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FTC settles with student debt relief operation for $835,000
On September 9, the FTC announced an $835,000 settlement with the operators of a student loan debt relief operation, resolving allegations against five individuals (collectively, “defendants”) whom the FTC claims engaged in deceptive marketing and charged illegal upfront fees. According to the November 2019 complaint, filed in the U.S. District Court for the Central District of California against the defendants and several others, the defendants allegedly used telemarketing calls, as well as media advertisements, to enroll consumers in student debt relief services in violation of the FTC Act and the Telemarketing Sales Rule. The defendants allegedly misrepresented that they were affiliated with the U.S. Department of Education and misrepresented “material aspects of their debt relief services,” including by promising to enroll consumers in repayment programs to reduce or eliminate payments and balances. Additionally, the defendants charged illegal upfront fees, and often placed the consumers’ loans into temporary forbearance or deferments with their student loan servicers, without the consumer’s authorization.
The settlement order includes a monetary judgment of over $43 million, which is partially suspended due to the defendants’ inability to pay. The defendants “will be required to surrender at least $835,000 and additional assets, which will be used for consumer redress.” Additionally, the defendants are prohibited from providing student debt relief services in the future and they must cooperate in the FTC’s pursuit of the case against the remaining defendants.
VA encourages mortgage relief after Hurricane Laura
On September 4, the Department of Veterans Affairs (VA) issued Circular 26-20-34 to encourage mortgagees to provide relief for VA borrowers affected by Hurricane Laura. The Circular encourages loan holders and servicers to (i) extend forbearance to distressed borrowers and to members of the National Guard assisting in the recovery efforts; (ii) establish a 90-day moratorium on initiating new foreclosures; (iii) waive late charges; and (iv) suspend credit reporting on affected loans. The Circular will be rescinded October 1, 2021. Mortgage servicers and veteran borrowers are also encouraged to review the VA’s Guidance on Natural Disasters.
FHA issues underwriting guidelines on prior forbearances
On September 10, FHA released Mortgagee Letter 2020-30, which discusses FHA’s underwriting guidelines for mortgages involving borrowers who were previously granted a forbearance. The letter notes that FHA is “expanding its underwriting guidelines” to address situations in which borrowers are seeking new FHA insured financing after being granted a forbearance, due to either a Presidentially Declared major disaster or some other hardship, including the Covid-19 pandemic. The letter specifies that a borrower will be eligible for a new FHA insured mortgage after being granted a forbearance if, among other things, (i) the borrower continued to make regularly scheduled payments and the forbearance plan is terminated; or (ii) for cash-out refinances, the borrower has completed the forbearance and has subsequently made 12 consecutive monthly payments; or (iii) for purchases and no cash-out refinances, the borrower has completed the forbearance and has subsequently made at least three consecutive monthly payments; or (iv) for “Credit Qualifying Streamline” refinances, the borrower has completed the forbearance and has subsequently made less than three consecutive monthly payments; and (v) for all “Streamline refinance” transactions, the borrower has made at least six payments on the FHA insured mortgage being refinanced.
FHA requires the new underwriting guidelines be implemented for all case numbers assigned on or after November 9.
Fannie and Freddie update Covid-19 Selling FAQs
On September 2, Fannie Mae updated its Covid-19 FAQs for sellers to reflect updates to FHFA’s temporary policy that allows Fannie Mae and Freddie Mac (GSEs) to purchase qualified single-family mortgages in forbearance that meet specific eligibility criteria due to the Covid-19 pandemic (covered by InfoBytes here), and to add a new question covering Covid-19 appraisal flexibilities. On August 27, Freddie Mac updated its Covid-19 selling-related FAQs to include substantially the same new question and response with respect to Covid-19 appraisal flexibilities.
Agencies extend foreclosure moratorium and other Covid-19 flexibilities
On August 27, Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will extend their moratorium on single-family foreclosures and real estate owned (REO) evictions until at least December 31 (which was set to expire on August 31, previously covered here). The foreclosure moratorium applies to homeowners with an Enterprise-backed, single-family mortgage and the REO eviction moratorium applies to properties that were acquired by the GSEs through foreclosure or deed-in-lieu of foreclosure transactions.
FHA also further extended its foreclosure and eviction moratorium through December 31 (also set to expire on August 31 and previously covered here). The moratorium applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, excluding legally vacant or abandoned properties (previously discussed here and here). Additional details can be found in Mortgagee Letter 2020-27.
Additionally, on August 26, FHFA announced an extension of a temporary policy that allows Fannie Mae and Freddie Mac (GSEs) to purchase qualified single-family mortgages in forbearance that meet specific eligibility criteria due to the Covid-19 pandemic. The policy is now extended for loans originated through September 30. As previously covered by InfoBytes, in an effort to provide liquidity to ensure continued lending during the Covid-19 pandemic, FHFA is allowing the GSEs to buy certain mortgages that enter forbearance within the first month after loan closing, prior to delivery to the GSEs.
FHFA also extended several loan origination flexibilities put in place to assist borrowers during the Covid-19 pandemic. Specifically, FHFA has further extended until September 30, the following provisions: “(i) alternative appraisals on purchase and rate term refinance loans; (ii) alternative methods for documenting income and verifying employment before loan closing; and (iii) expanding the use of power of attorney to assist with loan closings.”
FHFA delays implementation of new refinance fee
On August 25, FHFA announced that it will delay implementation of Fannie Mae and Freddie Mac’s new adverse market refinance fee until December 1. As previously covered by InfoBytes, the adverse market refinance fee of 50 basis points, or 0.5 percent, was originally slated to apply to certain refinance mortgages with settlement dates on or after September 1. FHFA received significant pushback regarding the fee, including concerns about its expedited implementation period, and lack of information regarding the market conditions that would be addressed by the change (see InfoBytes coverage here). In the new announcement, FHFA states that the fee is “necessary to cover projected COVID-19 losses of at least $6 billion at the Enterprises,” noting that $6 billion is the “conservatively projected” cost of actions taken to protect renters and borrowers based on (i) “$4 billion in loan losses due to projected forbearance defaults”; (ii) “$1 billion in foreclosure moratorium losses”; and (iii) “$1 billion in servicer compensation and other forbearance expenses.”
Department of Education extends Covid-19 student loan protections until 2021
On August 21, the U.S. Department of Education announced the implementation of the presidential memorandum extending a forbearance plan on federal student loans through the end of the year. As previously covered by InfoBytes, the memorandum directed the Department of Education to take action to continue to provide “deferments to borrowers as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020.” According to the announcement, until December 31, in addition to suspended payments and the waiver of all interest, there will be (i) no collections on defaulted federal loans; and (ii) borrowers will receive a refund of any continued employer garnishment related to defaulted federal loans. Additionally, non-payments by borrowers working full-time for qualified Public Service Loan Forgiveness employers will continue to receive credit towards their 120 payments.
Fannie Mae issues Covid-19-related selling updates
On August 12, Fannie Mae updated its Covid-19 frequently asked questions regarding the underwriting and loan eligibility for sellers. Fannie Mae’s FAQs (previously discussed here) were updated to address questions on selling loans in forbearance. The FAQs cite to Lender Letter 2020-06 (covered by InfoBytes here), stating that Fannie Mae will purchase loans that go into forbearance after loan closing before sale that became eligible for sale beginning May 1 and have note dates on or before August 31 and are delivered by October 31. Additionally, the FAQs state there are no plans to further extend the August 31 date.
President Trump extends student loan forbearance program
On August 8, President Trump issued an executive order to Secretary of Education Betsy DeVos extending a forbearance plan on student loans through the end of the year. The executive order directs the Department of Education to take action to continue to provide “deferments to borrowers as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020.” The current forbearance program provided under the CARES Act (covered by a Buckley Special Alert) ends September 30. While the executive order states that it applies to “student loans held by the Department of Education,” it does not specifically outline which kind of federal student loans are covered under the new forbearance order.
FHFA announces that multifamily property owners in forbearance must inform tenants of tenant protections
On August 6, the Federal Housing Finance Agency (FHFA) announced that multifamily property owners with mortgages backed by Fannie Mae or Freddie Mac (the Enterprises) who enter into a new or modified forbearance agreement must inform tenants in writing about tenant protections during the multifamily property owner's forbearance and repayment periods. Landlords with Enterprise-backed mortgages can enter new, or if qualified, modified forbearance if they experienced or continue to experience a financial hardship due to the Covid-19 emergency. While in forbearance, the property owners must agree not to evict tenants solely for the nonpayment of rent. The announcement notes that the Enterprises are modifying online multifamily property loan look-up tools to make it easier for tenants to find the tenant protections and to find out if the multifamily property in which they reside has an Enterprise-backed mortgage.