Ginnie issuers raise concerns with orphaned and re-performing VA loans
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Ginnie issuers raise concerns with orphaned and re-performing VA loans
Mandated by The Economic Growth, Regulatory Relief and Consumer Protection Act, Ginnie Mae changed pooling eligibility criteria for Department of Veterans Affairs (VA) refinance loans in securities guaranteed on or after June 1, 2018. Now, in order to be eligible for a Ginnie Mae security, the note date of the refinance loans must be on or after 210 days after the first monthly mortgage payment was made, or the date on which six full monthly payments have been made on the mortgage, whichever is later. Notably, however, the legislation provided no runway for lenders to transition VA refinance originations. A week after the legislation was signed into law, Ginnie Mae issued an All Participant Memorandum (APM) implementing the changes effective immediately.
“The abrupt implementation created a population of orphaned loans,” said Stephanie Schader, Vice President of The Collingwood Group. “Loans that were in pipeline or already guaranteed, but not yet securitized, that were compliant with the prevailing seasoning requirements at the time of origination were deemed ineligible and are essentially stranded.” Although a true source of pain for issuers, Ginnie Mae is advising issuers to look elsewhere for a solution to the orphaned loans.
The other concern raised by Ginnie Mae issuers is the pooling eligibility of re-performing VA refinance loans. Some discussions with Ginnie Mae suggest the agency expects issuers to perform reasonable due diligence to determine that the seasoning requirement on the prior loan was met. If an ineligible loan is discovered it will be treated the same as any other defective loan, and the remedy is a buyout. Unfortunately, the APM implementing the legislative changes is specific to ineligible loans in June 1, 2018, pools. Furthermore, the definition of a defective loan has not been updated to include VA refinances where the prior loan did not meet the respective seasoning requirement.
“Although Ginnie Mae appears to view the orphaned loans as a discrete population, re-performing loans are ongoing in nature. Written guidance or FAQs would at least provide clearer terms for the treatment of re-performing loans. Absent such guidance, future mortgage servicing rights (MSR) transfers could be adversely impacted,” Schader said.
The absence of implementation timelines and more specific guidance in the Act has been a source of frustration for mortgage lenders. Further regulatory advice in the near term would smooth over lingering anxieties concerning HMDA reporting expectations and the treatment of re-performing VA refinance loans. Other issues, however, such as loans orphaned by the immediate implementation of the VA churning restrictions, are likely to have a lasting impact on the applicable loans and their originators.
To read the complete commentary on implementation challenges, click here.
Senate confirms Clarida to Federal Reserve, two others remain in limbo
The Senate voted Tuesday to confirm Richard Clarida to serve a four-year term as vice chairman of the Federal Reserve Board of Governors and a 14-year term as a member.
The Senate voted 69-26 to confirm Clarida as vice chairman, with one Republican, Sen. Rand Paul, R-KY, opposing the nomination. Clarida’s nomination to serve as a Federal Reserve governor was confirmed through a voice vote.
His nomination drew criticism from Sen. Sherrod Brown, D-Ohio, ranking member on the Senate Banking Committee, who said Clarida did not sufficiently answer committee members’ questions during his confirmation hearing and afterwards in responses for the record.
“He failed to provide the committee [with] meaningful insight into his views,” Brown said in a floor speech before the full Senate voted. He said the responses the committee got were “pretty much identical” to another Federal Reserve nominee, Michelle Bowman.
Brown added that he was “not confident” Clarida would protect taxpayers and homeowners from the next financial crisis.
Clarida testified before the banking panel in May alongside Bowman, but Bowman’s nomination has not yet been considered by the full Senate.
A third nominee, Marvin Goodfriend, who testified before the committee in January, also hasn’t been considered by the full Senate. The Democrats on the committee unanimously opposed his nomination and Paul indicated that he would also vote “no.”
Read more: American Banker
Loans for residential construction rise
Despite the inventory headwinds being felt by the housing market, construction of new homes seems to be gathering speed. An indicator of this is the volume of residential construction loans, which is seeing a steady increase, according to an analysis by the National Association of Home Builders (NAHB).
The NAHB said that the 1.7 percent rise in residential construction loan volumes in the second quarter of 2018, marked 21 consecutive quarters of growth in this segment.
Easing credit conditions and a growing loan base are being seen as the key factors that have helped in the expansion of residential construction activity, the analysis revealed. “According to data from the FDIC and NAHB analysis, the outstanding stock of 1-4 unit residential construction loans made by the FDIC-insured institutions rose by $1.3 billion during the second quarter of 2018, raising the total stock of outstanding loans to $77 billion,” Robert Dietz, Chief Economist at NAHB noted in the association’s blog.
Read more: MReport
The best times of year to buy a home
Buying a home in the spring and summer these days looks like something you’d see out of “The Hunger Games.” For sellers, it’s the golden opportunity to get the most return on their real estate investment. Buyers, on the other hand, might feel like they’re in a gladiator ring.
A lack of affordable homes in many markets, along with fierce competition, rising prices and higher mortgage rates, have sidelined many buyers this year. That was evidenced in July by a continued slump in existing-home sales, which crawled to their slowest pace in two years, according to data from the National Association of Realtors.
As summer fades to fall, though, recent market shifts could give buyers a leg up in the latter part of the year. In July, for instance, the national inventory of homes listed above $350,000 rose 5.7 percent, according to new data from Realtor.com. The inventory swell is mostly in markets that have seen continual price growth that’s starting to decelerate. In fact, 16 major housing markets had a year-over-year increase in their inventory levels, Realtor.com found.
These slight changes, along with less buyer competition and sellers eager to get to the closing table before the holidays, could give serious buyers more latitude, says Danielle Hale, Realtor.com’s chief economist.
“Make no mistake: It’s still a sellers market in many places, but we’re starting to see the tide shift,” Hale says.
Read more: CNBC
Freddie weighs in on housing market
The growth of home sales slowed down this summer and is likely to remain that way for the rest of the year, according to Freddie Mac’s latest housing forecast. The August forecast by the GSE revealed that while the U.S. economy grew at its fastest pace in four years in Q2 2018, the housing market played a limited role in this growth.
The report indicated that slower home sales growth, as well as decreased refinance activity due to higher mortgage rates, were likely to cause single-family first-lien mortgage loans to slide around 8 percent this year to $1.66 trillion.
“Limited inventory continues to affect home sales and prices,” the report said. It noted that total home sales were likely to increase only “modestly” to 6.14 million. While prices were expected to moderate, they would still remain above inflation rates, the report stated.
The region most affected by the sluggish pace of home sales was the West, according to Sam Khater, Chief Economist at Freddie Mac.
Read more: DS News
June Case-Shiller results and July forecast: Shifting winds
It’s hard not to notice the winds beginning to shift in the housing market. But those changes have yet to reach the point where they’ve fully transitioned from home buyer headwinds into tailwinds, and likely won’t until at least the end of the decade.
Still, the signs of change are here: The U.S. National Case-Shiller Home Price Index climbed 6.2 percent in June from a year earlier, slightly slower than the 6.4 percent annual growth recorded in May. June prices rose 0.3 percent from May – slightly below expectations.
And annual home price appreciation was slower in June than in May in 14 of the 20 cities in Case-Shiller’s 20-City Composite Index. Las Vegas, Seattle and San Francisco continued to report the highest year-over-year gains at 13 percent, 12.8 percent and 10.7 percent, respectively.
But the slowdown, and the changes it brings, will be gradual. Inventory, when it begins to rise, will be coming up from incredibly low levels. Home value growth remains well above historic norms, even as it slows in some markets – and that rapid growth still makes saving an adequate down payment a challenge for many buyers. And while sellers are seemingly more open to cutting their initial asking price than in recent months, that trend is more prominent at the upper end of the market where there is more selection.
Read more: Zillow