InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Agencies jointly release fact sheets for services and consumers regarding CARES Act forbearance
The Federal Housing Administration, the Department of Veterans Affairs, and the Rural Housing Service have jointly issued fact sheets for servicers and for consumers outlining certain requirements and obligations under CARES Act mortgage payment forbearance. The fact sheet for servicers provides guidance for assisting and educating borrowers and explains that loss mitigation options will vary based on the program under which the loan is insured or guaranteed. The fact sheet for consumers provides guidance on requesting forbearance and information on the forbearance program.
Freddie Mac issues bulletin regarding selling requirements and guidance related to Covid-19
On May 5, Freddie Mac issued Bulletin 2020-14 to Freddie Mac sellers to provide guidance relating to selling requirements in light of Covid-19. The bulletin sets out temporary requirements related to mortgage purchase eligibility and self-reporting requirements for mortgages in Covid-19 related forbearance. It also extends certain previously announced temporary requirements for credit underwriting, and appraisal, condominium project, and power of attorney flexibilities until June 30. Further, Freddie Mac provided guidance and reminders relating to, among other things, furloughs and layoffs, unemployment compensation, and automated income assessment with Loan Product Advisor using tax return data.
GSEs to cover servicer advances on mortgages in forbearance
On May 1, Fannie Mae and Freddie Mac filed their first quarter 10-Qs, which included statements clarifying that in the coming months Fannie Mae and Freddie Mac, not loan servicers, will assume responsibility for advances on loans in forbearance that meet certain criteria. Fannie Mae’s 10-Q states that effective August 2020 “after four months of missed borrower payments on a loan…we will make the missed scheduled principal and interest payments…so long as the loan remains in the MBS trust.” As previously covered by InfoBytes, FHFA announced on April 21 that servicers are only obligated to advance principal and interest payments for up to four months on single-family loans. Likewise, Freddie Mac’s 10-Q similarly stated, “we expect to advance significant amounts to cover principal and interest payments to security holders for loans in forbearance in the coming months.”
VA announces new reporting code for Covid-19 forbearance requests
On April 29, the Department of Veterans Affairs announced a new reason for default which will assist the VA in identifying borrowers impacted by Covid-19. The VA replaced the reason “Energy/Environmental Cost” with “National Emergency Declaration” in the Electronic Default Notice (EDN). Servicers should use this new reason for default when reporting the EDN. Effective June 1, 2020, this new reason for default will be accepted prior to the 61st day of delinquency.
NCUA to seek information about emerging credit risks
On April 29, the National Credit Union Administration announced that it expanded its Covid-19 outreach to federally-insured credit unions to identify emerging credit risks. The NCUA notified regulated entities that examiners will contact them between May 4 and May 18 to discuss a list of questions concerning operating status, status of cash reserves and withdrawals, liquidity status, loans in forbearance, and balance of loans with outstanding balances.
HUD OIG issues Covid-19 guidance to homeowners
On April 28, the Department of Housing and Urban Development’s Office of Inspector General issued a bulletin outlining Federal Housing Administration guidance to servicers and borrowers regarding implementing the forbearance requirements of the CARES Act. The office issued the bulletin based on a review of information that the top 30 FHA mortgage servicers provide on their websites, which the office found to be incomplete, outdated, inconsistent, or unclear.
CFPB asks FCC to allow financial institutions to make certain Covid-19-related calls
On April 27, the CFPB sent a letter to the FCC in support of a petition filed at the end of March by several financial trade associations, which seeks an expedited ruling to allow financial institutions to make certain automated calls concerning Covid-19 relief options without violating the TCPA. The CFPB specifically encouraged the FCC to allow a limited number of automated Covid-19-related calls from financial institutions that would alert customers of offers of forbearance, payment deferrals, fee waivers, extensions or relaxations of repayment terms, loan modifications, and other resources related to loans secured by homes or vehicles. “Allowing financial institutions to make automated calls is one more way to maximize the outreach to ensure consumers receive important and timely information,” CFPB Director Kathy Kraninger noted, cautioning, however, that financial institutions must still comply with other legal requirements with respect to their communications with customers, including the Bureau’s mortgage servicing rules and Dodd-Frank’s prohibition on unfair, deceptive, or abusive acts or practices.
Fannie Mae issues a multifamily investor update regarding Covid-19
On April 23, Fannie Mae announced that it has published a list on DUS Disclose (MBS Reports section) that identifies MBS for which an underlying loan is in a Covid-19-related forbearance period. Fannie Mae will update the Multifamily MBS Covid-19 Forbearance List, which includes the pool number, CUSIP, and loan number, on a weekly basis. Investors are advised that the list will not include loans in a forbearance period for reasons other than Covid-19.
States offer relief to student loan borrowers not covered by CARES Act
On April 23 and 21, nine states announced a multi-state initiative to provide student loan relief options for borrowers with privately held student loans not covered by the CARES Act. California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, Vermont, and Washington outlined within their announcements specific measures for borrowers with commercially-owned Federal Family Education Loan Program loans and borrowers with private student loans who are struggling to make payments due to the Covid-19 pandemic. The announcements also noted that Virginia is participating in the initiative as well. These relief options, offered in conjunction with the listed private student loan servicers, include (i) a minimum 90-days of forbearance relief; (ii) a waiver of late fees; (iii) no negative credit reporting; (iv) a 90-day moratorium on collection lawsuits; and (v) enrollment in applicable borrower assistance programs, such as income-based repayment. The states cautioned that enrollment in these relief options is not automatic, and recommended borrowers contact their student loan servicer to see what options best suit their needs.
In addition, California, Colorado, Connecticut, New Jersey, Vermont, and Washington recommended that regulated student loan servicers with limited ability to take these actions due to investor restrictions or contractual obligations “should instead proactively work with loan holders whenever possible to relax those restrictions or obligations.”
FHFA: Fannie, Freddie to temporarily buy mortgages in forbearance due to Covid-19
On April 22, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (GSEs) will purchase “certain single-family mortgages in forbearance that meet specific eligibility criteria” for a limited period in an effort to provide liquidity to ensure continued lending. Current policies dictate that the GSEs do not purchase loans that are in forbearance; however, due to the economic effects of Covid-19, FHFA will begin allowing the GSEs to buy certain mortgages that enter forbearance within the first month after loan closing, prior to delivery to the GSEs. The temporary selling requirements in Freddie Mac Bulletin 2020-12 allow lenders to sell to the GSE mortgages in forbearance only on mortgages for home purchases or “no cash-out” mortgage refinances. Further, the mortgages must have note dates between February 1, 2020 and May 31, 2020, the dates of settlement must be after May 1, and the mortgages must not be more than 30 days delinquent. Fannie Mae Lender Letter 2020-06 follows most of the same guidelines provided in the Freddie Mac bulletin, but Fannie Mae will also buy mortgages for limited cash-out refinances. To limit losses, the GSEs will charge sellers loan-level price adjustments of 5 percent for loans to first-time homebuyers, and 7 percent for all others.