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Subprime: For years, the administration has denied FHA troubles. But emails reveal it not only knew of them, but also withheld evidence of projected insolvency from Congress. Under Obama, the Federal Housing Administration has increasingly backed new home loans to so-called rebound borrowers who recently defaulted on past mortgages. The agency is letting lower-income borrowers get loans just three years after foreclosure with as little as 3% down and subprime-low credit scores. In fact, 40% of newer FHA-backed loans are subprime. The risky lending has led to higher delinquencies. Now at 17%, delinquencies on FHA loans are so high the...

According to Bloomberg Briefs, there has been a jump in non-fixed rate notes. And this occurs whenever Treasury yields rise. But if we look at The Fed, Fannie Mae and Freddie Mac, they are currently invested primarily in fixed-rate products. The ARM (adjustable rate mortgage) share of mortgage applications has risen to 6.4% in recent months, but is well below historic highs. As we argued in a Mercatus research paper, “Do We Need the 30 Year Fixed-rate Mortgage?“, Mike Lea and I say no. In fact, ARMs have decided advantages over their fixed-rate cousin such as risk-sharing with the lender...

Nick Timiraos at the Wall Street Journal wrote that the FHA could suffer losses up to $115 billion over the next 30 years. In its annual audit, the FHA disclosed that under current conditions, its projected losses over 30 years would exceed its reserves by $13.5 billion. A more recent analysis, released in April by the White House’s budget office, showed the agency would require $943 million this year due to losses in its reverse-mortgage program, which allows homeowners who are 62 years or older to take cash out of their homes. (Yes, the reverse-mortgage program that I argued was...

May has been a difficult month for Ginnie Mae mortgage-backed securities investors (like The Fed). First, the US sovereign yield curve has increased since May 2nd. The spread between the Ginnie Current Coupon and the Bankrate 30 year FHA rate has risen from around 61 basis points to under 100 basis points. The Ginnie MBS 4.0% duration has been rising rapidly with the increase in the yield curve. See here for a definition of duration. The convexity of Ginnie 4.0s has increased as well. The good news for the FHA and Ginnie Mae is the rise in house prices over...

The cabinet nominee fought to keep the Supreme Court from reviewing his preferred extortion technique. One of the administration’s favorite legal theories, “disparate impact,” may get taken up again by the Supreme Court. Will the administration try to engineer some kind of payoff to take the issue away from the Court — again? In June 2012, the town of Mount Holly, N.J., petitioned the Supreme Court to review the legitimacy of racial discrimination claims premised solely on a disparate impact theory under the Fair Housing Act. Under this theory, a policy — such as requiring high credit scores for loans...

HUD Secretary Shaun Donovan said Congress and the Administration “should move forward this year with plans for overhauling the U.S. mortgage finance system,” including GSEs Fannie Mae and Freddie Mac, which were “seized by the government in 2008.” Donovan is quoted as saying, “Reform of the failed model of the GSEs, the private gains and socialized losses model, is a top priority and it’s critical that we make progress this year toward that goal.” There have been rumblings of GSE “reform” for the past several years. But the stock answer has been “But not now.” Fannie Mae’s record profits for...

Landing A Reverse Mortgage Just Got Tougher Mark Koba, CNBCApr. 14, 2013, 9:20 AMSeniors looking for a big cash payout from a reverse mortgage will have to look elsewhere for needed funds. A small but increasing number of defaults on the loan product has prompted a crackdown by the Federal Housing Administration (FHA) on the biggest payout loan to homeowners. The basic theory behind reverse mortgages — you must be 62 or older to apply — is that instead of making payments to a lender like in a traditional mortgage, the borrower receives non-taxable money from the lender, which does...

The Federal Housing Administration will charge borrowers higher mortgage insurance premiums on new FHA loans starting next week. If you are planning on getting an FHA loan in coming days, make sure your lender gets a case number from the FHA before Monday to avoid the higher fee. Lenders normally can get the case number assigned to the loan once the borrower applies for the mortgage. But if they are overwhelmed with applications, they may not get to it in time, says Cameron Findlay, director at Discover Home Loans. The annual fee on most FHA loans will increase by 0.1...

The economy is improving (at long last). Durable goods order surprised to the upside with a print of 5.7% SA. But the YoY NSA durable goods orders seems to be in a decline. And the housing market continues to exhibit price increases. The S&P Case-Shiller house price index rose 1.02% in January on a seasonally adjusted basis (SA). On a non seasonally adjusted basis, house prices rose only 0.1%. When we remove the seasonal adjustment, house prices nationally seem to be flat since the end of 2008 with some undulations. The big winners in January? The sand states where investors...

The Mortgage Bankers Association (MBA) released their application indices this morning. In a nutshell, mortgage applications fell -4.68% from the previous week. Purchase applications fell -2.53% and are at 1997 levels as the big push for homeownership from the Clinton Administration was starting. Refinancing applications fell -5.21%. They rose the previous week as mortgage rates started rising, but have cooled off this week. In fact, you can see a trend of decline in refi applications from last September. Mortgage rates have been trending up since October of last year. In refi news, the FHFA released a report showing that Home...

One of my favorite mortgage spreads to look at is the spread between retail mortgage rates (such as the Bankrate 30 year average fixed-rate) and the government agency/enterprise current coupon rates. Prior to November 2008, the spread between the retail mortgage rate and the Ginnie Mae current coupon rate was 22.60 basis points (median). But after October 2008, the median spread skyrocketed to 107.31 basis points. While the spreads vary over time, that is almost an 85 basis point increase in the spread. AND the correlation is falling. Why is this curious? Because the same thing happened to Fannie Mae...

I was just interviewed by WMAL radio in Washington DC on real estate and mortgage rates. Of course, I was asked what is happening to mortgage rates. I mentioned that the US economy is in a liquidity trap (where injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth). In fact, interest rates have been rising over the past several months. Since last November, the 10 year Treasury yield has risen. The yield curve has risen since November. And mortgage rates have risen as well. The...

The Federal Housing Administration has played a major role supporting housing markets through the downturn, but there are signs that the agency is beginning to cede market share back to the private sector. Data from CoreLogic underscores the first point. In the aftermath of the housing bust, private lenders have required down payments of 20%, while loans to the most creditworthy borrowers can have down payments of 10% if borrowers purchase mortgage insurance. For borrowers with less money to put down, government insurance programs are the best bet. The FHA, for example, allows borrowers to make down payments of just...

The following fhatestimony3 is my testimony to the House Financial Services committee on Wednesday at 9am. I. Introduction Chairman Hensarling and distinguished members of the committee, thank you for the invitation to testify at today’s hearing on “Examining the Proper Role of the Federal Housing Administration in our Mortgage Insurance Market” and to provide my perspective on the ongoing mortgage debacle, the resulting decline in the private mortgage insurance market and the need to return the FHA’s share of the insurance market back to pre-bubble levels. I am Anthony B. Sanders, Senior Scholar at George Mason University. The Federal Housing...

What is your prediction on mortgage spreads after the private sector almost vanished by 2008? The red line denotes non-GSE market share and the green line denotes GSE market share (e.g., Fannie Mae, Freddie Mac, etc.). The government essentially became a monopolist (although the government entities including the FHA compete with each other for market share). There are barriers to entry that would promote competition with Uncle Sam – it is called Dodd-Frank and the Consumer Financial Bureau. The vast majority of residential mortgages will continue to be purchase and/or insured by the Federal government. But after the effective nationalization...

A new and extensive analysis of 2.4 million loans insured by the Federal Housing Administration in recent years shows a pattern of risky lending that could generate $20 billion in losses and harm thousands of the nation’s most vulnerable borrowers. By ignoring risks in loans it insured in 2009 and 2010, the study concludes, the F.H.A. is imperiling both borrowers and taxpayers who stand behind the agency. The analysis emerged less than a month after the F.H.A.’s auditor submitted a troubling report on the financial soundness of its insurance fund. In mid-November, the auditor estimated that the fund, which backs...

Subprime Scandal: Now that the president's mismanagement of FHA has led to its insolvency, how will he avoid the embarrassment of a bailout? By squeezing banks, how else? Under Obama, the Federal Housing Administration has increasingly backed new home loans to so-called rebound borrowers who recently defaulted on past mortgages. The agency is allowing lower-income borrowers to get loans just three years after foreclosure with as little as 3% down and lousy credit scores. In fact, a whopping 40% of newer FHA-backed loans are subprime. The risky lending has led to higher delinquencies. In fact, at 17%, delinquencies on FHA...

Vindication is overrated, especially in a losing cause, so it brings no satisfaction to have predicted that the Federal Housing Administration would sooner or later threaten taxpayers. That day has arrived. Safely past the election, the feds announced Friday that the FHA's liabilities exceed its assets by at least $16.3 billion—and the gap could reach $93.7 billion in the worst case. Yet it's worth recalling that when we warned about FHA's troubles in September 2009, we got an accounting lecture from HUD Secretary Shaun Donovan and a letter from FHA Commissioner at the time, David Stevens, that we were "just...

The Federal Housing Administration is expected to report this week it could exhaust its reserves because of rising mortgage delinquencies, according to people familiar with the agency's finances, a development that could result in the agency needing to draw on taxpayer funding for the first time in its 78-year history. Such a report would likely set off a political fight over the government's role in housing, as it raises the prospect of billions of dollars being added to the U.S. government's effort to stabilize the hard-hit sector in the aftermath of the 2008 financial crisis, which already includes $137 billion...

A very important article came out from the Wall Street Journal yesterday titled “FHA Nears Need for Taxpayer Funds,” and it outlines the serious financial problems facing the Federal Housing Administration. For those that are unaware or need a refresher, the FHA has been the key element to the phony “housing recovery” the government has been trying to create. In the wake of the collapse of 2008, Fannie Mae and Freddie Mac blew up and what was left to pick up the pieces was the FHA. No private player would issue loans with down payments of 3%, but this was...

The Federal Housing Administration is so loaded with delinquent mortgages that its reserves are running low, according to a report from The Wall Street Journal. The Journal, whose Nick Timiraos cites people familiar with the matter, notes that 9.6% of the FHA’s $1.08 trillion mortgage guarantees are more than 90 days past due or in foreclosure. (Snip) The good news for the FHA is that it won’t have to go to great lengths to get access to bailout funds. Enter the U.S. Treasury. Because the FHA operates on a so-called ‘permanent and indefinite’ budget it won’t need to ask Congress...

With the presidential race entering the homestretch, most of the political world is wondering: Will there be an “October surprise”? But this year the real surprise may come in November, when the American people learn about the need for a taxpayer-funded bailout of the Federal Housing Administration (FHA). The FHA guarantees mortgages on loans made by FHA-approved lenders throughout the United States and insures mortgages on single-family homes. Traditionally, it has participated in a fairly small segment of the overall mortgage market. In 2006, the FHA’s market share was just 5 percent. But as credit availability tightened and underwriting standards...

Misuse of the FHA Preforeclosure Sale Program may have cost the Department of Housing and Urban Development (HUD) over a billion dollars for claims that did not meet program according to an audit released this week by the HUD's Region 7 Office of Inspector General (OIG). OIG initiated the audit after noticing significant deficiencies in borrower qualifications during an audit of program claims at one large lender. The Preforeclosure Sale Program allows borrowers in default due to an adverse an unavoidable financial situation to sell their home at fair market value and use the proceeds to pay off an FHA-guaranteed...

ight now, the U.S. Federal Housing Authority is offering historically low interest rates on home loans as part of an effort to kick-start the housing market. Under a plan introduced by President Barack Obama, an FHA-qualifying U.S. homebuyer can apply for a 30-year mortgage with a fixed interest rate of 3.75 percent and a 15-year fixed mortgage at 3 percent. FHA loans require as little as 3.5 percent of the home’s value up front in the form of a down payment. SNIPAccording to Edward Pinto, a resident fellow at the conservative American Enterprise Institute, FHA loans are allowing a repeat...

The U.S. Federal Reserve estimates that of the 12 million American homeowners who have negative equity, 3 million--or 1 out of every 4--are borrowers with FHA-insured loans.

Today, FHFA updated their study of principal reductions and Director Ed DeMarco presented the new results. He did NOT announce any trial program or agreement with the Obama Administration about using Fannie Mae and Freddie Mac to salvage the housing market. But he did say that an announcement will be out in a few weeks. As I said at Brookings, we have very little empirical evidence (other than anecdotal stories) that principal reductions work. We have not been through 3-4 years of mortgage modifications with principal reductions to see if they are as effective as forbearance in preventing defaults. FHFA...

Newsy had a nice summary of the principal reduction debate. It focuses on California Attorney General Kamala Harris requesting that mortgage giants Fannie Mae and Freddie Mac cease foreclosures (at least in California) and perform principal reductions. FHFA Acting Director Edward DeMarco is resistant to the idea saying the principal reductions would cost taxpayers $100 billion. “Only” $100 billion? A recent Fed study covered in HousingWire found that negative equity in the U.S. is approaching $4 trillion. $100 billion is a big number, but pales in comparison to the cost of wiping out all negative equity. So, the tab to...

The Bureau of Economic Analysis (BEA) released the Personal Income and Outlays report for February. The Good: Personal income increased $28.2 billion, or 0.2 percent in February and Personal consumption expenditures (PCE) increased $86.0 billion, or 0.8 percent (mostly consumer durables like autos and computers). Real Personal Consumption Expenditures (PCE) increased 0.5 percent in February, compared with an increase of 0.2 percent in January. Personal income rose 0.2% in February. The Bad: REAL personal income fell 0.1% in February. So, personal spending increased 0.5% while personal income FELL 0.1%. That means that households … are boarding the Debt Train again!...

I have heard that the government has started selling lots of foreclosed homes to government approved real estate management firms or property liquidators. 1. Where is more information on this process? 2. Who is getting to bid on lots of homes, how do we find out who is awarded the properties? 3. What are the long term ramifications of this?

<p>This seems like a really bad idea to me. Talk about crony capitalism. Individual buyers will be shut out from buying these properties.</p>

Link only, per FR posting rules

It took a $142 billion taxpayer bailout to convince the Obama Administration to pledge in February to wind down Fannie Mae and Freddie Mac, rein in the Federal Housing Administration and encourage the revival of a private mortgage market. So it's distressing to see Congress move in exactly the opposite direction less than a year later, with the quiet approval of the White House. While cable TV is chasing the trivia of Fannie and Freddie bonuses, the real news is that late Monday a bipartisan Congressional committee announced an agreement to increase FHA's maximum mortgage limits to $729,750 from $625,500...

Concerns are rising that the Federal Housing Administration could run out money if the economy doesn't recover soon, raising the risk the agency would seek a taxpayer bailout for the first time in its 77-year history. Since the mortgage crisis erupted five years ago, the FHA has played a critical role in housing finance as private lenders retreated. It backs about a third of all new mortgages originated for home purchases, up from around 5% in 2006. But, as the FHA prepares to release its annual financial report next week, a forthcoming study by Joseph Gyourko, a real estate and...

Who’s the largest owner of REO (bank-owned) inventory in the country? The taxpayers! That’s right. You and me. Mortgage giants Fannie Mae and Freddie Mac, along with the Federal Housing Administration (FHA), are currently holding approximately 250,000 foreclosed homes. That’s roughly half of all unsold, repossessed properties. Plus, these government-backed agencies may soon be forced to repossess 830,000 more homes currently in some stage of foreclosure. What’s a government to do with so many distressed properties? Unloading them into the market would only further depress values, while damaging the fragile U.S. economy that depends on real estate stability. Holding the...

WASHINGTON (MarketWatch) — Struggling to clear its inventory of foreclosed properties, the Obama administration said Wednesday it’s looking for investor ideas for converting more than 92,000 foreclosed properties owned by the U.S. government into rental units, a sign of the depths to which the U.S. housing market has sunk. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets and support neighborhood and home-price stability,” Treasury Secretary Timothy Geithner said in a statement. The Obama administration is working with the Federal Housing Finance Agency, the regulator for...

The Obama administration will announce plans Wednesday to seek investors' ideas for turning thousands of foreclosed properties owned by government-backed entities into rental homes, according to administration officials. The move is intended to put a floor under declining home prices by creating a way to deal with hundreds of thousands of potential foreclosures in coming years. Mortgage giants Fannie Mae and Freddie Mac sold a record 100,000 homes during the second quarter. Together with the Federal Housing Administration, the entities owned about 250,000 homes at the end of June, or around half of all unsold, repossessed properties. Another 830,000 homes...

The Federal Housing Administration is contemplating requiring a tighter debt-to-income ratio for borrowers, according to a July 6 American Banker story. The parameters of the requirement are still to be determined; however, lenders worry that the change could disqualify a large percentage of potential home loan applicants and hinder housing market recovery by further driving down prices. FHA’s motive is to lower its delinquency rate and maintain stability of its Mutual Mortgage Insurance fund. "It doesn't do anybody any good if the borrower can't meet their debt obligations," Robert Ryan, FHA's acting commissioner, told American Banker. "We absolutely have to...

FHA gives jobless homeowners one-year breakQualified appicants would not have to make mortgage payments during that time By DEREK KRAVITZ The Associated Press updated 7/7/2011 5:25:11 PM ET WASHINGTON — The Obama administration is making it easier for out-of-work homeowners to stay in their homes, as it tries to revamp its troubled foreclosure-prevention program. Starting Aug. 1, the Federal Housing Administration will extend the period for unemployed homeowners to miss mortgage payments to a full year from three or four months. That will allow qualified homeowners to go without making a monthly payment for 12 months before the foreclosure process...

Yesterday’s Case Shiller housing data was scary enough all by itself–housing prices have dropped a whopping 5% just in the past year. What nobody is factoring into the equation yet is one of the government’s favorite weapons of mass destruction–FHA loans. Taxpayer insured mortgages are all the rage as conventional loans have become harder to come by. Now that all of the cows have escaped and been run over by semi trucks, lenders have sealed the barn door shut and requiring borrowers to prove they can actually repay their loans as well as put up some kind of down payment....

The former treasurer of one of the country's largest mortgage firms - Taylor, Bean & Whitaker - pleaded guilty Thursday in U.S. District Court in Alexandria to charges of participating in a $1.9 billion fraud scheme. Desiree Brown, 45, of Hernando, Fla., was accused of participating in a scheme that contributed to the collapse of Colonial Bank in Alabama, one of the nation's largest regional banks. She was also charged with participating in a fraudulent but unsuccessful effort to extract $570 million of federal bailout funds from the Troubled Assets Relief Program. The case is being prosecuted by the Justice...

The Obama administration proposed raising fees for borrowers and requiring large down payments for home loans as part of a long-term effort to reduce the government's outsized footprint in the housing market, but warned that these moves could increase mortgage rates and potentially reduce the availability of the 30-year fixed rate mortgage, a mainstay of American housing for decades. In a long-awaited white paper, the administration said that it intends to wind down Fannie Mae and Freddie Mac, which together with the Federal Housing Administration provide more than 90 percent of housing finance, but said the process could take five...

Americans have lost more than $4 trillion in assets since the housing market collapsed in 2006. Risky government mortgage lending regulations helped inflate prices beyond reason, but those policies have not gone away. Instead, they've just moved into a new home, the Federal Housing Administration (FHA). Unless Congress acts to renovate eligibility requirements for borrowers, we could see an even worse financial disaster unfold.~snip~Participating lenders are caught between the Scylla of penalty for denying loans to marginal borrowers and the Charybdis of sanction for having too many defaults on their books. It will only get worse: The FHA has...

Cash-strapped cities and towns across America are having to pay out millions of dollars on new signs under orders of the federal government - because they are the wrong letter size. Washington officials have demanded that every single street sign in the nation which is currently in capitals must be replaced because they are supposedly too hard to read. In their place will be new signs with the same green background and the same font, the only difference being that they are in lower-case letters. For some cities the cost will be millions of dollars at a time when budgets...

Update: CNBC confirms that the New York Fed is part of a consortium that have launched a lawsuit against BofA regarding Countrywide mortgages. Shares are now off 3%. Original post: Interesting! Shares of Bank of America (BAC) are getting crushed on headlines that the New York Fed and PIMCO are about to jump on the Bank of America mortgage putback bandwagon. It's particularly surprising to see the NYFED jump in on the action, since that means they'd be actively working to weaken Bank of America. PIMCO is private, so their only interest is making more money. It makes sense. All...

4 In Your Corner continues to investigate the Rocket Docket. That's the speedy-foreclosure process in Southwest Florida's 20th Judicial Circuit. We have the story of one Charlotte County man who's trying to stop it. As a notary public with over 20-years experience, Ron Gillis scrutinized his mortgage documents preparing for his foreclosure hearing. And he claims to have found on paper what many of you have complained to 4 In Your Corner about, mortgage fraud and falsified documents; and in the courtroom, violation of due process and rogue judges. That's why he's filing complaints against foreclosure judges Leeann Schreiber and...

Bank of America alleged in a court filing this June: It appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies As I have repeatedly pointed out, the failure of the mortgage originators and banks to prepare and record proper documentation has led to an epidemic of fraud. The pledging of the same mortgage again and again to different trusts related to mortgage backed securities is just one result. And as long-time foreclosure investigator Nye Lavalle writes: On thousands of occasions I stated to regulators, CEOS, banks, Fannie and Freddie that the...

WASHINGTON (Dow Jones)--The White House is committed to holding banks accountable for any legal violations tied to housing foreclosures, White House Press Secretary Robert Gibbs said Tuesday. Gibbs also reiterated that the administration "strongly" supports an investigation by 50 state attorneys general into allegations that bank employees signed foreclosure documents without carefully reviewing the contents. Gibbs' statement comes as several large financial institutions, including Bank of America Corp. (BAC) and GMAC Mortgage, a lender and loan servicer, said they were restarting foreclosures. Bank of America said the company hasn't found significant problems with its process for seizing homes. The bank...

Foreclosure attorney David Stern, who is being investigated for fabricating legal documents, purposefully hid files from inspectors with Fannie Mae and Freddie Mac, a former employee said in recently released deposition. Stern had a tight-knit relationship with the two mortgage giants, and referred to them as his “babies,” former employee Kelly Scott said. Scott also said office managers and key staff members got gifts, including new cars. Stern’s law firm is one of the largest foreclosure law firms in Florida, handling thousands of cases per month. Attorney General Bill McCollum is investigating the firm for allegedly creating phony documents. McCollum’s...

Home buyers can once again purchase a home using FHA financing with a zero down payment. Previous zero down payment FHA loan programs were funded by seller contributions funneled through a nonprofit group which then donated the down payment to the purchaser. These seller-financed down payment programs were terminated in 2008 after the FHA experienced default rates three times higher than when buyers made a cash down payment. The innovative zero down payment FHA home purchase program was recently introduced by The Lending Company of Phoenix, Arizona. In order to meet the FHA required 3.5% down payment, the borrower receives...

Hardly a week goes by without President Obama accusing Republicans of being beholden to special interests. On Wednesday, he told students at Cuyahoga Community College in Parma, Ohio, that Republicans want to "cut regulations for special interests." Just two days earlier, he told union members that Republicans would "have those special interests riding shotgun, then they'd hit the gas, and we'd be right back in the ditch." Fortunately, those same union members will have their shovels at the ready to fill the nation's ditches with $50 billion in stimulus funding the president proposed this week for use on infrastructure projects....