#FHA – Federal Financial Analytics

30 11, 2023

FedFin on: FHA’s Mission and Mishaps

Arezou Rafikian2023-11-30T14:04:44-05:00November 30th, 2023|The Vault|

A new FRB-NY study confirms that 83% of loans from 2000-2022 went to first-time homebuyers, compared to 56% for the GSEs and 57% for private lenders. FHA loans of course have very high LTVs and low scores, with scores improving after 2008 when the PLS market stopped adversely selected FHA even though over half of FHA loans still have scores under 680. FHA sustainability has varied based on these and other factors, but 21.8% of borrowers from 2011-2016 still lost their homes.

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4 08, 2023

FedFin on: Credit-Risk Capital Rewrite

Arezou Rafikian2023-08-04T13:41:04-04:00August 4th, 2023|The Vault|

In this report, we proceed from our assessment of the proposed regulatory capital framework to an analysis of the rules governing credit risk. In addition to eliminating the advanced approach, the proposal imposes higher standards for some assets than under the old standardized approach (SA) via new “expanded” requirements. As detailed here, many expanded risk weightings are higher than current requirements either due to specific risk-weighted assessments (RWAs) or definitions and additional restrictions. This contributes to the added capital costs identified by the banking agencies in their impact assessment, suggesting that lower risk weightings in the expanded approach reflected the reduced risks described in the proposal for other assets and will ultimately have little bearing on regulatory-capital requirements and thus ….

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1 06, 2022

FedFin: How Adverse Is This?

Arezou Rafikian2023-02-21T12:50:01-05:00June 1st, 2022|The Vault|

As detailed in our new in-depth report, the CFPB has issued another sweeping rule by way of a seemingly innocuous circular not subject to public notice and comment. Under it, lenders that use third-party underwriting are responsible for ensuring that borrowers receive thorough adverse action notices even if the lender has no authority over the AI or other complex models determining credit outcome.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.

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16 05, 2022

FedFin: Minimizing Mortgages, Maximizing Community Service

Arezou Rafikian2023-02-21T15:06:30-05:00May 16th, 2022|The Vault|

As we noted last week, the federal banking agencies sighed a mighty sigh and heaved up a massive inter-agency proposal rewriting decades-old standards detailing which activities earn the Community Reinvestment Act (CRA) points essential for any bank’s strategic objectives and national reputation. As discussed below, the new proposal is lengthy, complex, and in some cases analytically daunting or flat-out confusing. Still one critical conclusion is clear…

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24 01, 2022

FedFin: The Processing Problem

Arezou Rafikian2023-04-21T14:29:25-04:00January 24th, 2022|The Vault|

A new Federal Reserve Bank of Atlanta study adds another element to those prior research argues are evidence of widespread racial discrimination in U.S. mortgage finance.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

9 12, 2021

FedFin: Super-Special

Arezou Rafikian2023-05-23T12:54:23-04:00December 9th, 2021|The Vault|

On Tuesday, HUD and the CFPB opened the door to special-purpose mortgage finance. Now, we expect FHFA to use this safe harbor to mandate express GSE equitable-finance programs and for banks to take much of what’s left in all their commitments after George Floyd’s murder and turn it into mortgage and other community-finance products.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

9 12, 2021

FedFin: Super-Special

Arezou Rafikian2023-05-23T12:54:16-04:00December 9th, 2021|The Vault|

On Tuesday, HUD and the CFPB opened the door to special-purpose mortgage finance. Now, we expect FHFA to use this safe harbor to mandate express GSE equitable-finance programs and for banks to take much of what’s left in all their commitments after George Floyd’s murder and turn it into mortgage and other community-finance products.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

2 12, 2021

FedFin: Going Down?

Arezou Rafikian2023-05-23T13:59:59-04:00December 2nd, 2021|The Vault|

Two recent studies add fuel to the fire we first spotted late last year: demands for ARMs that only go down. Director Thompson’s latest scorecard combines with her equitable-finance mission to make this option a top political priority even if its market feasibility remains at best uncertain.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

12 10, 2021

FedFin on: LIBOR Mortis

Arezou Rafikian2023-06-20T15:10:04-04:00October 12th, 2021|The Vault|

Although the majority of FHA ARMs are now LIBOR-linked, HUD has been waiting for Congress, the Fed, or forces on high to help it set a new benchmark. Although deliverance may come, HUD has now taken the belated step of tentatively starting its own replacement-benchmark exercise. What it does how for whom will of course drive not just all FHA loans, but also the market as a whole.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

7 09, 2021

Karen Petrou: The Coming Fair-Lending Fracas

Arezou Rafikian2023-08-22T12:43:29-04:00September 7th, 2021|The Vault|

A week ago Thursday, I was honored to participate in a Congressional Black Caucus Foundation forum assessing the extent to which the Fed exacerbates U.S. economic inequality. Views were mixed on that front, but several panelists stoutly condemned financial institutions for actively discriminating against people and communities of color and the Fed for allowing them to get away with it. That won’t be the last we hear of this.

As our recent assessment of the latest mortgage data make clear, these allegations are not without merit. That underlying factors are complex and sometimes include contradictory evidence does not belie the fact that data remain problematic, the industry is deeply distrusted, and the White House has made racial equity a top-priority Presidential action item. First to what the data do and don’t show and then to what will be done about them unless some of the things that can instead be done are quickly done.

The latest HMDA data show troubling denial disparity ratios (DDRs), interest-rate, and cost disparities when minorities are compared to whites. The DDR for Blacks was 2.6:1, rates were .125 percentage points higher, and the cost of a loan was 38% more. Black credit scores were the lowest among demographic groups (690) and loan amounts were the smallest, but these differences are still striking.

Little noticed but even more puzzling are the DDRs for Asians versus whites. Asian DDRs were 1.4:1 even though credit score and loan amounts were the highest of all demographic groups. …