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FHFA Plans Enhanced Oversight of Mortgage Servicing Transfers
On August 22, the FHFA Office of Inspector General (OIG) issued a report on its review of the FHFA’s oversight of Fannie Mae’s January 2013 representation and warranty settlement with a mortgage originator and the FHFA’s related approval of the sale of certain of the originator’s mortgage servicing rights (MSR) to specialty servicers. The OIG reviewed the process by which the FHFA assessed and approved the MSR transfer and concluded that the FHFA’s review of the MSR transfer did not reflect the “depth of analysis that likely would have been accorded had FHFA followed a process comparable to that used in its newly established process for reviewing mortgage repurchase . . . settlements.” As such, the OIG determined that the FHFA should establish a formal review process for “compensatory fee settlements and significant mortgage servicing rights transfers.” In a letter attached to the report, the FHFA concurred with the OIG’s recommendation, and committed to establish guidelines for compensatory fee settlements and significant MSR transfers by January 31, 2014.
Fannie Mae, Freddie Mac Update Selling Policies Based on CFPB QM Rule
On August 20, Fannie Mae issued Announcement SEL-2013-06 and Freddie Mac published Bulletin 2013-16, both of which update numerous selling requirements in response to the CFPB’s final Ability-to-Repay/Qualified Mortgage (ATR/QM) rule. As promised in their July 2013 notices to sellers, the issuances (i) detail new mortgage eligibility requirements (e.g., retirement of mortgages with original maturities in excess of 30 years and making mortgages with prepayment penalties ineligible for sale) (ii) revise thresholds for points and fees, (iii) revise higher-priced mortgage loans eligibility requirements, and (iv) remind sellers of other policies, including those related to the representation and warranty framework announced in September 2012. The changes take effect when the ATR/QM rule goes into effect on January 10, 2014.
FHFA Seeks Comment on Strategies to Reduce Fannie Mae, Freddie Mac Multifamily Role
On August 9, the FHFA sought public input for reducing Fannie Mae’s and Freddie Mac’s presence in the multifamily housing market. In its request for public comment, the FHFA set forth various potential strategies, and is considering (i) placing restrictions on available loan terms (e.g. ceasing providing five-year loan terms), (ii) simplifying and standardizing loan products (e.g. establishing common loan terms, product features, and underwriting requirements), (iii) imposing new limits on property financing (e.g. restricting maximum financing amount), and (iv) imposing new limits on business activities (e.g. prohibiting the purchase of seasoned loans or loan pools). Comments on the proposals are due by October 8, 2013.
Fannie Mae Updates Servicer Disaster Assistance Policies
On August 7, Fannie Mae issued Servicing Guide Announcement SVC-2013-16, which updates assistance policies for borrowers affected by earthquakes, floods, hurricanes, or other catastrophes caused by a person or event beyond the borrower’s control. The announcement provides a table of new pre-approved forbearance terms for borrowers affected by a disaster. Fannie Mae reminds servicers that while they have discretion to determine the appropriate duration of forbearance, any forbearance that exceeds the set terms must be approved in writing by Fannie Mae. The announcement also (i) updates requirements for insurance claim settlements, (ii) requires that income documentation be no more than 180 days old at the time of the post-disaster foreclosure prevention alternative evaluation, (iii) directs servicers to suspend credit reporting for a disaster-impacted borrower during a repayment plan or Trial Period Plan if the borrower is making the required payments, (iv) reduces eligibility requirements for streamlined modifications for borrowers completing a disaster-related forbearance plan in a FEMA-declared disaster area, (v) introduces a new modification, the Cap and Extended Modification for Disaster Relief, and (vi) addresses escrow analysis requirements prior to offering a Trial Period Plan for certain disaster-related modifications. All of these policy changes took effect immediately.
Fannie Mae Announces Standard and Streamlined Modifications Rate Adjustment
On July 31, Fannie Mae announced that as of September 1, 2013, the rate for standard and streamlined modifications is 4.625%, an increase from the 4% applicable to modifications with approved dates between December 1, 2012 and August 31, 2013. The notice reminds servicers that the interest rate used for the permanent loan modification must be the same interest rate reflected in the borrower’s Trial Period Plan.
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.
Fannie Mae Announces Lender Quality Control Requirements, Other Selling Guide Updates
On July 30, Fannie Mae announced in Selling Guide Announcement SEL-2013-05 significant revisions to its Lender Quality Control Requirements, including specific requirements related to lender’s ongoing quality control (QC) assessment of loan origination activities and associated procedures, with the aim of reducing the risk of repurchases. The announcement provides a table of numerous revised requirements and highlights several new requirements, including that lenders (i) ensure that the QC vendor complies with the lender’s QC plan and Fannie Mae’s requirements, (ii) review at least 10% of the loans reviewed by vendors, (iii) only use Fannie Mae’s appraisal field review forms, and (iv) provide to Fannie Mae upon request a copy of QC audits and audits of the QC process. The announcement also includes numerous other Selling Guide updates related to, among other things (i) compensatory fees, (ii) field reviews, and (iii) authorizations to transfer funds.
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.
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.