The Obama administration announced new modifications to the HAMP and FHA programs late last week to “better assist responsible homeowners who have been affected by the economic crisis through no fault of their own.”

So who benefits from the modifications? The program expands flexibility for mortgage companies and banks to assist unemployed homeowners as well as those who are underwater on their mortgages because of where they live – markets hardest hit by declines in home values.

And who doesn’t? Further into the Treasury press release, this elaboration:

The President has said: “We can’t stop every foreclosure.” And in fact, we can’t maintain the balance described above if we assist every borrower. For example, investors and speculators should not be protected under our efforts, nor should Americans living in million dollar homes or defaulters on vacation homes.

See the AP coverage of the story here.

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Hey American taxpayers, get your wallets ready…a group of economists from the NY Federal Reserve and NYU say the FHA is understating how much risk it’s taken on, which may make it a candidate for a taxpayer bailout.

The FHA currently backs more than 25% of all home loans – up from less than 2% just three years ago.

According to a recent article in the Wall Street Journal:

The economists warn that the Federal Housing Administration—which has jumped to fill the void left by the collapse of the private mortgage market—is overlooking factors that signal higher losses, according to a working paper released Thursday.

The agency has traditionally turned a profit for the U.S. government. But the economists warn that by underestimating the risks it faces, the FHA has increased the likelihood that it will have to ask Congress for money for the first time in its 75-year history.

The study doesn’t say how likely that now is, but “it’s hard to imagine that they won’t be returning to Congress several times,” said Andrew Caplin, one of the authors and an economics professor at NYU. “It’s just inconceivable that the loans … will not cause very large losses.”

The FHA says it would need taxpayer money only in a worst-case housing-market scenario.

Hmmm….and what would that “worst-case housing market scenario” look like? Something like what we’re in right now??

Read the entire article here.

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HUD Commissioner David H. Stevens announced a new initiative this week that focuses on mortgage companies with significant claims against the FHA mortgage insurance program, issuing 15 subpoenas to mortgage lenders across the country demanding documentation on failed loans that resulted in claims paid by the FHA insurance fund.

According to a press release posted on the HUD website:

“This initiative was prompted, in part, by the FHA Commissioner, David Stevens, who was alarmed by the incidence of claims against the FHA insurance fund by a number of poor performing companies and reached out to the HUD OIG for assistance.

FHA Commissioner David Stevens said, “We are taking risk management extremely seriously. In addition to the policy changes we are implementing and additional changes we plan to announce later this month, we need to hold FHA lenders accountable for the high rates of defaults and claims against FHA. The Inspector General’s initiative will help us determine whether there is fraud and better manage risk in the long run.

”The HUD OIG identified these direct endorsement companies from an analysis of loan data focusing on companies with a significant number of claims, a certain loan underwriting volume, a high ratio of defaults and claims compared to the national average, and claims that occurred earlier in the life of the mortgage. These are key indicators of problems at the origination or underwriting stages. The HUD OIG wants to see why these loans failed.”

The companies served with subpoenas included:

• First Tennessee Bank N.A., Memphis, TN
• Alethes LLC, Lakeway, TX
• Security Atlantic Mortgage Co., Edison, NJ
• Pine State Mortgage Corporation, Atlanta, GA
• Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
• Alacrity Financial Services, LLC, Southlake, TX
• Assurity Financial Services, LLC, Englewood, CO
• D and R Mortgage Corporation, Farmington, MI
• Webster Bank, Cheshire, CT
• Mac-Clair Mortgage Corporation, Flint, MI
• Americare Investment Group, Inc., Arlington, TX
• 1st Advantage Mortgage, Lombard, IL
• American Sterling Bank, Independence, MO
• Sterling National Mortgage Company Inc., Great Neck, NY
• Dell Franklin Financial LLC, Columbia, MD

No California mortgage lenders on the HUD subpoena list…yet.

The FHA has announced a number of policy changes “to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.”

The FHA said it would take the following steps:

• Increase the mortgage insurance premium (MIP);
• Update the combination of FICO scores and down payments for new borrowers;
• Reduce allowable seller concessions from 6% to 3%;
• Implement a series of significant measures aimed at increasing lender enforcement.

Of particular note is the reduction by half of allowable seller concessions and the increased enforcement on FHA lenders, including:

• Posting lender performance rankings on the HUD website
• Increased scrutiny of lender performance and compliance with FHA guidelines and standards
• Enforcement of indemnification provisions for lenders using delegated insuring process
• Requirement that all approved mortgagees assume liability for all of the loans that they originate and underwrite
• Authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches