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Fannie Mae Announces Numerous Updates to Selling Guide
On January 17, Fannie Mae issued Selling Guide Announcement SEL-2013-01, which provides notice of updates to several Selling Guide topics. First, eligibility for delivery of FHA-insured, HUD-guaranteed, VA-guaranteed, and RD-guaranteed mortgages is now available on a negotiated basis only. This change is effective for all government loans, including whole loans sold to Fannie Mae on or after May 1, 2013, and government loans in MBS with issue dates on or after May 1, 2013. Second, with regard to borrower refunds for overpayment of fees, effective immediately, the Guide has been updated to allow reimbursements in purchase transactions and limited cash-out refinance transactions to include refunds that may be required in accordance with certain federal laws or regulations. In such cases, the HUD-1 Settlement Statement must clearly identify the refund with a notation for the reason, and the loan file must include documentation to support the amount and reason for the refund. Third, the Announcement details a new policy regarding acceptable principal balance curtailments that may be made prior to delivery of a mortgage loan to Fannie Mae and lists the reasons for which Fannie Mae will permit curtailments, as well as documentation and delivery requirements. Finally, the Announcement lists updates and clarifications related to mortgage loans with an inter vivos revocable trust borrower.
Fannie Mae Obtains Comprehensive Settlement of Repurchase Claims Against Major Lender
On January 7, Fannie Mae and a national bank announced a comprehensive settlement to resolve all outstanding and future repurchase requests on nearly all single-family loans originated by the bank (and other lenders it later acquired) over a nine-year period and subsequently delivered to Fannie Mae. The announcement states that the loans had an outstanding unpaid principal balance of $297 billion as of November 30, 2012. Fannie Mae alleges that the lenders breached representations and warranties on the loans. The bank agreed to pay $3.55 billion in cash to Fannie Mae and to repurchase roughly 30,000 loans with cumulative unpaid principal balances and interest of $6.75 billion. On the loans retained by Fannie Mae, the bank remains responsible for certain payment and other obligations with respect to mortgage insurance rescissions, cancellations and denials, as well as its servicing, third-party indemnification, and recourse obligations. Finally, Fannie Mae and FHFA approved the transfer of servicing rights for roughly one million loans from the bank to specialty servicers, which FHFA stated is designed to benefit borrowers and reduce future credit losses to Fannie Mae.
Fannie Mae Clarifies Foreclosure Sherriff's Costs Reimbursement Process
On January 9, Fannie Mae issued a Servicing Notice regarding claims for reimbursement of foreclosure sheriff’s costs. Noting that some states require that the sheriff’s office perform some or all of the tasks associated with completing a foreclosure sale, the notice clarifies that when a servicer files a claim for reimbursement of the sheriff’s costs associated with foreclosure activities, Fannie Mae may require that the servicer provide supporting documentation with its request. Fannie Mae prefers that such costs be documented in a cost sheet on the sheriff’s office letterhead, but the notice includes an attachment listing other acceptable forms of documentation. The notice provides other reminders regarding the sheriff’s costs claim reimbursement process and supporting documentation.
Fannie Mae Updates Selling Guide to Reflect Previously Announced Policies
On December 18, Fannie Mae issued Selling Guide Announcement SEL-2012-14 (Announcement) announcing updates to the Selling Guide to reflect previously announced changes related to disaster policy and DU Refi Plus™ and Refi Plus Property Policies™. The Announcement also (i) provides further clarification regarding escrow account requirements for refinance transactions and clarification that the escrow account requirements do not apply to DU Refi Plus and Refi Plus mortgage loans, (ii) incorporates the Desktop Underwriter® archiving, and (iii) includes updated links from eFannieMae.com to the new business Web portal.
Fannie Mae and Freddie Mac Announce Next Phase of ULDD
On December 13, Fannie Mae and Freddie Mac published the Phase 2 Specification for the Uniform Loan Delivery Dataset (ULDD), the common set of data elements required by Fannie Mae and Freddie Mac for single-family loan deliveries as part of the Uniform Mortgage Data Program, an initiative announced in May 2010 to improve appraisal quality and other loan information. The Phase 2 ULDD specification contains a total of 19 joint data points, of which 15 of which were optional for both Fannie Mae and Freddie Mac as part of the Phase 1 ULDD specification, one data point that was conditionally required for Freddie Mac and optional for Fannie Mae, and three new data points. Lenders must begin collecting the Phase 2 data points for all loans with application received dates on or after March 1, 2014, for loans delivered on or after August 25, 2014.
Fannie Mae Updates Maximum Allowable Attorney Fees, Provides Standard Short Sale FAQs
On December 13, Fannie Mae issued Servicing Guide Announcement SVC-2012-26 to update the maximum allowable foreclosure attorney fees for mortgage loans, participation pool mortgage loans, and MBS mortgage loans serviced under the special servicing option secured by properties located in Idaho, Montana, New Hampshire, Puerto Rico, U.S. Virgin Islands, and Wyoming. All listed fee revisions are effective as of January 1, 2013. Concurrently, Fannie Mae issued Frequently Asked Questions regarding its standard short sale and deed-in-lieu of foreclosure requirements, which were announced last month in SVC-2012-19.
Fannie Mae Updates Servicing Guide to Implement Harmonized Contracts Directive
On December 5, Fannie Mae issued Servicing Guide Announcement SVC-2012-21, which provides numerous Servicing Guide updates to further conform to the FHFA’s directive that Fannie Mae and Freddie Mac align their servicing contracts and policies. The announcement provides new and revised policies regarding (i) metrics for performing and non-performing loans, (ii) servicer violations and remedies, (iii) compensatory fees, (iv) default events constituting a breach of a servicer’s contractual obligations, (v) servicing terminations and transfer of servicing remedies, (vi) response time frames and appeal process for remedies, and (vii) miscellaneous contractual changes.
Key Stakeholders Comment on FHFA State-Level Guarantee Fee Pricing Proposal
Over the past week, key stakeholders submitted comments on the FHFA’s proposal regarding state-level guarantee fees, which would allow Fannie Mae and Freddie Mac to charge higher upfront fees for single-family mortgages originated in Connecticut, Florida, Illinois, New Jersey, and New York. The FHFA argues that the higher fees are needed to offset higher default-related costs incurred by Fannie Mae and Freddie Mac in those states resulting in part from state and local foreclosure policies. Senators from four of those states sent a letter on November 21, 2012 asking the FHFA to abandon the proposal in its entirety, citing shortcomings in the proposal and negative impacts on borrowers in those states. The senators argued that the proposal would penalize borrowers in states with higher consumer protections and would undermine those protections and restrict residential lending. The Attorneys General of Illinois, Connecticut, and New York similarly objected to the proposal in a November 26, 2012 letter. Also on November 26, 2012, the ABA submitted a letter in support of the increased fees in which it pointed out that the fees would be modest and argued that the fees would help to spur state and local policymakers to reform foreclosure processes. On the same day, the MBA submitted a letter seeking more information about the formula used by the FHFA to determine which states should be assessed the higher fees and urging the FHFA to (i) expand the proposal to reward states with lower default-related costs, (ii) change the format of the proposed pricing to more closely match industry practice, and (iii) alter its approach to compensatory fees charged to servicers for unavoidable foreclosure delays. The FHFA received numerous other comment letters.
Fannie Mae Releases Standard Deed-in-Lieu of Foreclosure Requirements, Announces Other Servicing Policies
On November 28, Fannie Mae introduced new requirements for Fannie Mae Mortgage Release, Fannie Mae’s deed-in-lieu of foreclosure process. Servicing Guide Announcement SVC-2012-25 announced three exit options for borrowers under Mortgage Release: (i) immediate move, (ii) three-month transition with no rent payment, and (iii) 12-month lease with market rent payment. The new policy applies to mortgage loans evaluated for a Mortgage Release on or after March 1, 2013, though Fannie Mae encourages servicers to implement the policy changes earlier. The Announcement details Mortgage Release requirements, including borrower eligibility, documentation requirements, servicer duties and responsibilities, and mortgage insurer approval. The new requirements were developed in response to the FHFA’s directive to Fannie Mae and Freddie Mac to simplify and streamline the Mortgage Release processes, and they parallel those announced last week by Freddie Mac. SVC-2012-25 also updates certain short sale requirements originally addressed in SVC-2012-19, which are to be implemented immediately.
Also on November 28, Fannie Mae issued Servicing Guide Announcement SVC-2012-24, which, effective immediately, applies Servicing Guide terms and conditions regarding temporary suspension of foreclosure proceedings to all mortgage loans that have been referred to foreclosure prior to receipt of a complete Borrower Response Package, regardless of the length of the delinquency. The Announcement states that Fannie Mae approval is no longer required to postpone a foreclosure sale for a mortgage loan that is more than 12 months past due (as measured from the last paid installment date). Finally, on November 21, Fannie Mae issued Servicing Guide Announcement SVC-2012-23 to update the maximum foreclosure attorney fees allowed for certain states.
Fannie Mae and Freddie Mac Announce New Guidelines for Management of Law Firms
On November 9, Fannie Mae and Freddie Mac announced new, coordinated requirements with respect to the management of law firms for default servicing, bankruptcies, and related litigation. As described in Freddie Mac Bulletin 2012-25, effective June 1, 2013, servicers (i) will be permitted to choose their own attorneys, create their own processes for managing foreclosure processing, and maintain direct relationships with their law firms, (ii) will be required to establish procedures to manage and monitor all aspects of the law firm's performance and compliance with applicable requirements, and (iii) upon request, will be required to perform a due diligence review and provide Freddie Mac with the results. Fannie Mae Servicing Guide Announcement SVC-2012-22 similarly details new servicer requirements with regard to the use of outside law firms. Both Fannie Mae and Freddie Mac will accept and respond to servicer recommendations of law firms beginning March 1, 2013, and will begin conducting new firm training in April 2013. Law firms that are currently in the retained attorney network are not exempt from the new selection and retention processes.