A panel of top executives from various agencies talked Tuesday about what is going on with government related mortgage programs, including a revision to a key RESPA form and guaranteed closing costs.The session, entitled “What’s Going on with the Government Housing Programs?,” was held Tuesday in Chicago at the annual convention of the Mortgage Bankers Association of America.
The first speaker, Ginnie Mae president Ronald Rosenfeld, said Ginnie’s emphasis this year is eliminating paperwork. Rosenfeld noted that changes along these lines, such as eliminating the need for printed proof of insurance, will save the industry more than $10 million.
Rosenfeld said that effective immediately for federally regulated institutions and their affiliates on all outstanding pools, final pool certifications can now occur without providing collateral documents. Lenders are still required to maintain the collateral documents, but “Ginnie Mae will accept representations and warranties in lieu of collateral documents.” Rosenfeld, who was confirmed by the senate in July 2001, said this change will save issuers about $20 million annually.
“And this is just the beginning,” Rosenfeld continued. In an effort to demonstrate how responsive Ginnie Mae is, Rosenfeld said “if you feel you’re not getting the kind of attention that you are entitled to, please contact me,” then proceeded to give out his direct office line (202.708.0926) and home phone number.
“I won’t give you my home phone number, but the office number is 202.708.2601,” said Dr. John C. Weicher, the next speaker. Dr. Weicher, who is the Assistant Secretary for Housing and the Federal Housing Commissioner for the Department of Housing and Urban Development (HUD), was confirmed by the senate in May 2001.
Dr. Weicher said FHA made 201 multifamily commitments totalling $2.8 billion in financing last year on new construction and sub-rehab projects with over 39,000 units, the highest on record. Commitments were almost double the prior year’s 139 projects with 21,000 units for $1.5 billion in financing. Dr. Weicher attributed the jump to an increase in the insurance premium, which enabled the program to operate on a self-sustaining basis.
“Counting all our programs, we did $7.3 billion last year in multifamily, almost 150,000 units,” Dr. Weicher said. “That’s up from $4.7 billion in 2001…not quite a 100,000 units.”
Dr. Weicher said 6 million FHA residential loans are currently outstanding for almost one-half trillion dollars. He noted that during the last fiscal year FHA insured about 1.3 million loans, with 875,000 for home purchase.
“The typical income for these families was in the low forty thousand dollar range,” Dr. Weicher continued. He said FHA served about 17% of the overall home mortgage market last year.
Dr. Weicher talked about a proposed RESPA rule that includes a new Good Faith Estimate (GFE) that will report a bottom line “this is what it is going to cost you total.” The revision will move closing costs into new categories with varying levels of tolerance, including the following:
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- loan origination fee
- title insurances costs
- services provided by third parties
- taxes & other government charges
The benefit of the revised disclosure would be easier comparison shopping by consumers. No tolerance will be allowed on fees to originators.
Dr. Weicher also discussed the option of a guaranteed mortgage package. In this situation, the lender would guarantee the total settlement service costs at a fixed number. The benefit of a guaranteed package for the lender would be the ability to overtly negotiate volume discounts on settlement services.
“We are offering a carefully limited safe harbor from RESPA’s criminal penalties for guaranteed loan packages,” said Dr. Weicher. “We think that will encourage a packager to bargain hard with individual service providers for the lowest costs. We think it will allow volume discounts on services.”
Both the revised GFE and the guaranteed mortgage package would be required to provide a statement about how a higher rate will enable a lender to provide lower settlement costs through yield spread premiums, and a lower rate can be obtained by paying more money (points) up front.
Dr. Weicher addressed “junk fees”, saying “loan originators can charge all the junk fees they want, but the junk fees have to show up dollar-for-dollar” on the GFE for guaranteed mortgage packages.”
The proposed RESPA rule is open for public comment until October 28th, Dr. Weicher said.
Keith Pedigo, Director of the Loan Guaranty Service at the Department of Veterans Affairs (VA), said the agency has guaranteed nearly 17 million loans and made $740 billion in mortgage financing available to 16.8 million veterans during the 58 years of the program. During the last fiscal year, which ended about 3 weeks ago, VA guaranteed 317,000 loans for $40 billion. Pedigo said the homeownership rate among veterans is 78%, and the typical veteran gets a $126,000 mortgage and doesn’t make a down payment 91% of the time.
Some other data Pedigo provided about veteran borrowers includes:
