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Fannie Mae, Freddie Mac Implement New G-Fee Schedule
On December 16, Fannie Mae issued Selling Guide Announcement SEL-2013-09 and Freddie Mac issued Bulletin 2013-26 to implement new guarantee fees (g-fees) for 2014, as recently mandated by the FHFA. The announcements provide updated up-front g-fee grids, which the FHFA claims are needed to better align pricing with the credit risk characteristics of the borrower.
FHFA Increases Guarantee Fees
On December 9, the FHFA directed Fannie Mae and Freddie Mac to raise guarantee fees (g-fees). Under the directive, Fannie Mae and Freddie Mac will increase the base g-fee (or ongoing g-fee) for all mortgages by 10 basis points, and will update the up-front g-fee grid to better align pricing with the credit risk characteristics of the borrower. In addition, the up-front 25 basis point adverse market fee that has been assessed on all mortgages purchased by Freddie Mac and Fannie Mae since 2008 will be eliminated except in four states. As described in the FHFA’s State-Level Guarantee Fee Analysis, mortgages newly acquired by Fannie Mae and Freddie Mac that are originated in states that have expected carrying costs more than two standard deviations above the national average, will be charged an additional upfront guarantee fee of 25 basis points. The affected states include New York, New Jersey, Connecticut, and Florida. The FHFA originally proposed charging fees on mortgages originated in all states over one standard deviation, which would have covered the four listed, plus Illinois. The new g-fees will apply to (i) all loans exchanged for mortgage-backed securities with settlements starting April 1, 2014, and (ii) all loans sold for cash with commitments starting March 1, 2014.
FHFA Holds Conforming Loan Limits Steady, Announces Overhauled Mortgage Insurance Master Policy Requirements
On November 26, FHFA announced that 2014 maximum conforming loan limits will remain at $417,000, unchanged from 2013. On December 2, FHFA announced that Fannie Mae and Freddie Mac soon will provide guidance to lenders and servicers regarding specific effective dates for new requirements under the entities’ aligned, overhauled mortgage insurance master policies, which guidance will include changes related to loss mitigation, claims, assurance of coverage, and information sharing. FHFA, Fannie Mae, and Freddie Mac anticipate that the master policies will go into effect in 2014, pending review and approval by state insurance regulators.
Freddie Mac, Fannie Mae Update Short Sale, Deed-In-Lieu Of Foreclosure Requirements
On November 25, Freddie Mac issued Bulletin 2013-24 and Fannie Mae issued Servicing Guide Announcement SVC-2013-23, which revised numerous short sale and deed-in-lieu of foreclosure (DIL) requirements. The enterprises updated, among other things, eligibility requirements for exceptions to borrower documentation for short sales and DILs by (i) permitting a borrower whose mortgage debt has been discharged in a Chapter 7 bankruptcy to be eligible for an exception to documentation, regardless of FICO score; and (ii) removing mortgages that were originated as investment properties from eligibility for an exception to documentation. The enterprises also required servicers to: (i) submit a short sale or DIL recommendation for approval when the borrower’s cash reserves exceed $50,000; and (ii) delay, or ensure that foreclosure counsel delays, the next legal action in the foreclosure process when such servicers receive a first complete borrower response package (BRP) more than 37 days prior to a scheduled foreclosure sale date, and the evaluation results in an offer to proceed with a short sale or DIL. Finally, the enterprises revised the timeframes within which servicers are required to conduct an expedited review of a completed BRP and updated requirements relating to borrower appeals.
Fannie Mae Announces Miscellaneous Servicing Policy Changes
On December 4, Fannie Mae issued Servicing Guide Announcement SVC-2013-24, which: (i) updates the modification terms for the “Cap and Extend Modification for Disaster Relief” to require servicers to set the interest rate to a fixed rate; and (ii) establishes the steps servicers must follow to determine borrowers’ modified payment terms. Fannie Mae encourages servicers to implement the new requirements immediately, but will not require them to do so until February 1, 2014. The announcement likewise requires, with immediate effect, that servicers update Form 582 (Lender Record Information) promptly after any change in previously-submitted information occurs. Finally, the announcement adds to the Servicing Guide glossary a definition for “seriously delinquent mortgage loan.”
FHFA OIG Recommends Changes To Fannie Mae Short Sale Oversight
On November 20, the FHFA Office of Inspector General (OIG) issued a report critical of Fannie Mae’s oversight of its short sale process and the servicers who participate in that process. The OIG determined—based on a review of 41 short sale transactions handled by multiple Fannie Mae servicers—that five servicers were not always collecting all of the required documentation before making borrower eligibility determinations or seeking Fannie Mae approval. The report states also that servicers sometimes failed to conduct adequate reviews supporting borrower eligibility determinations. Further, the OIG found that borrowers with potentially significant financial resources sold multiple non-owner occupied properties through Fannie Mae’s streamlined documentation program, which allows servicers to approve short sales based only on low FICO scores and delinquency status. The OIG recommends that Fannie Mae strengthen its oversight of the short sale program by (i) enforcing the requirement that all borrowers outside the streamlined documentation program provide a borrower-certified borrower assistance form; (ii) establishing controls to identify and resolve inconsistencies between the borrower assistance form and supporting documentation; (iii) considering whether its servicer compensation structure should include the quality of borrower eligibility determinations for short sales and success in limiting losses; and (iv) enhancing controls over collection and use of electronic information from servicers on the financial condition of borrowers. The OIG also suggests that the FHFA should: (i) determine whether the streamlined documentation program should be available to borrowers seeking approval to short sell non-owner occupied properties; and (ii) provide examination coverage of Fannie Mae’s short sale activities with particular emphasis on identifying systemic deficiencies related to borrower submissions, Fannie Mae eligibility determinations, servicer compensation structure, and reliability of electronic information used in managing short sales.
Fannie Mae, Freddie Mac To Restrict Lender-Placed Insurance Practices
On November 5, the FHFA announced that it had directed Fannie Mae and Freddie Mac to implement new restrictions on lender-placed insurance practices. In March, the FHFA sought comments on certain potential lender-placed insurance restrictions, including new policies to (i) prohibit sellers and servicers from receiving, directly or indirectly, remuneration associated with placing coverage with or maintaining placement with particular insurance providers, and (ii) prohibit sellers and servicers from receiving, directly or indirectly, remuneration associated with an insurance provider ceding premiums to a reinsurer that is owned by, affiliated with or controlled by the sellers or servicer. Following that comment process and related efforts by the FHFA to obtain feedback on these issues, the FHFA now has directed Fannie Mae and Freddie Mac to provide aligned guidance to sellers and servicers to prohibit servicers from being reimbursed for expenses associated with captive reinsurance arrangements. The announcement does not provide any timeline for the new guidance, but states Fannie Mae and Freddie Mac will provide implementation schedules with the new rules.
Fannie Mae Announces Servicing Policy Changes
On October 30, Fannie Mae issued Servicing Guide Announcement SVC-2013-22, which describes various servicing policy updates. First, effective on or after February 1, 2014 for condominium insurance policy renewals, Fannie Mae is prohibiting the use of master or blanket insurance policies that cover multiple unaffiliated projects. Second, effective immediately for mortgage loan modifications, Fannie Mae is requiring that principal forbearance is payable upon the earliest of the maturity of the mortgage loan modification, sale or transfer of the property, refinance of the loan, or payoff of the interest-bearing unpaid principal. Third, effective January 1, 2014 for property inspection reimbursements, the Announcement updates the maximum amounts Fannie Mae will reimburse servicers for property inspections, outlines servicer responsibilities related to reimbursement requests, and clarifies the escalated case resolution process. Finally, the Announcement reminds servicers of their obligation to comply with both the Selling Guide and Servicing Guide, and informs servicers that requirements for maintaining eligibility and related fees were recently updated in the Selling Guide.
Fannie Mae, Freddie Mac Preview Next ULDD Phase, Update Current Phase
On October 29, Fannie Mae and Freddie Mac jointly published a Uniform Loan Delivery Dataset (ULDD) Phase 3 preview, which is intended to provide lenders and vendors with an early look at the next phase’s specification to help them prepare for implementation in the fourth quarter of 2015. The joint preview identifies 15 new data points—13 related to the CFPB’s new ability-to-repay rule and two other data points that were deferred from Phase 2. In addition, the joint publication provides additional implementation notes and guidance on the 17 new data points that will be implemented in ULDD Phase 2 in 2015 (the exact implementation date will be announced by the end of the first quarter of 2014).
Fannie Mae Updates Selling Guide
On October 22, Fannie Mae issued Selling Guide Announcement SEL-2013-08, which updates policies regarding (i) the use of a power of attorney, (ii) DU Refi Plus and Refi Plus eligibility, and (iii) master or blanket insurance for unaffiliated projects, among other miscellaneous updates. The Announcement updates provisions for use of a power of attorney in connection with the final loan application, restrictions on certain transaction types for which a power of attorney may be used, and requirements specifying who may not act as the attorney-in-fact or agent due to a potential financial connection to the transaction, except under limited circumstances. It also addresses the growing practice of lenders using powers of attorney as a matter of convenience or cost savings through a closing transaction facilitated by an online, interactive session between the borrower and a lender-chosen attorney-in-fact. In addition, the Announcement states that the eligibility date for DU Refi Plus or Refi Plus, which previously required the original loan to have been acquired by Fannie Mae on or before May 31, 2009, will now be based on the note date of the original loan. Finally, effective February 1, 2014, Fannie Mae will no longer permit master hazard insurance policies that provide coverage for multiple unaffiliated projects in a single insurance policy.