FHFA debates if lenders should be able to choose a credit scoring model
At an FHFA virtual hearing, credit scoring agencies showed their support for “Lender Choice” as a credit scoring model.
The agency presented four credit scoring options, each of which has its fans and detractors.
“We urge the FHFA to adopt Option 3 [allowing lenders to deliver loans with any approved score],” said Silvio Tavares, president and CEO at VantageScore, which was developed by the three major credit bureaus, Experian, Transunion and Equifax. “It’s the best and only option that enables true competition and that will directly enable more creditworthy consumers to have access to mortgage loans.”
However, FHFA acting director Sandra Thompson acknowledged that careful consideration is still needed. “No proposed credit scoring option will be a silver bullet for expanding equitable access to credit,” she said
CFPB warns mortgage servicers to be careful with Homeowner Assistance Fund
The CFPB has detailed stringent responsibilities for mortgage servicers that participate in Homeowner Assistance Fund programs and warned that related activity will be monitored closely.
“Servicers should review their existing policies and procedures to ensure that borrowers are not improperly referred to foreclosure, for example, especially while a servicer is working with a borrower during the HAF application process or waiting for payment of HAF funds,” said Lorelei Salas, assistant director for supervision policy.
So far, all of the programs allow HAF funds to be used for mortgage relief within certain parameters set at state level. In some states, HAF money can also be used for other purposes like utility payments and for payment of delinquent property taxes.
FHA introduces 30-day buyer preference for certain post-foreclosure sales
The FHA has introduced a 30-day buyer preference for certain home sales from its default inventory, which may put more of these houses in the hands of owner-occupants, nonprofits and governmental entities. This policy gives these buyers first opportunities to acquire post-foreclosure properties without conveyance of title process.
“This policy change is critical as the nation continues to address the challenges of a real estate market in which home prices are high and the availability of affordable housing supply is low,” said Lopa Kolluri, principal deputy assistant secretary for housing and the FHA.
Critics of the new policy feel these preferred buyers’ limited financial resources should restrict their involvement even when they get first pick at distressed properties.
CFPB urged to adopt tiered supervision of independent mortgage banks
The CFPB must follow the Dodd-Frank Act’s standard of tiered supervision of small- and mid-sized independent mortgage banks based on size, volume and extent of state supervision, said the Community Home Lenders Association.
“Such an approach would mirror that of other financial regulators such as the FDIC, which uses memorandums of understanding, a common informal agreement used to obtain a commitment from a bank’s board of directors to implement corrective measures,” the CHLA said.
The group also opposes any use of regulation by enforcement, a previous common practice.
FHFA weighs changing counterparty risks and lenders should too
The FHFA continues to focus firmly on its public mission, but is now also looking into the risks of potentially leaving its conservatorship role as the country emerges from the fullest impact of the pandemic. But when Fannie and Freddie reassess their risks and change their policies, lenders often have to as well.
“While it is prudent for the GSEs to periodically review and assess their counterparties regarding their financial stability and capabilities, unilaterally applying these standards to banks and nonbanks could create an unlevel playing field in favor of the banks,” said Tom Piercy, president, national enterprise business development at Incenter.
The FHFA is reviewing comments on re-proposed counterparty standards for housing finance firms, as well as reassessing ongoing mission-related borrower policy updates.
CFPB reiterates skepticism of AI in fair-lending report
A report from the Consumer Financial Protection Bureau noted an increase in actions against redlining and discriminatory practices.
The CFPB said financial services will be increasingly shaped by predictive analytics, algorithms, and machine learning but that technology can also reinforce “historical biases that have excluded too many Americans from opportunities.”
FHA explains how to handle Homeowner Assistance Fund applicants
The FHA has confirmed that the agency wants to help mortgage servicers pause foreclosure proceedings in circumstances where relief is sought from the HAF.
Such situations include notification from the state HAF program that a borrower has applied for or received final approval for the funds, how long the hold is, or whether the servicer may be called upon to terminate the foreclosure.
“FHA permits the application of additional funds such as HAF to be used as a part of the borrower’s loan mod, or to reduce a partial claim amount if needed, or to pay the partial claim off, depending on the situation, including for the COVID-19 loss mitigation options,” said Matt Martin, national servicing center director of the HUD.