Minimize interest loss on delinquent FHA Loans.
Thanks to the FHA loan program, the American dream of homeownership has become a reality for millions. But when an FHA borrower can't make their payments, you're responsible for making interest payments to the investor — and you will usually not be reimbursed fully for the interest payments on an FHA claim.
Fortunately, there's a way to reduce the amount of interest you pay. An FHA loan can be purchased out of a Ginnie Mae pool once it has reached the 90-day delinquency mark. This can be accomplished using a special credit facility known as a Ginnie Mae early buyout (EBO) facility.
With an EBO facility, you'll have the funds available to buy the loan out of the Ginnie Mae pool to minimize your interest loss.
Realize income from reperforming loans.
Now that you've lessened some of the expenses associated with delinquent loans, you should also consider additional revenue opportunities. As part of your business, you regularly work with borrowers to bring their loans current, a process known as reinstatement. For loans that reach the 90-day delinquency mark, it's estimated that 30% to 60% of these loans will re-perform. Loans that are purchased out of a pool can then be re-securitized once they are brought current, allowing you to recognize a gain on sale at the time of re-securitization. For example:
A $200,000 delinquent loan was bought out of a Ginnie Mae pool and was subsequently brought current. It is now eligible for re-securitization. Assuming an average premium of 4.0%, the gain on sale would be $8,000. $200,000 x 4.0% = $8,000
You're already realizing reinstatement gains on the loans you bring current via modification. But what about loans that are brought current on repayment plans or simply through your collection efforts? We can help you realize reinstatement gain on sale on these loans as well. Plus, any rate of interest that the borrower pays above the Texas Capital Bank pass-through rate on reinstatement, through modification or otherwise, is yours to keep.
Reduce Ginnie Mae delinquency rates.
Most mortgage lenders understand the importance of maintaining good relations with Ginnie Mae by staying within delinquency guidelines, but it's not always as easy as it may seem. Selling a part of your portfolio, a shift in your release or retain strategies, a portfolio acquisition, a natural disaster, and even trending economic conditions can significantly impact portfolio metrics.
Repurchasing delinquent loans through the Texas Capital Bank EBO program provides immediate improvement to your DQ3+, DQP and other Ginnie Mae delinquency measurements.
We aim to keep it simple. That's why we limit one-off processes for loans pledged on your EBO facility. To start, there's no change in the servicing of the loan. You or your subservicer can continue to service the loan as you do today. There is also no recorded reassignment of the mortgage or deed of trust, and no modification of holder or beneficiary in MERS.
Just as important, your loan documents can remain with your current document custodian. Our interest in the loan is recognized by your custodian in a tri-party agreement between you, Texas Capital Bank and your custodian. This agreement allows you to move documents to courts, attorneys and other necessary parties as you see fit to protect your interests without requiring approval from Texas Capital Bank.
After funding, you will name Texas Capital Bank as holder of the FHA Mortgage Insurance Certificate. Once the loan is paid off of the facility, we'll transfer the holder status back to your company that same day.
Reporting is straightforward. You’ll just provide us with the same standard servicing investor reports and loss mitigation (SFDMS) reporting that you currently provide to the FHA.
You will set up Texas Capital Bank on a standard remittance, whereby you send actual principal payments collected from the prior month on an agreed-upon payment date. Actual interest collections are retained by you, rewarding you for your loss mitigation efforts. There is no need to calculate interest due to Texas Capital Bank; we will provide you with a monthly loan level interest invoice.
For reinstatements, simply request a settlement statement to determine the loan repurchase amount. We will provide the statement to you same day. You can pay off the loan using your own funds or with your Texas Capital Bank warehouse facility, or through the pool settlement.
In the case of a conveyance claim, if the loan is claimed while Texas Capital Bank is the holder of the insurance, the claim funds will be delivered to Texas Capital Bank. We will credit your EBO facility, and any difference will be settled with you after the application of the claim funds. We will notify you of the receipt of any claim funds within one business day of receipt to ensure expedited processing.
For non-conveyance claims, we will pass through funds received from the FHA to your account so that you can apply them to your loan balance. The funds will then be paid to Texas Capital Bank on the next remittance date.
Start-Up and Ongoing Support
At Texas Capital Bank, we’re committed to providing expert resources to help your business run smoothly. We’ll meet with your team to provide step-by-step guidance to set up and utilize our EBO program. Contact your Texas Capital Bank representative to schedule a meeting.