The Lenders Keep Disappearing

November 17, 2011 By Leave a Comment

Since the last half of 2009, federal agencies have severely cracked down on faulty Federal Housing Administration lenders; therefore news regarding the government suspending various lenders hasn’t exactly qualified as “news” since this is becoming such a common and expected scene.    The cracking down continued on Tuesday afternoon when Allied Home Mortgage Corporation, a critical lender based in Houston, Texas, was suspended by the U.S. Department of Housing and Urban Development.

HUD Takes Big Gamble With Taxpayer Dollars

This looked like a lot more than a suspension, but rather a loud statement. No time was wasted on Tuesday, as the U.S. Department of Housing and Urban Development’s (HUD) Mortgagee Review Board immediately dropped the Houston-based Corporation from its list of lenders.    Yet, Allied Home Mortgage wasn’t just any FHA lender; it was amongst the HUD’s largest approved ones with major responsibilities in which the stakeholders included taxpayers and American families victimized by foreclosures.    Seems like a big gamble to let them go, but the HUD was more than sure it was in their best interest with intentions to prevent the lender from originating and underwriting new mortgages insured by the FHA.    Also in on the action was the Government National Mortgage Association, also known as the Ginnie Mae.    It was initially established in the 1960s to promote home ownership and is owned within the HUD.    The Ginnie Mae joined the HUD in suspending Allied Home Mortgage with the intent to halt its authority to issue securities in the Mortgage-Backed Securities program.

FHA Harmed?

Two officials of Allied Home Mortgage, James C. Hodge, company president and chief executive officer, and Jeanne L. Stell, chief compliance officer and executive vice president, are now facing a lawsuit issued by the Justice Department in Manhattan’s U.S. District Court and have been expelled from their positions.    According to numerous reports, the FHA and Ginnie Mae have filed the suit under damages that aren’t completely specific, but total up to a whopping $834 million in insurance, under claims that the lender engaged in fraudulent practices. The Mortgagee Review Board apparently found that Allied Home Mortgage Corporation had abused its power and responsibility in more than 600 branches, violating FHA regulations by originating loans in unapproved branch offices and then attempting to hide its wrongdoings by submitting information they knew was false.    A report by Reuters would later say that upon contacting James Hodge in Houston, the Allied president would label the charges as “absurd”.

“We will not tolerate mortgage lenders who play fast and loose with FHA’s standards,” said HUD’s General Counsel Helen Kanovsky in a New York news conference.    “These defendants demonstrated a pattern of recklessness and utter disregard for how we do business. They’ve harmed FHA, hurt homeowners, and now they’ll be held to account for their actions.”

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FHA goes after 15 Mortgage Lenders

January 19, 2010 By Leave a Comment

I applaud the FHA working in concert with the OIG (Office of Inspector General) in researching the underwriting guidelines of 15 mortgage lenders. The main thrust of the investigation is to make sure that these mortgage lenders are not issuing loans that would undermine the financial viability of the FHA. These 15 mortgage lenders had a higher than normal incidence of defaults on the loans that they issued.

With the FHA being one of the major sources of home mortgage financing it is imperative that they are protected from what we have been through recently with Fannie and Freddie loans.

David H. Stevens, Assistant Secretary of Housing for the FHA has said, “It’s important to note that FHA has been taking actions against poorly performing lenders since the day I took this job six months ago. This cooperative effort with the OIG is another indication that we will not tolerate lending practices that pose a risk to the FHA fund, and we have pledged to assist the Inspector General’s Office in any way we can. The Inspector General’s initiative will help us determine whether there is fraud at these companies and better manage risk in the long run.”

We here at RateWindow will be cheering you on!

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What type of loan is best fha, va, or conventional?

July 21, 2009 By Leave a Comment

Mary PoppinsI love summertime.  It’s not just the whole birds-chirping and flowers blooming thing—it’s also when home sales are traditionally churning merrily.

Okay, so I might sound a little too Mary Poppins-ish there.  Blame my wife and her penchant for Julie Andrews musicals.  But the fact is, historical data shows that home sales traditionally began to heat up in early spring, and deals are still being made in June and July.   And this year, despite a relatively weak economy in many areas, looks to follow that trend, with applications for home purchases continuing to climb according to the Mortgage Bankers Association.

What is changing, however, is the type of loans that folks are choosing.  In fact, if you’re looking to buy a home, odds are that you’re considering a government-insured FHA and VA loan.  In fact, Bloomberg reports that more than one-third of prospective homebuyers are selecting government insured mortgages—the highest number since the early 1990’s.

Why would you, as a prospective homebuyer, choose a government-insured loan over a conventional one?  Well, there are a number of reasons.  First, these government programs usually have lower down payment requirements than their conventional counterpart.  If your home’s purchase price is $250,000, FHA guidelines require you to have a down payment of $8,750.00 (3.5%) while a conventional loan would require a down payment of $12,500.00 (5%).    Credit and debt-to-income standards are also generally more lenient with government insured loans than conventional loan programs.

Now, there are some downsides to government-insured loans, like you are required to carry private mortgage insurance (PMI) along with paying an upfront fee of 1.75% (this is normally financed into the loan amount), and currently the rates on FHA loans are running .125%  higher than conventional loans.  You’ll want to make sure that you talk to your loan officer about all of the pros and cons of several types of loan programs before making your decision.

Keep in mind as well that loan type will have an impact on how much your loan will cost you.  That’s why it’s extraordinarily important that you work with a loan officer you can trust—one committed to absolute transparency in mortgage lending.   Make sure that you know, from the first time you discuss your mortgage loan, exactly the type of fees that he or she will charge and how much those fees are going to be.  And ask—point-blank– for full disclosure of the yield spread premium on the loan you’re considering.  Transparency is crucial to getting the best deal for you, and should quickly be added to your list of favorite things.    Like raindrops on roses and whiskers on kittens.

Raindrops on—where on earth did that come from?  Oh wait.

Honey?!  How many times do I need to ask you not to put that DVD in when I’m working….?

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