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Fannie Mae and Freddie Mac update high LTV refinance ratio for one-unit, principal residences
On May 22, Fannie Mae issued Lender Letter LL-2018-02, which updates options related to the high loan-to-value (LTV) refinance option released in September 2017 (LL-2017-05). Fannie Mae, at the direction of the Federal Housing Finance Authority and in conjunction with Freddie Mac, increased the minimum refinance LTV ratio from 95.01 percent to 97.01 percent for one-unit, principal residences. Additionally, there are no minimum credit score requirements or a maximum debt-to-income ratio for most high LTV refinances. The Lender Letter also notes that the Loan-Level Price Adjustment Matrix on Fannie Mae’s website is updated to include the high LTV refinances and provides specific loan delivery requirements.
Freddie Mac announced the same LTV ratio change in Guide Bulletin 2018-8. The bulletin also announced, among other things, a “Credit Fee in Price” cap structure, effective on January 1, 2019, for applicable refinance mortgages. According to the bulletin, the pricing cap is designed to balance affordability to the consumer and risk to the lender. The pricing cap structure is related to the LTV ratio of the refinance and occupancy type of the property. Other updates include, (i) clarification of income stability and credit inquiries; (ii) concurrent transfers of servicing; and (iii) investor reporting change initiative.
FHA extends foreclosure moratoriums for certain properties in Puerto Rico & U.S. Virgin Islands
On May 16, the Federal Housing Administration (FHA) released Mortgagee Letter ML 2018-03 (ML 2018-03), which extends the 180-day foreclosure moratorium on FHA-insured properties in Puerto Rico & the U.S. Virgin Islands affected by Hurricane Maria for an additional 90 days. As previously covered by InfoBytes, in March, FHA extended the moratorium an additional 60 days to May 18. The foreclosure moratorium is now in effect, for properties that meet certain conditions, until August 16.
Find continuing InfoBytes coverage on disaster relief here.
CFPB updates TRID Small Entity Compliance Guide and Guide to Forms
On May 15, the CFPB released the 2018 updated versions of the “Know Before You Owe” mortgage disclosure rule Small Entity Compliance Guide (versions 4.1 and 5.2) and Guide to Forms (versions 1.5 and 2.1). Because the optional compliance period with the 2017 TILA-RESPA Integrated Disclosure Rule (TRID) extends through October 1, the CFPB updated both versions of each guide. Additionally, all four versions are updated with the 2018 TRID changes (covered by InfoBytes here), which will become effective prior to the end of the 2017 optional compliance period.
Georgia amends state code provisions related to financial institutions
On May 3, the Georgia governor signed into law an act amending provisions of the Official Code of Georgia applicable to the state’s Department of Banking and Finance (Department) and financial institutions generally, including banks, credit unions, licensed sellers of payment instruments, and mortgage lenders and brokers. Among other things, HB 780 grants the Department and/or its commissioner (i) powers to authorize state chartered financial institutions to exercise powers authorized by federal law but not authorized under state law; (ii) the authority to remove individuals employed by state chartered financial institutions, including officers and directors; and (iii) the ability to establish a process for state chartered financial institutions to “exercise rights and powers authorized solely under federal law.” HB 870 also amends the Official Code of Georgia to provide for the Department’s licensing of mortgage lenders and brokers. The law took effect on May 3, and does not apply to litigation pending as of March 9.
9th Circuit will not rehear interest on escrow preemption decision
On May 16, a panel of three judges on the U.S. Court of Appeals for the 9th Circuit denied the petition for an en banc rehearing of its March decision, which held that a California law that requires a bank to pay interest on escrow funds is not preempted by federal law. In addition to the national bank’s appeal for a rehearing, the OCC notably filed an amicus brief supporting the rehearing, arguing that the court “comprehensively misinterpreted” the Supreme Court’s 1996 decision Barnett Bank of Marion County v. Nelson. (Previously covered by InfoBytes here.) The panel noted that the full court had been advised of the bank’s petition for rehearing, and no judge had requested a vote on rehearing.
Federal agencies issue disaster relief guidance for North Carolina, Indiana, and Hawaii
Department of Veterans Affairs (VA)
On May 16, the Department of Veterans affairs released Circular 26-18-10, requesting relief for veterans impacted by Hawaii’s volcanic eruptions and earthquakes. Among other things, the Circular (i) encourages loan holders to extend forbearance to borrowers in distress because of the storms; (ii) requests that loan holders establish a 90-day moratorium on initiating new foreclosures on loans affected by the major disaster; and (iii) waives late charges on affected loans. Previously on May 14, the VA released Circular 26-18-08 and Circular 26-18-09, which provide for similar relief in areas affected by severe storms and flooding in Hawaii and North Carolina.
FDIC
On May 16, the FDIC issued FIL-28-2018 to provide regulatory relief to financial institutions and facilitate recovery in areas of Indiana affected by severe storms and flooding from February 14 through March 4. The FDIC is encouraging institutions to consider, among other things, extending repayment terms and restructuring existing loans that may be affected by the natural disasters. Additionally, the FDIC notes that institutions may receive favorable Community Reinvestment Act (CRA) consideration for certain development loans, investments, and services in support of disaster recovery. The FDIC also issued FIL-29-2018, which provides similar guidance for financial institutions for areas of North Carolina affected by tornadoes and severe storms on April 15.
Find more InfoBytes disaster relief coverage here.
FHFA and the Enterprises release Language Access Plan
On May 10, Fannie Mae and Freddie Mac (the Enterprises), in conjunction with the Federal Housing Finance Authority (FHFA), released a Language Access Multi-Year Plan (Plan), which identifies potential solutions for the obstacles faced by limited English proficiency (LEP) borrowers in accessing mortgage credit. The Plan was developed based on research and testing conducted in 2016 and 2017 to assist the Enterprises and FHFA in identifying the issues faced by LEP borrowers throughout the mortgage cycle. Key milestones for the Enterprises and FHFA for 2018 and beyond include (i) creating a clearinghouse with centralized resources, such as translated mortgage documents; (ii) establishing a language access working group; (iii) developing a disclosure that accompanies the Preferred Language Question on the Uniform Residential Loan Application (URLA) (previously covered by InfoBytes here); (iv) developing glossaries that include mortgage and real estate terms; (v) in addition to Spanish, translating the URLA into additional languages; and (vi) creating a language access line to provide consumers with assistance expeditiously.
HUD announces plan to seek public comment on Disparate Impact Regulation
On May 10, the Department of Housing and Urban Development announced its intention to seek public comment on whether the 2013 Disparate Impact Regulation (Regulation), which provides a framework for establishing legal liability for facially neutral practices that have a discriminatory effect under the Fair Housing Act (FHA), is consistent with the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Covered by a Buckley Sandler Special Alert.) The Supreme Court upheld the use of a disparate impact theory to establish liability under the Fair Housing Act, but according to HUD’s announcement, the Court only referenced the Regulation in its ruling but did not directly rule upon it.
As previously covered by InfoBytes, in October 2017, the Treasury Department called on HUD to reconsider the Regulation as it relates to the insurance industry – specifically, to homeowner’s insurance.
VA updates Disaster Loan Modification guidance regarding re-amortization
On May 8, the Department of Veterans Affairs (VA) released clarification of its Disaster Loan Modification guidance in circular 26-17-39. (Previously covered by InfoBytes here.) The revised circular now allows a servicer to re-amortize if necessary to meet investor guidelines, so long as the new monthly payment is the same or less than the current.
Find more InfoBytes disaster relief coverage here.
7th Circuit affirms RESPA requires actual damages under QWR rules
On April 10, the U.S. Court of Appeals for the 7th Circuit affirmed the district court’s dismissal of a RESPA action because the plaintiff did not properly establish actual damages arising out of her non-receipt of a response to her Qualified Written Request (QWR) to the bank. The opinion explains that the plaintiff’s property was vandalized in 2014 and the bank received insurance money to escrow for repairs. In 2015, the bank released funds for the repairs and subsequently, the plaintiff’s contractor abandoned the job; the property was then vandalized twice more. On September 5, 2015, the plaintiff sent the bank a letter asking about the status of her loan, specifically regarding how insurance money was being handled. The bank sent a response to the letter on September 25, 2015, but the plaintiff alleges she never received the bank’s response and contends the bank’s failure to respond to her QWR caused her emotional distress and contributed to her divorce. The 7th Circuit agreed with the district court that the plaintiff failed to establish how a response to her QWR would have resolved her financial inability to make the required repairs since RESPA does not require the bank to pay money in response to a written request. Moreover, the Appeals Court held that some of the plaintiffs asserted injuries, such as her divorce, are outside the scope of RESPA.