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MBA Sends Letter to FHA on Proposed Lender Indemnification Guidance

WASHINGTON, D.C. – December 7, 2010 – (RealEstateRama) — On Monday, December 6, 2010, The Mortgage Bankers Association, (MBA) submitted the attached comment letter to the Federal Housing Administration (FHA) on the proposed guidance for the Department of Housing and Urban Development (HUD), Federal Housing Administration Single Family Insurance process: Eligibility, Indemnification, and Termination. The proposed rule, which would affect lenders who participate in the Lender Insurance (LI) process, would provide more stringent indemnification requirements regarding mortgagee indemnification to HUD.

In the comment letter, MBA President and CEO John Courson expresses concern that the proposed rule would penalize responsible lenders by requiring them to indemnify for loans regardless of cause or materiality and without a well-defined, clear and transparent appeals process. The letter notes that such increased risk could discourage lender participation in the FHA program and could cause lenders to further tighten their own guidelines for underwriting FHA loans.

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA’s Web site: www.mortgagebankers.org.