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FHA Adds Rate Flexibility to Retention Effort.(Regulatory Watch)
Byline: Brian Collins
Washington-To encourage more loan modifications, the Federal Housing Administration will allow servicers to increase the interest rate on the new loan so it can be sold at par and avoid a loss.
The Department of Housing and Urban Development set the maximum interest rate increase at 200 basis points above the 10-year Treasury rate, according to an Aug. 14 mortgagee letter.
Mortgage servicing consultant Bob Lyons noted it is difficult to sell or repool modified loans in today's market without taking a loss.
"They are trying to give them a little more latitude," he said, provided the borrower can afford the payments and it results in a performing loan. His firm, Lyons McCloskey, is based in Fairfax Station, Va. In a loan modification, FHA servicers generally reduce the interest rate and extend the term of the loan by up to 10 years.
HUD also is encouraging servicers to undertake loan ...
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Source: HighBeam Research, FHA Adds Rate Flexibility to Retention Effort.(Regulatory Watch)