as low as 3.5 percent and offering other incentives to stabilize the market. Real estate agents in some hard-hit areas say every single one of their clients is using the F.H.A.

“They’re counting their pennies, scraping up that 3.5 percent,” Bonni Malone of Prudential Americana in Las Vegas said. “Mostly they’re buying foreclosed homes from banks, although I had one client who bought from a guy that was dying. It’s turning around the market.”

While the government’s actions have helped avert full-scale economic disaster, there is growing concern that it might have doled out its favors with too generous a hand.

Many of the loans the F.H.A. insured in 2007 and last year are now turning delinquent, agency officials acknowledge. The loans made in those two years are performing “far worse” than newer loans, dragging down the whole portfolio, Mr. Stevens of the F.H.A. said in an interview.

The number of F.H.A. mortgage holders in default is 410,916, up 76 percent from a year ago, when 232,864 were in default, according to agency data.

Despite the agency’s attempt to outrun its fate by insuring ever-larger amounts of new loans to such borrowers as Ms. Shimon — the current rate is over a billion dollars a day — 7.77 percent of the portfolio is in default, up from 5.6 percent a year ago.

Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.

“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

The troubled loans are nevertheless weighing on the agency’s capital reserve fund, which has fallen to below its Congressionally mandated minimum of 2 percent, from over 6 percent two years ago.

The optimism expressed by Mr. Stevens, the F.H.A. commissioner, places him at odds not only with some outside experts but with Kenneth Donohue, the inspector general of the Housing and Urban Development Department, who is also F.H.A.’s watchdog. Mr. Donohue said the drop in reserves was “a flashing red light” that the agency was not taking seriously enough.

“It might be we’ll get ourselves out of this and that everything will be fine, but I don’t paint that rosy a picture,” Mr. Donohue said. “They’re banking on the fact that the economy will continue to improve, that the housing market will begin to sustain itself.”

He noted that if private lenders had raised their down payment requirements in the last two years, it raised the question, “what does the F.H.A. think it is doing by asking only 3.5 percent?”

Any more than that and Ms. Shimon, 45, would still be a renter. As it was, she cashed in her retirement savings account to come up with the necessary funds. She did not have enough to spare for closing costs, so her mortgage broker arranged a deal where the charges were wrapped into the loan at the cost of a higher interest rate. She cried when the deal was done.

The house was empty and trashed. Slowly, she is trying to bring it back to life. She spent the first few weeks picking up garbage in the backyard.

Is Ms. Shimon a good bet? Even she has no easy answer. Her mortgage payment, $1,100, is half of what she takes home every month. It is not easy to make ends meet. Teachers can get laid off like everyone else.

“The government,” she said, “is doing what it needed to do — taking a risk on people.”

Chaz Fullenkamp, an automotive technician in Columbus, Ohio, got an F.H.A. loan even though he was living on the financial edge. “If I got unemployed, I’d be wiped out in a month or two,” he says. Thanks to the F.H.A., however, he is better off than he used to be.

Mr. Fullenkamp used F.H.A. insurance to buy a house this spring for $179,000. The eager seller paid the closing costs and also gave Mr. Fullenkamp $2,500 in cash. He immediately applied for the $8,000 tax rebate. Even taking his down payment into account, he came out ahead.

“I knew in my heart I could not really afford the house, but they gave it to me anyway,” said Mr. Fullenkamp, 22. “I thought, ‘Wow, I’m surprised I pulled that off.’ ”

As the number of loans has soared, random quality control checks have decreased sharply, F.H.A. staff members say. Mr. Donohue, the inspector general, cited numerous examples of organized fraud in testimony to Congress earlier this year.

“They need to stop taking bad loans in the door,” he said in an interview. “They’re taking on all this volume, they have to have very active underwriting standards.”

September 18, 2009

FHA Running Out of Funds?

Filed under: FHA Loan,Mortgage

Washington Post – The Federal Housing Administration has been hit so hard by the mortgage crisis that for the first time, the agency’s cash reserves will drop below the minimum level set by Congress, FHA officials said.

The FHA guaranteed about a quarter of all U.S. home loans made this year, and the reserves are meant as a financial cushion to ensure that the agency can cover unexpected losses.

“It’s very serious,” FHA Commissioner David H. Stevens said in an interview. “There’s nothing more serious that we’re addressing right now, outside the housing crisis in general, than this issue.”

Until now, government officials have warned that the agency could be forced to ask Congress for billions of dollars in emergency aid or charge borrowers more for taking out FHA-insured loans if the reserves fell below the required level, equal to 2 percent of all loans guaranteed by the agency.

Both options are politically unpalatable. Congress and the public are weary of bailouts after the government spent hundreds of billions of dollars rescuing banks; insurance companies; automakers; and the mortgage finance giants, Fannie Mae and Freddie Mac. Raising premiums for borrowers could increase the cost of buying a home just as a wounded housing market is showing signs of life.

Stevens said that such drastic actions are not needed. He said he is planning to announce Friday several measures that should help the reserves rebound quickly.

The FHA, which is part of the Department of Housing and Urban Development, insures home mortgages against losses, thus helping prospective borrowers obtain loans. It uses the insurance premiums paid by these borrowers to pay for mortgage defaults. Since its creation in 1934, it has never used taxpayer money to cover losses at its flagship home-buying program. But rapidly rising defaults have burned through the agency’s reserves, raising the prospect that it would have to take dramatic action.

The reserves are meant to ensure that the agency remains solvent and can continue helping people get mortgages, which in turn supports the housing market and wider economy.

An independent audit due out this fall will show that the agency’s reserves will drop below the 2 percent level as of Oct. 1, the start of the new fiscal year, Stevens said.

Although the reserves had remained well above the minimum required level during the housing boom, the audit last year showed they had shrunk to 3 percent as of Sept. 30, compared with 6.4 percent a year earlier. The fund’s value was estimated at $12.9 billion, down from $21.2 billion the previous year.

‘Not Going to Congress’

Earlier this year, HUD Inspector General Kenneth Donohue told a Senate panel that falling below the reserve’s minimum threshold would require an “increase in premiums or congressional appropriation intervention to make up the shortfall.”

But Stevens, who became FHA commissioner in July, said these options are not on the table. “We are absolutely not going to Congress and asking for money for FHA,” he said. “We’re not going to need a special subsidy or special funding of any kind.”

He stressed that the agency plans to take other steps that will help beef up the reserves. Some of these measures address fraudulent loans that can contribute to FHA’s losses.

For one, he will propose that banks and other lenders that do business with the FHA have at least $1 million in capital they can use to repay the agency for losses if they were involved in fraud. Now, they are required only to hold $250,000. Second, he will propose that lenders also take responsibility for any losses due to fraud committed by the mortgage brokers with whom they work.

In an effort to reduce the risks faced by the agency — and thus the potential for losses — Stevens said he plans to hire a chief risk officer by the end of the year. The agency has never had one in its 75-year-history.

Though these changes were in the works before the FHA reviewed the new audit, he said the steps should help fatten up the FHA’s loss reserves faster than projected.

The new audit shows that even without any new measures, the reserves will rebound to the required level within two or three years largely as the result of the recovery in the housing market, Stevens said. This calculation is based on projections of future home prices, interest rates and the volume and credit quality of FHA’s business.

Agency’s Financial Health

The audit appears especially dire because it offers a snapshot of the agency’s financial standing at the depths of a severe recession, and it does not take into account the new loans FHA will insure and the new premiums it will collect, Stevens said. The borrowers receiving recent FHA-backed loans have, on balance, been more creditworthy than those the agency is used to catering to, he said.

And while the reserves are at a historic low, Stevens noted that they represent only part of the money the agency maintains to cover losses on insured mortgages. The agency, on an ongoing basis, pays for losses directly out of a second fund. The reserve fund is intended as a backup should losses exceed forecasts. In total, these two funds had $30.4 billion as of June 30, up from $28.3 billion on Sept. 30, 2008, according to Stevens.

The FHA’s financial health is in the spotlight in part because of its key role in buoying the housing market.

The agency lost much of its relevance during the housing boom when home prices soared and borrowers raced to aggressive subprime lenders. But after the subprime market collapsed, borrowers flocked back to the FHA, the only option for those who lack stellar credit or hefty down payments. Its historic role in backing loans is more crucial now than ever.

The agency does not lend money; it insures lenders against losses. It has captured 23 percent of all new loans made so far this year, up from just 3 percent in 2006.

But the agency’s sudden popularity has alarmed some lawmakers, who regularly question whether the FHA has the resources and expertise to handle its increased workload and avert an avalanche of new defaults.

August 7, 2009

Loan Modifications & Bankruptcy

The Department was recently approached by the mortgage industry and bankruptcy experts regarding the Department’s current guidance on mortgagors in bankruptcy.  As a result of these discussions, the Department understands that contact with debtor’s counsel or a bankruptcy trustee does not constitute a violation of the automatic stay and that waiting until a bankruptcy is discharged or dismissed before offering loss mitigation may be injurious to the interests of the borrower, the mortgagee and the FHA insurance funds. 

Effective immediately, mortgagees must, upon receipt of notice of a bankruptcy filing, send information to debtor’s counsel indicating that loss mitigation may be available, and provide instruction sufficient to facilitate workout discussions including documentation requirements, timeframes and servicer contact information.  Working through debtor’s counsel, mortgagees may offer appropriate loss mitigation options prior to discharge or dismissal, without requiring relief from the automatic stay and in the case of a Chapter 7 bankruptcy, without requiring re-affirmation of the debt.  It is strongly recommended that the bankruptcy trustee be copied on all such communications.  All loss mitigation actions must be approved by the Bankruptcy Court prior to final execution. 

Nothing in this mortgagee letter requires that mortgagees make direct contact with any borrower under bankruptcy protection.  However, the information required to file a bankruptcy petition (now a matter of public record) will often include sufficient financial information for the mortgagee to properly evaluate the borrower’s eligibility for loss mitigation.  Using this financial information, many mortgagees have been able to complete the loss mitigation evaluation before the bankruptcy plan is confirmed and have offered a pre-approved loan modification agreement.  For those mortgagors that sought bankruptcy protection solely to avoid foreclosure of their homes, this solution allowed the mortgagor to have the bankruptcy dismissed and begin fresh with a mortgage obligation that is both current and with payments that the mortgagor can afford.  For those mortgagors with other financial problems, the resolution of the mortgage problem will put them in a better position to resolve the remaining financial issues.

Where the mortgagor filed the bankruptcy Pro Se, (without an attorney), the Department recommends that information relating to the availability of loss mitigation be provided to the mortgagor with a copy to the bankruptcy trustee.  This communication must not infer that it is in any way an attempt to collect a debt.  Mortgagees must consult their legal counsel for appropriate language. 

Mortgagee Letter 2008-32

July 8, 2009

Let Me Out! My Loan-To-Value is 322 Percent!

Filed under: FHA Loan,Short Sale

We bought a house in Brevard County, FL in 2005 with an FHA backed loan. It has recently been pointed out to us that our house should not have been approved for financing because it has no heat. I contacted FHA, they confirmed houses outside of a few South Florida counties are required to have a permanent heat source.

Do we have any recourse in this situation?  We are now trying to get out of the house by way of short sale, we owe $129,000 and the home is valued at $40,000.  We need to move to pursue work opportunities in other parts of the country.

Thanks for your help!
Melissa (more…)

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