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Banking Agencies Extend Deadline to Request Independent Foreclosure Review
On February 15, the Federal Reserve Board and the Office of the Comptroller of the Currency announced that the deadline for borrowers to seek review of their mortgage foreclosures under the Independent Foreclosure Review program has been extended to July 31, 2012. Under the program, an eligible borrower can have his or her foreclosure reviewed by independent consultants to determine whether the borrower was financially injured due to errors, misrepresentations, or other deficiencies in the foreclosure process. An injured borrower may be eligible for compensation or other remedies.
Federal Reserve Releases Mortgage Servicing Monetary Sanction Orders
On February 13, the Federal Reserve Board (FRB) released the consent orders requiring five major mortgage servicing companies to pay a combined $766.5 million in monetary sanctions. The consent orders were entered in connection with the $25 billion multi-party mortgage servicing settlement announced on February 9, and that total settlement amount includes the FRB sanctions.
HUD Withdraws Rule Proposed to Allow Farm Credit System Institutions to Participate in FHA Mortgage Insurance Program
On February 13, HUD withdrew its proposed rule that would have allowed Farm Credit System direct lenders to participate in FHA mortgage insurance programs as FHA-approved mortgagees and lenders in an effort to increase housing credit available in rural areas. The withdrawal notice states that the rule would conflict with the Obama administration’s policy of reducing the FHA’s market share and bringing private capital back into the housing finance market.
HUD Clarifies Requirements Regarding Closing a Loan in the Name of an FHA-Approved Mortgagee Acting as a Sponsored Third Party Originator
On February 10, HUD issued Mortgagee Letter 2012-2 to clarify the requirements for the origination, closing, and submission for FHA insurance endorsement of loans via the sponsored third-party origination process. The Letter states that all third-party originators must be sponsored by an FHA-approved Direct Endorsement lender, and that sponsoring lenders are responsible for ensuring that the originators they sponsor adhere to FHA requirements. Sponsored third-party originator compliance failures may result in administrative action against the sponsoring mortgagee. Moreover, compliance failures by an FHA-approved mortgagee acting as a third-party sponsored originator may result in administrative action against both the sponsoring mortgagee and the FHA-approved mortgagee.
HUD Announces Multifamily Low Income Housing Tax Credit Pilot Program
On February 3, HUD issued Mortgagee Letter 2012-1 to launch a new pilot program to streamline FHA mortgage insurance applications for projects with equity from the Low Income Housing Tax Credit program. The program utilizes a separate application and processing system and during its first phase will provide permanent financing for low risk transactions. The Letter outlines eligibility requirements and the application process for the program and notes that the three-year rule waiver set to expire this month is extended for an additional year for tax credit projects that participate in the pilot. According to HUD’s press release, the pilot program is being launched in Chicago, Detroit, Boston, and Los Angeles.
Freddie Mac Releases Detailed Procedures for Tracking Expenses
On February 15, Freddie Mac published Single Family Seller/Servicer Guide Bulletin 2012-5 to implement new requirements related to the City of Chicago’s Vacant Property Ordinance. As previously reported, the FHFA sued Chicago over the ordinance, which requires lenders to register vacant properties and pay a $500 registration fee per property. Whether the property has been foreclosed upon or not, the ordinance also imposes maintenance and other obligations on lenders and their agents (including servicers, Fannie Mae, and Freddie Mac), and includes fines for non-compliance. The Bulletin, which follows up on a December 12 industry notice, establishes procedures for tracking and submitting expenses incurred pursuant to the ordinance and directs servicers to make required payments “under protest.” The Bulletin also eliminates the requirement for servicers to obtain prior consent from Freddie Mac to decline an application for a Mortgage assumption and reinforces the requirement that the servicer, for itself and on behalf of Freddie Mac, must waive all rights to seek deficiencies for short payoffs and deed-in-lieu of foreclosure transactions on Freddie Mac mortgages that have closed in accordance with the Guide.
Fannie Mae Discontinues National Monthly Median Cost of Funds Index and Revises Delinquency Status Code Descriptions
On February 15, Fannie Mae issued a notice to servicers advising that, effective March 15, 2012, servicers must use the Federal Cost of Funds Index published by Freddie Mac instead of the National Monthly Median Cost of Funds Index for adjustable rate mortgages. Also on February 15, Fannie Mae issued a servicing notice to clarify the descriptions of certain mandatory effective or completion date requirements for delinquency status codes announced in June 2011.
Freddie Mac Updates Selling Guide Regarding Guaranteed Rural Housing and Newly Constructed Homes, Advises Sellers Regarding SEC Disclosures
On February 10, Freddie Mac issued Bulletin 2012-4 with updates to the Single Family Seller/Servicer Guide regarding mortgages for newly constructed homes and mortgages under the Rural Housing Service’s Guaranteed Rural Housing (GRH) loan program. Effective immediately, the terms “Newly Built Home Mortgage” and “Mortgages for Newly Constructed Homes” have been removed from the Guide as unnecessary in light of other changes. With respect to nonassumable GRH mortgages, effective as to settlements on or after June 1, 2012, such loans must be sold to Freddie Mac with recourse and with Freddie Mac’s written approval in the Purchase Documents, but a minimum Indicator Score of 620 is no longer required.
On the same day, Freddie Mac advised all sellers that it had filed its initial report pursuant to a new SEC rule requiring public disclosure of information regarding asset-backed securities loan repurchase requests, including the identity of the originator. It will continue to disclose such information in quarterly reports to the SEC beginning in May 2012.
Report Claims to Show Widespread Foreclosure Irregularities In San Francisco
On February 15, the San Francisco Assessor-Recorder, Phil Ting, released an audit report conducted by Aequitas that found 84 percent of foreclosures sampled contained at least one violation of California’s foreclosure laws. The Assessor-Recorder argues that the results prove the need for state legislation to provide greater mortgage industry oversight, including legislation to address document recording transparency, dual tracking, and general foreclosure processes. The report sampled 382 foreclosures in San Francisco from 2009 through 2011, finding that 75 percent had a problem with the assignment of the deed of trust and 59 percent had assignments that were filed after the notice of default. The report also alleges findings of other unlawful foreclosure actions or “suspicious activity”, but Mr. Ting stressed that he is not asserting that “every distressed borrower is a victim and that the mortgage industry is collectively guilty of defrauding homeowners.”
New York's Chief Judge Outlines New Foreclosure Process, Announces Commercial Division Task Force
On February 14, the Chief Judge of the New York Court of Appeals, Jonathan Lippman, announced a new state foreclosure process that will involve special court parts designed to facilitate settlement conferences. Conferences will be calendared based on the identity of the lender, and each week of the month will be dedicated to a different lender’s cases. Lenders will be required to assign a representative with full authority to enter into mortgage modifications for the entire week of cases, which should reduce delays in the foreclosure process. The new program, which was announced in Chief Judge Lippman’s annual State of the Judiciary address, is a partnership between legal service organizations and several major banks. It will start in New York City, but statewide application is planned. The Chief Judge also announced the formation of a new task force to consider possible reforms to the Commercial Division in order to “create an even more hospitable environment for business.” The task force will consider (i) the process by which judges are selected for that division, (ii) options for better controlling dockets, and (iii) policies to manage the flow of cases and leverage non-judicial personnel and alternative dispute resolution.