The state of FHA reserves

March 7, 2012 by · Leave a Comment
Filed under: General, Legislative 

There’s been considerable interest in the media in FHA’s financial position. The agency recently announced several increases to the premiums it charges borrowers to have their mortgage guaranteed by the agency. Those increases, along with some reports that FHA might request federal funds to shore up its reserves, make it seem like the agency is navigating a rocky period.

On the premium increases, the 0.10 percent hike that takes effect April 1 is mandated by law as part of the bill Congress passed at the end of 2011 to extend the payroll tax vacation. That bill required an increase in the guarantee fee that Fannie Mae and Freddie Mac charge banks for guaranteeing loans. Congress included the FHA increase in the bill, too, at least in part to create parity with Fannie and Freddie, NAR analysts say. Read More.

RESPA violations with fee-splitting: yes or no?

January 18, 2012 by · Leave a Comment
Filed under: General, Legal 

In a case before the U.S. Supreme Court on whether Sec. 8(b) of the Real Estate Settlement Procedures Act (RESPA) is violated when a fee charged by a settlement service provider isn’t split as a referral fee or “kickback” to another settlement service provider, NAR argued in an amicus brief it filed with the Court yesterday that the intent of the Sec. 8(b) of RESPA is to cover only circumstances where the fee is shared, and not where the settlement service provider retains the entire fee.

The plaintiff in the case before the Court claims that the fee charged and retained by a lender violated RESPA because no services were performed in exchange for the fee, but the lower court ruled against this view, saying Sec. 8(b) of RESPA is only intended to regulate fee-splitting arrangements, such as those in which companies receive money or other things of value in exchange for a referral. In its brief, NAR argues that the lower court decision is correct and it recommends the Supreme Court affirm this view. To hold otherwise, NAR argued, would be inconsistent with Congress’ express directive that RESPA is not intended to regulate fees charged by settlement service providers.

This issue has great importance to real estate brokers who wish to charge and retain a flat “administrative fee” in addition to a percentage based commission. Several other lower courts have held that doing so violates RESPA, even if the fee is not shared with another, unless the broker can establish specific services were performed for the fee charged. The case is Freeman vs. Quicken Loans (Docket No. 10-1042). Read More.

Guarantee fees may increase due to legislation

January 9, 2012 by · Leave a Comment
Filed under: General, Legislative 

The Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to increase their guarantee fees effective April 1. The directive to increase the fees responds to the federal law enacted three weeks ago which is using the fees to help offset the cost to extend the payroll tax reduction.

NAR opposed the increase in fees to pay for non-housing-related purposes. The increase will remain in effect through September 30, 2021. Lenders who choose to pass this increase on to borrowers will likely increase the rate offered to a borrower by .1 percent sometime before April 1, 2012. Analysts estimate the increase in cost over 30 years to be between $4,000 and $5,400 on a $200,000 loan, or $11-15 a month. Read More.