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Financial Services Law Insights and Observations


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  • FHFA Releases Analysis of Principal Forgiveness Loan Modification Option


    On January 23, the Federal Housing Finance Agency (FHFA), the entity serving as conservator for Fannie Mae and Freddie Mac, released a letter sent to certain members of Congress describing the internal analyses that resulted in FHFA’s decision not to use principal forgiveness as part of Fannie Mae’s and Freddie Mac’s loan modification programs. In short, the letter and analyses support FHFA’s previous publicly-stated conclusion that FHFA lacks statutory authority to incur the taxpayer losses that would result from the use of principal forgiveness. The letter concludes that “forbearance achieves marginally lower losses for the taxpayer than forgiveness,” but both provide the same more affordable payment for the borrower. The additional costs of principal forgiveness would not be offset by preservation of Fannie Mae and Freddie Mac assets.

    Freddie Mac Fannie Mae

  • Freddie Mac, Fannie Mae Announce Unemployment Forbearance Programs


    On January 6, Freddie Mac published Bulletin 2012-2, which allows servicers to offer eligible borrowers a short-term unemployment forbearance period, and the possibility of an extended unemployment forbearance period, if needed. On January 11, Fannie Mae followed with Servicer Guide Announcement SVC-2012-01, implementing a substantially similar program. Under the new programs, servicers may suspend or reduce an eligible borrower’s mortgage payments for a period of six months. With approval from Freddie Mac or Fannie Mae, respectively, servicers also may extend the six-month forbearance period for up to an additional six months, provided that the period does not extend beyond a date that would cause the delinquency to exceed twelve months. Further, following an unemployment forbearance period, a borrower may be re-evaluated for a new Home Affordable Modification Program (HAMP) or non-HAMP trial-period plan if the borrower was complying with the terms of the existing trial plan before obtaining unemployment forbearance. Under the Freddie Mac program, servicers must incorporate unemployment forbearance into their operations by February 1, 2012, but servicers have until March 1, 2012 to comply under the Fannie Mae program.

    Freddie Mac Fannie Mae Mortgage Servicing

  • Fannie Mae and Freddie Mac Announce Guaranty Fee Increase


    On December 30, Fannie Mae and Freddie Mac announced a 10 basis point increase of the guaranty fee charged for all mortgages delivered for securitization on or after April 1, 2012. The credit fee on whole loans will also increase by the same amount. The increases are required by the Temporary Payroll Tax Cut Continuation Act enacted on December 23, 2011, and a subsequent directive from the Federal Housing Finance Agency. The Act uses the increase in fees to cover fiscal costs associated with a two-month extension of a payroll tax reduction.

    Click here for a copy of the Freddie Mac announcement; click here for the Fannie Mae announcement.

    Freddie Mac Fannie Mae

  • Freddie Mac Revises Guide to Reflect Changes to Relief Refinance Mortgage Requirements


    On January 5, Freddie Mac issued Bulletin 2012-1, which revises the Freddie Mac Relief Refinance Mortgage - Same Servicer program requirements for mortgages with loan-to-value (LTV) ratios less than or equal to 80 percent. Effective immediately, the minimum Indicator Score requirement for such loans is eliminated, provided the principal and interest payment does not increase by more than 20 percent. Freddie Mac also eliminated the maximum total LTV and Home Equity Line of Credit total LTV ratio requirement of 105 percent for Relief Refinance Mortgages - Same Servicer and Relief Refinance Mortgages - Open Access with LTV ratios of less than or equal to 80 percent.

    Freddie Mac


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