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Freddie Mac Updates Disaster Assistance, Other Servicing Policies
On August 15, Freddie Mac issued Bulletin 2013-15, which updates and revises many of its servicing requirements, including those related to assistance for borrowers impacted by an eligible disaster. With respect to such impacted borrowers, the Bulletin provides updated requirements related to (i) property protection activities, such as ascertaining the extent of the damage, and, if necessary, securing abandoned properties, (ii) managing the delinquency of a borrower whose mortgaged premises or place of employment was impacted by a disaster, (iii) the addition of the new Disaster Relief Modification for Borrowers who were current or less than 31 days delinquent at the time of a disaster, (iv) streamlined modifications for borrowers who were current or less than 31 days delinquent at the time of a disaster, (v) Trial Period Plan eligibility requirements, (vi) insurance loss settlements, and (vi) credit reporting. The Bulletin also instructs servicers to follow applicable state laws when handling Freddie Mac default legal matters (e.g. foreclosure) and adds a new Guide chapter about when servicers should take advantage of state procedures that allow for quickly completing foreclosures. Further, the Bulletin (i) revises requirements for servicemembers and their dependents, (ii) revises property inspection requirements, (iii) revises requirements for the reimbursement of attorney fees and costs related to contested foreclosures and mediation, expenses incurred for title work, and condominium, homeowners association and Planned Unit Development assessments in super lien states, (iv) permanently extends the submission time frame for 104SF claims from 30 days to 45 days, and (v) updates unemployment forbearance requirements.
Fannie Mae, Freddie Mac Announce Uniform Dataset to Support CFPB Closing Disclosures
On July 30, Fannie Mae and Freddie Mac announced that they are developing a standardized dataset to support the consolidated closing disclosure forms expected to be finalized by the CFPB in the coming months. The new Uniform Closing Dataset (UCD) is a component of the broader Uniform Mortgage Data Program currently being implemented by Fannie Mae and Freddie Mac, which is designed to standardize the way loan data is defined, captured, and delivered. The enterprises are currently obtaining input from select industry participants and will release the UCD after the CFPB finalizes its rule.
Fannie Mae, Freddie Mac Alter Servicing Incentives
This week, Fannie Mae (SVC-2013-15) and Freddie Mac (Bulletin 2013-14) announced that they are altering certain servicing incentives. Effective for all collection periods with a start date on or after August 1, 2013, the two entities are eliminating the complete Borrower Response Package and Delinquency improvement performance standard and the related incentive and compensatory fee structure. Servicers still must collect the package when required to do so by the enterprises’ respective guides. In addition, for mortgages with HAMP modification effective dates on or after April 1, 2014, the entities are increasing the servicer incentive by $500 if the modification is completed in accordance with the Guide.
FHFA Announces Settlement in Lead MBS Action
On July 25, the FHFA announced that a financial institution agreed to pay roughly $885 million to settle allegations that the offering documents it provided to Fannie Mae and Freddie Mac in connection with the sale of billions of dollars in residential MBS included materially false statements or omitted material information, resulting in massive losses to the enterprises. The institution will pay approximately $415 million to Fannie Mae and $470 million to Freddie Mac to resolve claims related to securities sold to the companies between 2004 and 2007. The settlement ends the lead case of 18 cases the FHFA filed in 2011. In April 2013, the Second Circuit held that the action, filed within three years after the FHFA was appointed conservator of Freddie Mac and Fannie Mae, was timely under the relevant sections of Housing and Economic Recovery Act, and that the FHFA has standing to bring the action.
Freddie Mac Updates Numerous Selling Requirements
On July 18, Freddie Mac issued Bulletin Number 2013-13, which updates or revises numerous selling requirements. For Relief Refinance Mortgages sold under fixed rate cash commitments taken out on or after July 19, 2013, Freddie Mac is reinstating the cash adjustor for mortgages with loan-to-value ratios greater than 105% and less than or equal to 125% and is adjusting the cash adjustor value for mortgages with LTV ratios over 125%. Effective immediately, Freddie Mac is relaxing requirements regarding authorized user accounts to give sellers that option to evaluate the impact of authorized user accounts on a borrower’s credit report. If a seller determines that the impact on a borrower’s overall credit history is insignificant and the information on the credit report is representative of a borrower’s credit reputation, then (i) for Loan Prospector mortgages, the Loan Prospector decision may be considered valid and (ii) for manually underwritten mortgages the FICO score may be considered usable. The Bulletin also (i) simplifies eligibility and review requirements for condominium projects; (ii) eliminates requirements contained within Section 22.24 of the Seller/Servicer Guide for properties in subdivisions that do not have resale restrictions; (iii) updates section 22.23 of the Guide with new terminology to eliminate references to “inclusionary zoning;” (iv) updates certain ULDD data point requirements for Condominium Projects and Manufactured Homes; and (v) clarifies the eligibility of living trusts for Texas Equity Section 50(a)(6) mortgages.
House Chairman Outlines Housing Reform Bill
On July 11, House Financial Services Committee Chairman Jeb Hensarling (R-TX) outlined legislation set to be unveiled next week that is designed to reform the housing finance market. The centerpiece of the comprehensive bill is a plan to end the government’s conservatorship of Fannie Mae and Freddie Mac over a five year period, move those entities into receivership, and liquidate them. The bill would aim to replace the government-backed mortgage finance companies with a secondary market funded only by private capital, supported by a non-government, not-for-profit mortgage market utility regulated by the FHFA. The legislation also will include numerous provisions designed to “break down barriers to private investment capital,” including by delaying implementation of Basel III capital rules for community financial institutions and incorporating portions of a bipartisan proposal to change the calculation of loan points and fees in determining qualified mortgage eligibility. Finally, the bill would separate the FHA from HUD, limit the FHA’s mission to only serving first-time homebuyers and borrowers below 115% of area median income (AMI) nationwide or 150% of AMI in high-cost areas, lower the minimum and maximum FHA loan limits, and increase FHA down payment requirements, among other changes to the FHA program.
Fannie Mae, Freddie Mac Provide Additional Information Regarding QM Requirements
On July 2, Fannie Mae and Freddie Mac provided lenders additional information about eligibility criteria for mortgages with application dates on or after January 10, 2014. Recently, the FHFA directed Fannie Mae and Freddie Mac to limit future mortgage acquisitions to loans that meet the requirements for qualified mortgages under the CFPB’s ability-to-repay/qualified mortgage rule. The letters state that, effective January 10, 2014, mortgages will be eligible for sale to either entity only if they (i) are fully amortizing, (ii) have terms no longer than 30 years, and (iii) have points and fees of 3% or less of the total loan amount. In addition, both entities will continue to purchase mortgage loans that are exempt from the ability-to-repay rule. Fannie Mae and Freddie Mac anticipate updating policies regarding representations and warranties, as well as certain policies related to loan eligibility in August 2013, and plan to provide information about how they will test for compliance with the new eligibility criteria in September 2013.
Freddie Mac Changes Low Activity Fee to No Activity Fee
On June 25, Freddie Mac announced in Bulletin 2013-12 that, based on industry feedback, it is changing its recently-announced “low activity fee” to a “no activity fee.” In May, Freddie Mac announced that, effective January 1, 2014, a seller/servicer would be charged a $7,500 fee if the seller/servicer did not either (i) sell mortgages to Freddie Mac with an aggregate unpaid principal balance greater than $5 million during the immediately preceding calendar year, or (ii) service, or act as a servicing agent for, mortgages for Freddie Mac with an aggregate unpaid principal balance of at least $25 million as of December 31 of the immediately preceding calendar year. Under the revised policy, seller/servicers can avoid the fee if they (i) sell to Freddie Mac during the immediately preceding 36 months, or (ii) service, or act as a servicing agent for, a mortgage portfolio for Freddie Mac as of December 31 of the immediately preceding calendar year. In addition, new seller/servicers are exempt from the fee until they have been approved by Freddie Mac for three years.
Freddie Mac Makes Loan Quality Advisor Available to Sellers
On June 24, Freddie Mac issued Bulletin 2013-11, which announced that a new web-based risk and eligibility assessment tool, Loan Quality Advisor (LQA), is now available to sellers. It is designed to help sellers identify loan eligibility issues both pre- and post-closing. The Bulletin provides information regarding a new agreement that provides the terms and conditions for sellers using the LQA. In addition, effective immediately, sellers are permitted to resubmit construction conversion and renovation mortgages to Loan Prospector after the note date or the effective date of permanent financing.
Freddie Mac Announces Numerous Servicing Requirements
On June 14, Freddie Mac issued Bulletin 2013-10 to announce servicing policy changes with regard to Hurricane Sandy, foreclosure and alternatives to foreclosure, and other servicing issues. The Bulletin announces that servicers must submit any Hurricane Sandy exterior property inspection reimbursements by September 16, 2013, using a new template included in the Bulletin. Regarding foreclosures, the Bulletin, among other things, (i) sets the parameters under which servicers may utilize bulk trial foreclosures as an alternative foreclosure process in Florida, (ii) updates requirements for requests related to the preservation of deficiency rights, (iii) revises FICO score seasoning requirements for standard short sales and deeds-in-lieu of foreclosure (DILs), (iv) revises property inspection and closing requirements for DILs and adds a MLS requirement for short sales, and (v) removes, in most instances, the requirement that a servicer obtain a copy of a borrower’s tax transcript or most recent signed federal income tax return to be evaluated for HAMP. Among numerous other servicing policy updates, the Bulletin also (i) specifies that Freddie Mac does not reimburse for credit reports obtained in servicing activities, and (ii) requires servicers to notify Freddie Mac within 24 hours of blocking or rejecting a mortgage or mortgage transaction based on a valid match to the OFAC list of Specially Designated Nationals and Blocked Persons.