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Fannie Mae Announces Miscellaneous Servicing Policy Changes
On May 1, Fannie Mae issued Servicing Guide Announcement SVC-2013-10, which includes numerous servicing policy changes. The announcement informs servicers that they must (i) conduct regular testing of compliance with applicable laws in all jurisdictions in which they service mortgage loans for Fannie Mae, (ii) provide test results to senior management and, upon request, to Fannie Mae, and (iii) maintain evidence of any corrective actions. For eMortgages, the Announcement explains that servicers must obtain special approval to service such mortgages by contacting their Servicing Consultant, Portfolio Manager, or Fannie Mae’s National Servicing Organization’s Servicing Solutions Center. The Announcement also (i) provides new requirements for repayments of escrow deficits and shortages for all conventional loan modifications, (ii) requires servicers to obtain the results of property valuation order requests for the purposes of bidding instructions through HomeSaver Solutions® Network within 7 to 10 calendar days from the date the servicer submits the request, (iii) clarifies delinquency management and default prevention policies outlined in SVC-2012-18, (iv) removes Guide language regarding temporary possession of mortgage notes, and (v) incorporates a recent change to Moody’s rating system.
Fannie Mae Revises Execution of Legal Documents Policy, Changes Bidding Instructions Format
On April 17, Fannie Mae issued Servicing Guide Announcement SVC-2013-09, which revises Fannie Mae’s execution of legal documents policy related to (i) quitclaim deeds, (ii) limited power of attorney, (iii) execution of assumptions, and (iv) releases of security. The policy changes are effective immediately. Also on April 17, Fannie Mae issued a servicing notice to inform servicers of a change in the format for bidding instructions to help clarify the situations in which specific bidding instructions must be used.
FHFA Announces Two-Year HARP Extension
On April 11, the FHFA announced that Fannie Mae and Freddie Mac will extend the Home Affordable Refinance Program (HARP) to December 31, 2015. The program was set to expire at the end of 2013. In addition, the FHFA plans to launch a nationwide campaign to educate consumers about HARP. The FHFA announcement also includes HARP frequently-asked-questions and eligibility criteria for a HARP refinance.
Fannie Mae Updates Delinquency Status Reporting Policies
On April 10, Fannie Mae issued Servicing Guide Announcement SVC-2013-08, which introduces a delinquency status code hierarchy and updates delinquency status code definitions. The hierarchy requires servicers to report the most appropriate delinquency status code based on priority level, using a six level priority hierarchy. The announcement explains that when multiple delinquency status codes are applicable to an individual loan, the servicer must use the appropriate delinquency status code in the highest priority, though Priority Level 1 through 3 status codes are mutually exclusive. The changes will take effect for the February 2014 delinquency status code reporting cycle (for January 2014 activity), though Fannie Mae encourages servicers to implement the new policies as soon as possible.
Fannie Mae Announces Numerous Selling Guide Updates
On April 9, Fannie Mae issued Selling Guide Announcement SEL-2013-03, which updates numerous guide sections. According to the announcement, effective immediately, all lenders that wish to deliver eMortgages must obtain special approval evidenced by an addendum to their Mortgage Selling and Servicing Contract (MSCC), and not by a variance to their Master Agreement. Lenders that currently have variances by way of their Master Agreement will still be entitled to electronically deliver mortgages until the variance is converted to an MSCC addendum. The Selling Guide also has been updated to reflect previously announced policy changes regarding lender incentives for borrowers, private flood insurance policies, and the new selling representation and warranty framework. With regard to that new framework, the announcement includes a table summarizing the major updates. Fannie Mae also authorized changes to the last page of the note and security instrument to comply with the requirements of TILA and Regulation Z. Lenders are encouraged to implement the changes to the note and security instrument immediately and no later than January 10, 2014. Finally, the announcement includes numerous minor Guide changes and clarifications.
Fannie Mae Announces Numerous Servicing Policy Changes
On April 3, Fannie Mae issued Servicing Guide Announcement SVC-2013-07, which outlines policy updates regarding (i) lender-placed property insurance requirements, (ii) military indulgence reporting and reimbursement processes, and (iii) scheduled/schedule remittance payoffs. Effective immediately, the announcement retracts the lender-placed insurance requirements introduced in Announcement SVC-2012-04, but the hazard insurance claims processing requirements in that 2012 announcement remain in effect. Fannie Mae also replaced in its entirety the sections of Part III, Chapter 1, Exhibit 1: Military Indulgence, that relate to reporting to Fannie Mae and requesting reimbursement for advances. The announcement includes an attachment with the new section, and notes that servicers also must retain the servicemember's orders and the completed Request for Military Indulgence (Form 180) in the individual mortgage loan file as long as the military indulgence remains in effect. Finally, also effective immediately, the announcement allows a subservicer greater flexibility in deciding whether it will consider any full payoff received on the first business day of a month as though it was received in the prior calendar month. Subservicers may either select one option for all loans serviced on behalf of Fannie Mae or elect the option based on its individual agreement with the servicer for which is it subservicing Fannie Mae mortgage loans.
FHFA OIG Calls for Oversight of Counterparty Compliance with Consumer Protection Laws
On March 26, the FHFA Office of Inspector General (OIG) issued a report that concludes the FHFA has failed to actively oversee how Fannie Mae and Freddie Mac monitor counterparty compliance with federal and state consumer protection laws. The OIG review found that the FHFA is vulnerable to questions about why it does not have a strategy to monitor the Enterprises’ activities to assess whether they are aligned with the public interest as reflected in federal and state laws and regulations, and that the Enterprises’ failure to pursue seller repurchase demands related to mortgages in default with no material underwriting deficiencies—but that were originated in violation of consumer protection laws—may result in losses to the Enterprises that could be avoided or mitigated. The OIG concludes that given the FHFA’s duty under HERA to ensure that the activities of the Enterprises are consistent with the public interest, the FHFA should develop and implement a risk-based plan to monitor the Enterprises’ oversight of their counterparties’ compliance with contractual requirements, including consumer protection laws. According to the report, the FHFA has begun to put together a plan to address this oversight role.
Fannie Mae and Freddie Mac Stress Importance of Lender Data Accuracy
On March 26, Fannie Mae and Freddie Mac reminded lenders of the importance of data accuracy to improve the overall quality of loan delivery data submitted to each entity and ensure that it is complete and fully reflective of the terms of the mortgage. The announcement clarifies information about certain data points and provides examples for lenders.
Fannie Mae Announces Miscellaneous Servicing Policy Updates
On March 27, Fannie Mae issued Servicing Guide Announcement SVC-2013-06, which announces policy updates regarding (i) redelivery of balloons, (ii) property value ordering process, and (iii) Mortgage Release and REOgram Submissions. The announcement states that Fannie Mae is eliminating Servicing Guide procedures for removing a balloon mortgage loan from an MBS pool when a refinance is effective after the balloon maturity date, and that servicers should contact their Investor Reporting Business Analyst for specific instructions on the process for past-due balloon mortgage loans serviced in a special servicing option MBS pool. The announcement also provides detailed instructions about a new servicer requirement to place orders directly with Fannie Mae (i) to determine the market value of property for short sales, and (ii) for Mortgage Releases and foreclosure sale bidding, if required by Fannie Mae or a mortgage insurer. Finally, effective immediately, servicers are no longer required to obtain recordation of the release of the subordinate lien within 60 days of the borrower’s acceptance of the offer for a Mortgage Release and instead, evidence of recordation of the subordinate lien release will be required with submission of the REOgram.
FHFA Announces Streamlined Modification Initiative
On March 27, the FHFA announced that Fannie Mae and Freddie Mac will begin a new loan modification initiative on July 1, 2013. As described in more detail in Fannie Mae Servicing Guide Announcement SVC-2013-05 and Freddie Mac Bulletin Number 2013-5, servicers will be required to offer eligible borrowers who are at least 90 days delinquent on their mortgage a way to lower their monthly payments and modify their mortgage without requiring financial or hardship documentation. Eligible borrowers will need to demonstrate a willingness and ability to pay by making three on-time trial payments, after which the mortgage will be permanently modified. Borrowers will still have the option to document income and financial hardship, which could result in a modification with additional savings. The program will expire on August 1, 2015.