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Financial Services Law Insights and Observations


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  • VA announces its targeted foreclosure moratorium on VA loans

    Federal Issues

    On May 29, the VA announced a targeted foreclosure moratorium on VA-guaranteed loans, which will give servicers time to implement the Veterans Affairs Servicing Purchase (VASP) program. Servicers can implement the VASP program beginning May 31, and the VA expects servicers to fully implement VASP no later than October 1.

    According to the circular, which went into effect immediately, the VA is urging servicers to put in place a targeted foreclosure moratorium for VA-guaranteed loans through December 31. During this period, servicers should refrain from initiating, advancing or completing the foreclosure process unless an exception applies. Exceptions include when a property is vacant or abandoned, a borrower has clearly expressed no interest in maintaining homeownership or preventing foreclosure, no mortgage payment has been received for at least 210 days and the borrower is nonresponsive, or after determining no possible home retention option, including VASP, is feasible for the borrower. Additionally, during the targeted moratorium, servicers will be expected to continue loss mitigation efforts for delinquent loans and offer workable solutions to borrowers, as detailed in the VA Servicer Handbook. Servicers are also encouraged to avoid negative credit reporting on affected loans. For borrowers affected by Covid-19, servicers should offer loan deferments, disaster extend modifications, and Covid-19 refund modifications until they implement VASP or through September 30, whichever is sooner. 

    Federal Issues Department of Veterans Affairs Consumer Finance Mortgages Servicing

  • VA proposes rule changes to VA-Guaranteed, IRRRLoans

    Agency Rule-Making & Guidance

    On March 7, the VA published a supplemental notice of proposed rulemaking in the Federal Register titled “Loan Guaranty: Revisions to VA-Guaranteed or Insured Interest Rate Reduction Refinancing Loans” which sought comment on whether the “date of loan issuance” should be defined as date of the note (as originally suggested) or as the date “the first payment is due.” The notice explained the VA did not receive any comments on this aspect of the proposed rule and enumerated several concerns with the initial proposed definition. The comment period for this proposed rule will close on May 6.

    Agency Rule-Making & Guidance Federal Issues Department of Veterans Affairs Loans

  • VA issues circular to address loan holder fees on assuming a VA-guaranteed loan

    Federal Issues

    On February 26, the Department of Veterans Affairs published a circular to address assumption fees, specifically permitting a loan holder to charge an additional assumption-related fee based on the location of the relevant property when the assumption of a VA-guaranteed loan closes. This additional fee is in addition to the previously permitted assumption fees which must be less than $300 for loan holders with maximum authority or $250 for loan holders without automatic authority. The VA set the amount of the additional assumption fee allowed in Exhibit A to the circular, which can be found here.

    Federal Issues Department of Veterans Affairs

  • VA announces updates to loan repayment relief for borrowers affected by Covid-19

    Federal Issues

    On February 9, the Department of Veterans Affairs (VA) issued a circular to consolidate updates related to VA’s disaster modification and loan deferment options. Effective February 9, the circular reiterates the options for disaster modifications and loan deferment and extends the options available for borrowers affected by Covid-19 through May 31, 2024. According to the circular, a servicer can provide a VA disaster modification without VA preapproval until May 31 regardless of the borrower’s enrollment in a Covid-19 forbearance plan, or Covid-19’s impact on the default. Additionally, the VA is allowing for disaster extend modifications to extend the loan’s original maturity date by up to 18 months, instead of the standard 12 months, if the loan is modified not later than May 31. Further, subject to certain requirements and restrictions, the circular also granted servicers flexibility to offer loan deferment when borrowers have missed payments due to the pandemic, regardless of CARES Act forbearance.

    Federal Issues Department of Veterans Affairs Servicer Covid-19 Forbearance

  • Fannie Mae releases notice on loan limit changes

    Federal Issues

    On January 3, Fannie Mae updated its mortgage loan underwriting system, Desktop Underwriter (DU), to support changes made to FHA and VA loan limits. The update will take place during the weekend of January 20. For FHA loan casefiles submitted before the weekend of January 20, the FHA National Low Cost Area Limit amounts will be updated in DU to reflect the new values. For FHA loan casefiles submitted on or after the weekend of January 20, DU will display the 2024 FHA National Low Cost Area Limit. Fannie Mae notes that lenders are responsible for verifying the correct information when determining eligibility. For VA 2024 county loan limits, cases submitted before the weekend of January 20 will be underwritten using the 2023 VA county loan limits. All case files submitted on or after the weekend of January 20 will be underwritten using the 2024 VA county loan limits. Fannie Mae notes since the “2024 VA county loan limits will not be implemented on the date they are in effect[;] lenders are responsible for ensuring that the correct VA county loan limit is applied to all VA loans underwritten through DU from Jan. 1 to Jan. 20.”

    Federal Issues FHA Department of Veterans Affairs Loans

  • VA asks all mortgage servicers to pause all VA foreclosures, extends the Covid-19 Refund Modification program

    Agency Rule-Making & Guidance

    On November 17, the U.S. Department of Veterans Affairs (VA) asked all mortgage servicers to pause any foreclosure proceedings of VA-guaranteed loans, as well as extended its Covid-19 Refund Modification program through May 2024. The VA acknowledges that the veteran community is struggling to make mortgage payments, despite VA-backed mortgages having some of the lowest foreclosure rates in the U.S. The VA’s extension of its Covid-19 Refund Modification program allows more veterans to get a zero-interest, deferred-payment loan to maintain affordable monthly payments. The VA wishes to delay any foreclosure proceedings so that it may continue to assist veterans before it launches its VA Servicing Purchase program, which will allow the VA to purchase defaulted VA loans, modify them, and create a direct loan so that veterans will have a chance at keeping their homes.

    Agency Rule-Making & Guidance Department of Veterans Affairs Foreclosure

  • CFPB looks at mortgage-pricing differences

    Federal Issues

    On May 24, the CFPB reported price dispersion trends in the mortgage industry, finding that borrowers could save at least $100 per month by choosing cheaper lenders. Price dispersion—the difference in interest rates charged by different lenders for the same loan product—is significant in the mortgage market, the Bureau said, following a review of 2021 HMDA data focusing on numbers for the 20 largest-volume lenders for each of the market segments. Examining price dispersion by loan type, including FHA and Department of Veterans Affairs loans, loans backed by Fannie Mae and Freddie Mac, and jumbo loans, the Bureau considered several potential factors contributing to price dispersion such as lender differences, competition, and increased demand. Additionally, the Bureau found that various options provided by lenders may account for different costs and choices made by consumers who may not select the cheapest option due to other factors that outweigh price differences. Data also suggested that competition in the mortgage market does not always translate into lower prices, the Bureau reported, noting that a recent study administered by the Bureau and the FHFA revealed that “most borrowers who recently took out a mortgage responded that they believe they would pay the same price regardless of which lender they choose” and that few borrowers consider more than two options. The data also found that lenders who choose to take on riskier loans may compensate for the risk by charging higher prices.

    Federal Issues CFPB Consumer Finance HMDA FHA Mortgages Department of Veterans Affairs Fannie Mae Freddie Mac

  • CFPB shutters mortgage lender, alleging deceptive advertising

    Federal Issues

    On February 27, the CFPB entered a consent order against a California-based mortgage lender (respondent) for alleged repeat violations of the Consumer Financial Protection Act, TILA (Regulation Z), and the Mortgage Acts and Practices Advertising Rule (Regulation N), in relation to a 2015 consent order. As previously covered by InfoBytes, in 2015, the Bureau claimed the respondent (which is licensed in at least 30 states and Puerto Rico and originates consumer mortgages guaranteed by the Department of Veterans Affairs and mortgages insured by the FHA) allegedly led consumers to believe it was affiliated with the U.S. government. Specifically, respondent allegedly used the names and logos of the VA and FHA in its advertisements, described loan products as part of a “distinctive program offered by the U.S. government,” and instructed consumers to call the “VA Interest Rate Reduction Department” at a phone number belonging to the mortgage lender, thus implying that the mailings were sent by government agencies. The 2015 consent order required the respondent to abide by several prohibitions and imposed a $250,000 civil money penalty.

    The Bureau contends, however, that after the 2015 consent order went into effect, the respondent continued to send millions of mortgage advertisements that allegedly made deceptive representations or contained inadequate or impermissible disclosures, including that the respondent was affiliated with the VA or the FHA. Additionally, the Bureau alleges that the respondent misrepresented interest rates, key terms, and the amount of monthly payments, and falsely represented that benefits available to qualifying borrowers were time limited. Many of these alleged misrepresentations, the Bureau claims, were expressly prohibited by the 2015 consent order.

    The 2023 consent order permanently bans the respondent from engaging in any mortgage lending activities, or from “otherwise participating in or receiving remuneration from mortgage lending, or assisting others in doing so.” The respondent, which neither admits nor denies the allegations, is also required pay a $1 million civil money penalty.

    Federal Issues CFPB Enforcement Mortgages Military Lending Consumer Finance CFPA TILA MAP Rule Regulation Z Regulation N Department of Veterans Affairs FHA

  • VA reduces funding fee for certain loans

    Agency Rule-Making & Guidance

    On February 14, the Department of Veterans Affairs announced a funding fee charge update for loans closed on or after April 7, 2023. According to Circular 26-23-06, funding fees are charged on VA transactions involving a home loan where a borrower does not qualify for a fee waiver. A reduced funding fee also applies to borrowers purchasing or constructing a home with a five or 10 percent down payment. The VA explained that lenders are to continue charging non-exempt veterans the current funding fee percentage for loans closed prior to April 7 (fee rates are listed here). For loans closed on or after April 7, lenders must charge the new funding fee percentage (fee rates are listed here).

    Agency Rule-Making & Guidance Federal Issues Department of Veterans Affairs Consumer Finance Fees Mortgages

  • VA to update appraisal requirements and guidance for guaranteed housing loans

    Federal Issues

    On December 27, President Biden signed H.R. 7735, the Improving Access to the VA Home Loan Benefit Act of 2022, which requires the Department of Veterans Affairs to update its regulations, requirements, and guidance related to appraisals for housing loans guaranteed by the agency. The regulations and requirements must specify when an appraisal is required, how an appraisal is to be conducted, and who is eligible to conduct an appraisal for such loans. The Act also requires the VA to submit recommendations to Congress no later than 90 days after the date of enactment for improving appraisal delivery times for VA loans. The agency must consider these recommendations when it prescribes its updated regulations and requirements. Additionally, the VA must provide guidance for desktop appraisals, taking into account situations where a desktop appraisal could provide cost savings for borrowers whereas “a traditional appraisal requirement could cause time delays and jeopardize the completion of a transaction.”

    Federal Issues Federal Legislation Appraisal Department of Veterans Affairs Biden


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