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» VISIT US ONLINE @ DSNEWS.COM 53 millions of dollars. ere is no doubt the pendulum has swung too far and lenders are overburdened with compliance risk associated with the origination and servicing of mortgage loans, followed by the looming risk of repurchase. e costs and time associated with the origi- nation of a mortgage loan have skyrocketed and these costs are being passed along to the mortgagor. is again plays into the afford- ability factor. Of note, mortgage servicers have taken a tremendous beating in recent years – both financially and in reputation. Billions upon billions of dollars have been settled between servicers and various government enti- ties; scrutiny and settlement negotiations continue today, in particular for some non- bank servicers. However, policymakers and regulators must realize that there is a point at which industry leaders and their sharehold- ers will say "enough is enough, we cannot continue to put our institutions at risk." Again on the topic of enforcement, with Attorney General Holder's departure, will a new attorney general continue to aggres- sively pursue lenders and servicers for their past transgressions? e conventional view is the status quo will continue, as most of these cases originate with a handful of U.S. Attorney offices, in particular New York and Colorado. ere is little reason to believe the HUD OIG will pump the brakes, except to the degree they are resource-constrained. Our firm continues to be made aware of smaller FHA lenders who are dealing with False Claims Act allegations. Conversations between government and industry leaders suggest some relief on repurchase risk going forward. Time will tell. Industry leaders must feel confident that they are protecting their companies and their shareholders before they will again fully embrace the origination of mortgage loans for inclusion in Ginnie Mae, Fannie Mae, and Freddie Mac securities. One step forward is seen in the creation of a single security, making Fannie Mae and Freddie Mac mortgage-backed securities completely fungible to ensure the maximum amount of liquidity in the market. is change will instill confidence in investors while streamlining the process for lend- ers delivering mortgages to the secondary market. Whatever the future for Fannie Mae and Freddie Mac, a common security in the marketplace is a win-win. PRIVATE MORTGAGE INSURERS As the conventional conforming market evolves, it is important to examine the role of private mortgage insurance. e Federal Housing Finance Agency has sought comment on a proposed rule to establish Private Mortgage Insurer Eligibility Requirements, with the final guidance expected late in 2014 or early 2015. e requirements will prescribe the standards by which private mortgage insur- ers are deemed eligible to provide mortgage insurance on loans owned or guaranteed by Fannie Mae and Freddie Mac. Imple- mentation of these standards will ensure the financial strength of participants in the private mortgage insurance industry and provide important risk protection to lenders and the GSEs. In comments to the FHFA, the industry has raised a valid concern: e final rule should not result in a considerable increase in total cost to the borrower. First- time homebuyers, low-to-moderate income borrowers, and underserved communities rely on access to low down payment financ- ing secured by private mortgage insurance. I predict that this policy dialogue will end well, with FHFA and the GSEs listening closely to the comments from the industry. e final set of rules will be appropriately stringent, yet allow the mortgage insurance companies to price their products at affordable levels. FEDERAL HOUSING ADMINISTRATION Mortgage loan programs offered through the Federal Housing Administration are essential to meeting the needs of America in 2015 and beyond. From both ends of the spectrum, FHA has served, and continues to serve, the needs of homeowners in America – from first-time homeowners to seniors seeking to age in places facilitated by a Home Equity Conversion Mortgage (HECM). e recent release of the annual review of the FHA Mutual Mortgage Insurance Fund indicated some much-needed improvement in the performance of the Fund. For one, the MMI Fund is now positive, having improved by approximately $21 billion over the past two years. According to FHA, the fund now stands at $4.8 billion in economic value with a capital ratio of 0.41 percent. While not yet at the congressionally-prescribed rate of 2 percent, the 0.41 percent capital ratio is much improved from last year. Overall FHA delinquency rates have fallen, as have the losses on the sale of FHA REO. Looking toward 2015, as FHA works with the Office of Management and Budget to finalize the 2016 proposed administration's budget, this latest annual review and its positive trajectory might be a step toward the "Billions upon billions of dollars have been settled between servicers and various government entities; scrutiny and settlement negotiations continue today, in particular for some non-bank servicers. However, policymakers and regulators must realize that there is a point at which industry leaders and their shareholders will say 'enough is enough, we cannot continue to put our institutions at risk.'" COVER STORY SPECIAL FE ATURE INDUSTRY INSIGHT INDUSTRY INSIGHT

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