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Lenders Fear FHA Rule Could Cripple Program.(Federal Housing Administration)
Lenders and servicers are warning the Department of Housing and Urban Development that a proposal to impose severe penalties for loss mitigation violations could undermine the Federal Housing Administration loan program.
Under a HUD proposal, servicers could face a $277,000 penalty for failing to help a delinquent borrower avoid foreclosure.
Servicers claim this penalty is unfair and excessive, and HUD would do better to provide monetary awards to encourage loss mitigation efforts.
Commenting on the proposal, SunTrust Mortgage Inc., Richmond, Va., and Midland Mortgage Co., Oklahoma City, urged HUD to limit the potential liability of servicers so they are not hit with large fines for past mistakes or minor violations of the agency's loss mitigation standards.
A servicer with a 95% compliance record that has a 1.5% foreclosure rate on 100,000 FHA loans could incur over $20 million in penalties, according to Midland Mortgage. "If HUD were to actually impose penalties of such magnitude for a 95% compliance record, we believe the lenders would quickly begin charging higher interest rates to new FHA borrowers or exit the FHA lending business," Midland Mortgage says in a comment letter.
Midland and SunTrust, along with the Mortgage Bankers Association, want HUD to create a "safe harbor" for servicers who have demonstrated overall compliance with HUD's loss mitigation rules.
"We are concerned that the inability to avoid tremble damages may make FHA servicing less attractive. FHA must continue to be an affordable source of financing for low- and moderate-income borrowers," MBA says.
- Loss Mitigation Is Cost Effective.
- Magazine article from: National Mortgage News APGAR, WILLIAM November 8, 1999 700+ words
...effectiveness of the FHA's loss mitigation program, which provides single...audit report on the single family loss mitigation program. As stated in the Executive Summary, the use of loss mitigation is indeed rising exponentially...
- The return of LOSS mitigation. (loan servicing)
- Magazine article from: Mortgage Banking Litton, Larry B., Sr. May 1, 1997 700+ words
...delinquent loans by implementing aggressive loss-mitigation programs. Whereas traditional servicing...to 1,000 loans per employee), loss mitigation is a highly labor-intensive business...Servicing executives generally resist loss-mitigation activity for several reasons. Loss...
- TNLMA[TM] Announces Official Launch of National Loss Mitigation...
- Press release article from: Business Wire March 11, 2009 700+ words
...Regulatory Proactive Association for the Loss Mitigation Industry and Loan Modification Service...the first national association for Loss Mitigation and Loan Modifications founded to...meeting the growing public demand for loss mitigation services. "TNLMA[TM] believes...
- Managing to cushion the blow. (mortgage servicing industry's loss mitigation...
- Magazine article from: Mortgage Banking Hoff, John R. February 1, 1997 700+ words
...agencies are bringing dramatic changes to loss mitigation. A new survey captures what servicers...understand how they are approaching loss mitigation as this new era in delinquency management...the servicing industry relative to loss mitigation. What is essentially taking place...
- LOGS Adds Loss Mitigation Feature to Online Communications.
- Magazine article from: Mortgage Servicing News April 1, 2000 700+ words
...Services Inc. has developed a loss mitigation module for its LOGS Management...identify and communicate potential loss mitigation opportunities online to mortgage servicers. The loss mitigation module is especially useful in...
- TNLMA[TM] Announces Launch of Certification Program for Loan Modification...
- Press release article from: Business Wire March 19, 2009 700+ words
...National Proactive Association for the Loss Mitigation Industry and Loan Modification Service...of ethics for loan modification and loss mitigation specialists. Upon completion of this...forum for executives from leading loss mitigation companies to come together in conferences...
- Firm Offering More in the Way of Loss Mitigation Services.
- News wire article from: Mortgage Line Harmon, Jennifer November 7, 2008 700+ words
...foreclosure each day, successful loss mitigation is of critical importance in today...industry know it has expanded its loss mitigation package to include its notary service...been reported that 50% to 60% of loss mitigation packages are not returned from the...
- Fitch Ratings Reports on U.S. RMBS Loss Mitigation Strategies.
- Press release article from: Business Wire October 14, 2003 700+ words
...released a report on residential mortgage loss mitigation strategies. In today's servicing...by the borrower is the servicers' loss mitigation practices while working with borrowers...foreclosure. Servicers have long relied on loss mitigation techniques to avoid or lessen the...
Source: HighBeam Research, Lenders Fear FHA Rule Could Cripple Program.(Federal Housing...