It appears that HUD is trying to pilot a FHA Foreclosure Prevention but as simple as it appears, why has it taken so long?

The Department of Housing and Urban Development is starting a pilot program in Detroit to purchase Federal Housing Administration single family loans from lenders after all loss mitigation options have been exhausted and foreclosure is the next step.

“Under this program, we will create means for lenders or investors to sell their non-performing mortgages before foreclosure to HUD and a joint venture partner who will be responsible for servicing the loan and helping families stay in their homes,” HUD Secretary Steve Preston said.

HUD expects to purchase the FHA loans at a “significant discount” so the joint venture partner can modify the loans and make it more affordable for the homeowners.

WASHINGTON - Faith-based organizations are making a huge difference in the Bush Administration’s efforts to reduce homelessness, U.S. Department of Housing and Urban Development Secretary Steve Preston said today. Addressing the White House National Faith-Based and Community Initiatives Conference, Preston highlighted the Administration’s partnership with faith-based and community organizations and steps being taken to reduce chronic homelessness, especially among veterans.

“The Faith-Based and Community Initiative combines the strengths of the public and private sectors to make our social programs work better,” said Preston. “There is a vast, network of partnerships between HUD, local communities and nonprofit organizations around the country. These partnerships are incredibly effective in helping to reduce the number of persons who are calling the streets their home.”

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Big changes are in store for the U.S. financial system. Treasury Secretary Henry Paulson announced a list of goals earlier today that include a broad expansion of the Federal Reserve’s powers.

Under Paulson’s plan, the Fed would essentially serve as a financial markets moderator. If enacted, the changes would reportedly be largely invisible to consumers but would drastically alter how the financial services industry is regulated.

The Secretary of Housing And Urban Development is stepping down amid several ethics investigation. Alphonso Jackson said earlier today that he’ll resign April 18 to attend to persona and family matters. The resignation comes after criticism from members of Congress that Jackson has refused to respond adequately to allegations of impropriety.

Suitability Standards Could Open Up Lenders To a Fair Housing Can of Worms, a compliance expert said Monday at the SourceMedia Fraud and Risk Conference in Las Vegas.

According to Gary Lacefield, who spent a decade as a senior civil rights analyst and supervisor of lending investigations at the Department of Housing and Urban Development, lenders will “need to be very cautious” if legislators and regulators impose true suitability standards on the mortgage business.

“If we do away with automated underwriting,” he asked, “how are we going to protect ourselves from frivolous charges of discrimination?” Mr. Lacefield, who left HUD in 1999 after personally supervising or conducting more than 1,600 investigations, said automated underwriting was created in large measure in the mid 1990s to protect lenders from charges of bias. And it worked.

Once computer systems started spitting out loan approvals based solely on lenders’ underwriting criteria, without being touched by humans and their inherent biases, they all but wiped out fair housing cases against lenders, he said.

But if suitability standards are imposed as a response to abusive lending practices, Mr. Lacefield, who is now director of compliance at WR Starkey Mortgage, Plano, Texas, said automated underwriting would be little more than an exercise in futility.

“If we take out the specificity provided by automated underwriting, we leave ourselves wide open to allegations of discriminatory behavior,” he warned.

FHASecure Will Refinance Interest Only Mortgages and Some Option ARMs

The Federal Housing Administration is willing to refinance certain delinquent borrowers with interest-only and payment-option adjustable rate mortgage under the FHASecure program, which is designed to rescue subprime borrowers.

However, the delinquency on an IO or option ARM must be the result of an interest rate reset or the full amortization of the mortgage, according to the Department of Housing and Urban Development.

Shortly after HUD launched FHASecure on September 5, lenders began asking whether IO and option ARMs would be eligible.

Mortgage industry consultant Bud Carter pointed out the revision. “FHA will refinance almost any loan, except a conventional fixed rate mortgage that is delinquent,” he said. Mr. Carter is with Potomac Partners in Washington.

The president elect of the National Association of Mortgage Brokers says the Department of Housing and Urban Development does “not care about true simplification” of the Real Estate Settlement Procedures Act, and he vowed to vehemently oppose HUD’s latest RESPA proposal.

The proposal, which had not yet been released officially, includes a four page good faith estimate instead of a one page GFE favored by the NAMB, Marc Savitt told attendees at the Southeast Mortgage Brokers Conference.

Mr. Savitt charged that HUD had bowed to pressure from other industry participants, contending that the RESPA proposal is about market share, not simplification. He said the new rule is similar to one HUD proposed back in 2004 but with the packaging provisions removed.

Mr. Savitt vowed that the NAMB would “hit them with everything we have.” In response to the 2004 rule, a grassroots campaign resulted in 45,000 letters of protest. “That is nothing compared with this time,” he predicted.

He called on mortgage brokers to contact their customers and have them write letters to HUD. Mr. Savitt told the conferees that the NAMB has attorneys in place ready to file a lawsuit against HUD as soon as the rule is formally published.

The Department of Housing and Urban Development is investigating payments of “excessive” fees to non-approved mortgage brokers by Federal Housing Administration FHA lenders.

HUD officials have noticed that some FHA lenders are charging borrowers points and paying $4,000 to $5,000 to brokers for simply bringing a customer to their office. Brokers that are not approved by the FHA cannot take a loan application or close an FHA loan. HUD rules do allow nonapproved brokers to refer borrowers to FHA lenders.

However, FHA Commissioner Brian Montgomery indicated that a $4,000 fee is a “little excessive” and that his agency has “ramped up an investigation.” HUD officials are also reviewing FHA guidelines for nonapproved brokers and talking with department officials that deal with Real Estate Settlement Procedures Act matters. These fees seem to be “beyond what is reasonable and customary,” Mr. Montgomery said in an interview.

The Department of Housing and Urban Development is very close to sending a RESPA proposal to the Office of Management and Budget that revamps the good faith estimate and HUD-1 settlement sheet, according to a high-ranking HUD official.

The Real Estate Settlement Procedures Act proposal will be shipped over to the OMB “very soon,” HUD Assistant Secretary Brian Montgomery indicated. The proposal includes a standard GFE form to create more consistency in the initial disclosure that mortgage applicants receive from lenders on the costs of a mortgage transaction.

The GFE will be comparable to the HUD-1 settlement sheet, and fees that might change before closing are grouped together. Increases should not exceed certain tolerances, which are also disclosed to consumers.

HUD also plans to ask Congress to amend RESPA to require that borrowers receive closing documents sooner and to increase civil monetary penalties.

The Department of Housing and Urban Development estimates that the Federal Housing Administration could help about 240,000 homeowners facing resets on their adjustable rate mortgages avoid foreclosure.

“Of the 2 million loans expected to reset by the end of 2008, we estimate about 500,000 will actually foreclose,” HUD Secretary Alphonso Jackson told the House Financial Services Committee.

“Through FHA, we estimate that we can help about half those homeowners.” The secretary noted that HUD can help these homeowners under its new FHASecure refinancing program. However, the FHA could help even more struggling homeowners if Congress passes FHA reform legislation, he said.

The Federal Housing Administration would be able to charge risk-based premiums based on a borrower’s credit score and down payment under a proposed rule the Department of Housing and Urban Development will publish soon in the Federal Register. The FHA mortgage insurance program currently charges a 150-basis-point upfront premium and a 50-bp annual premium for most borrowers.

Under the proposal, which is being issued for a 30-day comment period, the FHA can charge a maximum upfront premium of 2.25% and a 55-bp annual premium for loans with only 3% down. With these limits, the FHA could provide mortgage insurance for borrowers with credit scores above 499.

Discounted premiums would be available for first-time homebuyers who complete pre-purchase homeownership counseling. Creditworthy borrowers with credit scores above 679 and 10% down would pay only a 75-bp upfront premium and a 50-bp annual premium. HUD plans to establish this RBP system if Congress does not pass an FHA bill by Jan. 1.