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Freddie limits single-family mortgage purchases
On June 7, Freddie Mac announced a new cap, or limit, on the purchase of certain single-family mortgages secured by investment properties and second homes to 7 percent of total single-family mortgage acquisitions. For July, Freddie Mac updated the requirements for investment property and second home mortgages to state that if a seller sells more than five mortgages secured by second homes and/or investment properties, the seller’s delivery of such mortgages may not, by the measure of the aggregate unpaid principal balance (UPB) of a mortgage, exceed 6.5 percent “of the total UPB for all [m]ortgages sold during that month.” After July, the cap will be set at 6 percent. The announcement also noted that the cap “is intended to be temporary” and may be revised as needed.
District Court allows county’s FHA claims to proceed
On June 1, the U.S. District Court for the Northern District of Illinois denied a national bank’s motion to dismiss claims that its allegedly discriminatory mortgage lending practices violated the Fair Housing Act. According to a complaint filed by the County of Cook in Illinois (County), the increase in foreclosures during the relevant time period were proximately caused by the bank’s mortgage practices, and caused the County to incur financial injury, including foreclosure-related and judicial proceeding costs and municipal expenses due to an increase in vacant properties. The bank filed a motion to dismiss, arguing that that the County did not have standing to sue because “the judicial proceedings and other activities associated with the additional foreclosures” actually “yielded a net benefit to the County.” The court disagreed, ruling that all the County had to do was show a reasonable argument that the bank’s lending practices resulted in foreclosures. The bank “does not dispute that the County has properly alleged in its complaint a financial injury sufficient, at least at the pleading stage, to support standing,” the court wrote.
New Hampshire clarifies licensing requirements
On May 27, the New Hampshire governor signed HB 312, which clarifies certain deadlines and provisions in consumer credit applications and licensing requirements for mortgage loan originators. Among other things, HB 312 states that company licensees or persons must “deliver to the commissioner a list of all New Hampshire consumers who have contracted with the licensee or with whom the licensee is otherwise engaged in business regulated under this chapter, and other requested lists summarizing the business of the licensee, within 7 days of receipt of the request” or be subject to a $50 fine per day for each day. The bill further stipulates that a “license shall not be issued and effective unless the applicant or licensee is licensed or registered in the state where its principal office is located.” This provision modifies the previous requirements, in that it is now only applicable to nondepository mortgage bankers, brokers, and servicers, but no longer applies to mortgage loan originators. Additional provisions address, among other things, “examinations of family trust companies, delegation by credit union boards to committees, qualifications of the banking commissioner, and authorizing depository banks to elect benefit corporation status.” The act takes effect 60 days after its passage.
FDIC releases April enforcement actions
On May 28, the FDIC released a list of administrative enforcement actions taken against banks and individuals in April. During the month, the FDIC issued 10 orders consisting of “two Orders to Pay Civil Money Penalties, one Section 19 Application, one Order Terminating Consent Order, and one Order of Prohibition from Further Participation.” Among the orders is a civil money penalty imposed against a Washington-based bank related to alleged violations of the Flood Disaster Protection Act (FDPA) for “failing to obtain adequate flood insurance on buildings and/or the buildings’ contents securing designated loans at the time the Bank made, increased, extended, or renewed the loans.” The order requires the payment of a $17,000 civil money penalty.
The FDIC also imposed a civil money penalty against a California-based bank related to alleged violations of the FDPA. Among other things, the FDIC claims that the bank (i) failed to notify the borrower to obtain flood insurance; and (ii) failed to purchase flood insurance on the borrower’s behalf. The order requires the payment of a $281,000 civil money penalty.
FHA clarifies eligibility of nonpermanent residents
On May 28, FHA announced the publication of Mortgagee Letter (ML) 2021-12, which clarifies the eligibility of FHA-insured financing for Deferred Action for Childhood Arrivals (DACA) recipients and amends employment documentation requirements for citizens of the Freely Associated States and individuals with H-1B status. ML 2021-12 also updates requirements for certain non-permanent residents seeking to obtain insured mortgage financing under FHA’s Single Family Title I and Title II forward mortgage insurance programs. FHA notes that while the guidance may be implemented immediately, it must be implemented for mortgages with case numbers assigned on or after July 26, 2021.
CFPB releases report on manufactured housing financing
On May 27, the CFPB released a report providing insights into manufactured housing financing, which is a source of lending for millions of manufactured housing homeowners. The report utilizes new information about manufactured housing that was added in 2018 to the list of HMDA data. The report also examines the differences between mortgage loans for site-built homes, mortgage loans for manufactured homes, and chattel loans for manufactured homes. The report found, among other things: (i) about 42 percent of manufactured home purchase loans are “chattel” loans, which are secured by the home but not the land; (ii) about 70 percent of the time, homeowners seeking a loan on a site-built home are approved, but about 30 percent of manufactured home loan applications are approved; (iii) the top five lenders account for over 40 percent of manufactured housing purchase loans and nearly 75 percent of chattel lending; and (iv) Hispanic, Black and African American, American Indian and Alaska Native, and elderly borrowers “are more likely than other consumers to take out chattel loans, even after controlling for land ownership.” The report also pointed out that “compared to mortgages for site-built homes, manufactured homes mortgages tend to have smaller loan amounts, higher interest rates, fewer refinances, and less of a secondary market, patterns that are even more acute for chattel loans.”
VA updates loan repayment relief for Covid-19 borrowers
On June 3, the Department of Veterans Affairs (VA) issued changes updating Circular 26-21-07 to address loan repayment relief for borrowers affected by Covid-19. The circular provides servicers with information regarding home retention options and foreclosure alternatives to use to assist borrowers affected by the pandemic. The guidance stems from the extended duration of the pandemic and developments in the VA’s program. According to the changes, “servicers should not require a borrower to make a lump sum payment to bring the loan current.” Additionally, the VA will allow “for Disaster Extend Modifications to extend the loan’s original maturity date for up to 18 months, in cases where the loan is modified not later than the date that is 18 months after the date on which the COVID-19 national emergency ends.” The circular is effective until April 1, 2022.
Colorado amends executive order regarding eviction protections
On June 1, the Colorado governor issued Executive Order 2021 110, which amends Executive Order 2021 088, as extended by Executive Order 2021 105. The amendment provides that an individual is prohibited from filing or initiating actions for forcible entry and detainer (i.e., eviction), including any demand for rent, unless the individual has notified the tenant in writing of the resources available to tenants and landlords, including a copy of the Department of Local Affairs resources. The Executive Order also directs the Executive Officer of the Department of Local Affairs to continue working with landlords to implement the model rent repayment agreements, to assist individuals who are unable to pay rent. Executive Order 2021 110 is set to expire on June 30. Previous coverage relating to Colorado’s eviction orders can be found here, here, here, and here.
VA establishes VAPCP requirements
On May 28, the Department of Veterans Affairs (VA) published a final rule in the Federal Register, which establishes the “COVID–19 Veterans Assistance Partial Claim Payment” (VAPCP) program to help veterans resume making normal loan payments on VA-guaranteed loans after exiting forbearance due to the Covid-19 pandemic. The final rule incorporates several revisions in response to comments submitted by veterans, lenders, servicers, consumer groups, and trade associations on the VA’s proposed rule published last December (covered by InfoBytes here). Under the final rule, the partial claim maximum limit is increased from the proposed 15 percent to 30 percent of the unpaid principal balance of the guaranteed loan as of the date the veteran entered into a Covid-19 forbearance. The timeframe for servicers to submit partial claim payment requests to the VA also was increased from 90 to 120 days. Additionally, the final rule will allow servicers to use the Covid-VAPCP program “even if other home retention options are feasible, provided the partial claim payment option is in the veteran’s financial interest.” For a loan to qualify for a Covid-VAPCP, among other things, (i) the guaranteed loan must have been either current or less than 30 days past due on March 1, 2020, or made on or after March 1, 2020; (ii) the veteran must have received a Covid-19 forbearance and missed at least one scheduled monthly payment; (iii) at least one unpaid scheduled monthly payment must remain that the veteran did not make while under a Covid-19 forbearance; (iv) the veteran must indicate the ability to “resume making scheduled monthly payments, on time and in full, and that the veteran occupies, as the veteran’s residence, the property securing the guaranteed loan for which the partial claim is requested”; and (v) the veteran must timely execute all necessary loan documents in order to establish an obligation to repay the partial claim payment.
Notably, the final rule strikes the following requirements that were included in the proposed rule: (i) veterans will not be required to repay the partial claim within 120 months; (ii) interest will not be charged on the Covid-VAPCP; and (iii) servicers will not have to complete financial evaluations of veterans in the program.
The rule is effective July 27.
Maine to establish program to assist homeowners impacted by Covid-19
On May 28, Maine’s Bureau of Consumer Protection announced the Maine Homeowner Assistance Fund (HAF) Program to mitigate financial hardship for certain homeowners resulting from the Covid-19 pandemic. The details of the program are still in development as the superintendent holds meetings with stakeholders.