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Financial Services Law Insights and Observations

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  • New York Demands Credit Score Changes for Hurricane Sandy-Impacted Consumers

    Consumer Finance

    On April 25, New York Governor Andrew Cuomo announced that the New York Department of Financial Services (DFS) sent a letter to several consumer credit bureaus, demanding that the firms (i) ensure that credit scores are not lowered for consumers adversely impacted by Hurricane Sandy, (ii) reset any scores that have been lowered, (iii) work with banks and other lenders to red flag any negative information relating to storm-impacted consumers, and (iv) meet with the DFS to permanently change procedures to prevent credit scores from going down for consumers impacted by a disaster. The letter asserts such actions are required because financial challenges created by the storm could negatively impact individual credit scores for reasons that are unrelated to their creditworthiness. The state’s press release provides a phone number for consumers to call if they believe that their credit has been “unfairly impacted” by the storm.

    Consumer Reporting Disaster Relief

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  • Freddie Mac Supplements Storm Relief Guidance

    Lending

    On December 18, Freddie Mac updated its disaster relief policies through Bulletin 2012-29 (Bulletin). Effective immediately, but only temporarily, servicers must perform one interior disaster-related property inspection for delinquent mortgages secured by properties in eligible disaster areas that have been identified as abandoned as of, or prior to the date of the area being declared an eligible disaster area. Freddie Mac will reimburse servicers up to $20 per property for the additional costs associated with completing the interior inspections. For mortgages secured by properties located in eligible disaster areas, which were reported as current in the most recent reporting cycle just prior to the area being declared an eligible disaster area, Freddie Mac will reimburse servicers up to $10 per property for one exterior property inspection related to the disaster. The Bulletin also provides instructions regarding forbearance plans for borrowers who are or were in approved or active trial period plans and whose property or places of employment are located in an eligible Hurricane Sandy disaster area.

    Freddie Mac Mortgage Servicing Disaster Relief Mortgage Modification Mortgages

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  • Fannie Mae, Freddie Mac Announce Additional Storm Relief Measures

    Lending

    On November 9, Fannie Mae and Freddie Mac announced that effective immediately servicers can suspend for 90 days evictions and foreclosures involving borrowers affected by Hurricane Sandy in order to assess the borrowers’ situations. In addition, next week Fannie Mae and Freddie Mac will issue guidance to servicers to expand the options they can offer to homeowners impacted by the hurricane. Under the new Fannie Mae guidance, servicers will be authorized to (i) extend forbearance for up to 12 months, where appropriate, (ii) provide loan modifications, once the homeowner is able to resume monthly mortgage payments, (iii) waive any late payment charges, (iv) suspend credit reporting for any homeowner for whom relief is granted, and (v) delay the initiation of any foreclosure action to determine the condition of the property and the borrower’s employment and income status. Freddie Mac’s policy changes will authorize servicers to (i) automatically suspend for 90 days evictions and foreclosure sales for borrowers with homes secured by Freddie Mac owned-or guaranteed mortgages and located in eligible disaster areas, (ii) verbally grant 90-day forbearances to all borrowers in eligible disaster areas, including borrowers with mortgages modified under HAMP or who are currently in a HAMP or Standard Modification Trial Period Plan, and (iii) expedite the distribution of insurance proceeds on storm damage claims. Additionally, Freddie Mac will maintain pricing that was in place at the time of the storm for mortgages that are secured by homes in eligible disaster areas and delivered through Freddie Mac's bulk guarantor channel.

    Foreclosure Freddie Mac Fannie Mae Mortgage Servicing HAMP / HARP Disaster Relief Mortgages Mortgage Modification

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  • Fannie Mae and Freddie Mac Issue Disaster Assistance Reminders for Servicers, Announce Disaster Policy Changes for Sellers

    Lending

    On October 31, Fannie Mae issued a servicing notice to remind servicers that they may temporarily suspend or reduce mortgage payments for up to ninety days for borrowers whose income is affected by a disaster or for borrowers within federally declared disaster areas. The notice also lists the steps a servicer providing relief measures must take once it becomes aware that a property has incurred damage as a result of a disaster. On November 1, Fannie Mae issued Selling Guide Announcement SEL-2012-12, which establishes a permanent selling policy for mortgages impacted by a disaster. This policy replaces Fannie Mae’s traditional approach of issuing Lender Letters for each disaster. Under the new policy, for mortgage loans other than DU Refi Plus and Refi Plus, lenders must take prudent and reasonable actions to determine whether the condition of the property may have materially changed since the effective date of the appraisal report, and whether an additional inspection or appraisal is necessary. The Announcement identifies specific criteria lenders should use when determining if a mortgage can be delivered without additional action. Fannie Mae will not require a property secured by a DU Refi Plus or Refi Plus mortgage to undergo an additional inspection and/or new appraisal following a disaster, and will not require that a property damaged as a result of a disaster be repaired prior to delivery as long as the loan meets the property insurance requirements described in the Selling Guide.

    On October 30, Freddie Mac announced that its full menu of relief policies for borrowers affected by disaster is being extended to homeowners whose homes were damaged or destroyed by Hurricane Sandy and are located in jurisdictions that the President has declared to be Major Disaster Areas and where he has made federal Individual Assistance programs available to affected individuals and households. Freddie Mac encouraged servicers to help affected borrowers with Freddie Mac loans by (i) suspending foreclosure and eviction proceedings for up to 12 months, (ii) waiving assessments of penalties or late fees against borrowers with disaster-damaged homes, and (iii) not reporting forbearance or delinquencies caused by the disaster to the nation's credit bureaus. On November 2, Freddie Mac issued Single-Family Seller/Servicer Guide Bulletin 2012-24 to revise selling requirements for properties damaged as a result of a disaster. The Bulletin explains that, on a temporary basis for mortgages secured by properties located in eligible Disaster Areas impacted by Hurricane Sandy, required property valuation and underwriting documentation must be dated no more than 180 days before the note date. For Relief Refinance Mortgages, sellers are not required to determine if an additional property inspection or a new appraisal is necessary after an initial property valuation has been relied upon, provided that the mortgage meets property insurance requirements.

    Freddie Mac Fannie Mae Mortgage Origination Mortgage Servicing Disaster Relief Mortgages Mortgage Modification

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