Risky Business

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Page 9 of 83 Good Intentions The industry is attempting to make amends by addressing agency abuses of power while simultaneously attracting young renters to homeownership. FHFA Announces HARP Extension to 2015 The Federal Housing Finance Agency (FHFA) granted the Home Affordable Refinance Program (HARP) a two-year extension, the agency announced. Under the direction of FHFA, Fannie Mae and Freddie Mac's regulator, the program will live on until December 31, 2015. HARP was set to expire at the end of this year. "More than 2 million homeowners have refinanced through HARP, proving it a useful tool for reducing risk," said FHFA acting director Edward J. DeMarco. "We are extending the program so more underwater borrowers can benefit from lower interest rates." Over the years, the program has helped hundreds of thousands of deeply underwater borrowers find relief. According to FHFA's latest report, 252,443 borrowers with loan-to-value ratios more than 125 percent have been able to refinance through the program. The agency also announced it plans to launch a campaign in an attempt to reach more eligible borrowers for the program. While the FHFA stated it can't provide "hard estimates" on the number of additional homeowners who are eligible, the hope is for a substantial number to be reached. Millenials Ready to Join Housing Market Nearly two-thirds of millennials expressed an increased interest in buying, and it's not because they are tired of apartment living, according to a survey from Pulte Group, Inc., a national homebuilder. 8 | The M Report survey, 76 percent said they plan to live with a significant other, whether it be a spouse or girlfriend/boyfriend. Another 22 percent plan to live with friends or relatives. CFPB Strikes Settlement with Mortgage Insurers over Alleged Kickbacks The PulteGroup Home Index Survey (PGHI) showed 65 percent of renters between ages 18 and 34 with an annual income of at least $50,000 said their intention to buy has increased significantly or somewhat over the past year. The majority of millennials, or 52 percent, are interested in buying because they view a home as an investment and have a desire to own and build equity. Only 12 percent stated they are tired of apartment living. "Millennials have witnessed the housing boom and bust, but still believe homeowner- ship is a good investment," said Fred Ehle, VP for PulteGroup. "Consistent with other thirdparty research that shows more than 90 percent of millennials plan to buy a home someday, we see a lot of young adults who are making financial sacrifices to afford a place of their own. With the combination of incredibly low mortgage rates, rising rental rates, and very low inventory levels, millennials realize now is a good time to purchase a home." Although many millennials are single, most aren't planning to reside in their home alone. According to the The Consumer Financial Protection Bureau (CFPB) announced enforcement actions against four mortgage insurance companies that allegedly gave kickbacks to lenders in exchange for business. CFPB filed complaints and proposed consent orders against Genworth U.S. Mortgage Insurance Corporation (USMI), Mortgage Guaranty Insurance Corporation (MGIC), Radian Guaranty Inc., and United Guaranty Corporation (UGC) for their alleged roles in kickback arrangements. The proposed orders require the companies to pay $15.4 million in penalties to the bureau. According to an agency release, CFPB alleges that the four insurers provided kickbacks to mortgage lenders by purchasing captive reinsurance that was "essentially worthless but was designed to make a profit for the lenders." In exchange for the kickbacks, the insurers are believed to have received lucrative business referrals. The alleged arrangements took place for more than 10 years, including the years leading up to the financial crisis. "Illegal kickbacks distort markets and can inflate the financial burden of homeownership for consumers," said CFPB director Richard Cordray. "We believe these mortgage insurance companies funneled millions of dollars to mortgage lenders for well over a decade. The orders announced today put an end to these types of arrangements and require these insurers to pay more than $15 million in penalties for violating the law." In addition to paying the fines, the companies have agreed to reform their practices. Under the proposed orders, the insurers are prohibited from entering into any new captive mortgage reinsurance arrangements with affiliates of mortgage lenders; they are also barred from obtaining captive reinsurance on any new mortgages for a period of 10 years. As pre-existing arrangements come to a close, the insurers will forfeit any right to the funds not directly related to collecting on reinsurance claims. The companies will continue to be monitored by CFPB and are required to make reports in order to ensure their compliance with the provisions of the orders. Are you an origination news junkie? Go to and sign up to receive MReport news daily! We feature the top headlines and stories breaking daily via the MReport Daily newsletter, webcasts, and social media. If you need more, follow us on Facebook, LinkedIn, and Twitter.

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