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Fannie Mae Updates Short Sale Requirements, Issues Servicing Clarifications and Reminders
On June 19, Fannie Mae issued Servicing Guide Announcement SVC-2013-13, which describes policy changes related to its standard short sale requirements, including (i) the multiple listing service requirements, (ii) credit report seasoning, and (iii) streamlined documentation requirements for transition from standard short sale to standard deed-in-lieu of foreclosure. With regard to standard deeds-in-lieu of foreclosure, the announcement addresses (i) property inspection requirements, (ii) REOgram® and subordinate lien release submission requirements, and (iii) title insurance requirements. In a Servicing Notice issued the same day, Fannie Mae clarified its policies related to (i) “full file” reporting to credit repositories, (ii) certain income documentation requirements, and (iii) liquidation reporting requirements for standard short sales and deeds-in-lieu of foreclosure.
Connecticut Expands Foreclosure Mediation Program
On June 18, Connecticut enacted HB 6355, which expands the state’s existing foreclosure mediation program and adds new mortgagee requirements. Specifically, the bill extends the foreclosure mediation program to (i) cover the disposition of property through means other than foreclosure, including short sales and deeds-in-lieu of foreclosure, and (ii) foreclosure actions with return dates of July 1, 2008 through June 30, 2009. The bill also, among other things, (i) establishes a pre-mediation process, (ii) requires mortgagees to provide to a borrower a complete financial package in connection with a request for a foreclosure alternative and provide to a mediator and the borrower an account history and related information after receiving notification that the case has been assigned to mediation, and (iii) establishes expedited foreclosure procedures for vacant and abandoned properties. The bill becomes effective on July 15, 2013.
Massachusetts Finalizes Foreclosure Regulations
Last week, the Massachusetts Division of Banks adopted revised foreclosure and mortgage modification regulations. The amendments implement a 2012 law that makes it harder to foreclose in that state, including by creating a pre-foreclosure modification notice requirement for creditors. The amended regulations (i) establish the processes for a borrower and creditor with regard to the borrower’s right to request a loan modification, (ii) establish the actions that constitute a borrower’s good faith response to a creditor’s notice of the right to request a loan modification, (iii) define good faith efforts by creditors to avoid foreclosure, and (iv) establish safe harbors for creditors that comply with the loan modification process. The new regulations take effect on June 21, 2013 and must be implemented by September 18, 2013.
Freddie Mac Announces Numerous Servicing Requirements
On June 14, Freddie Mac issued Bulletin 2013-10 to announce servicing policy changes with regard to Hurricane Sandy, foreclosure and alternatives to foreclosure, and other servicing issues. The Bulletin announces that servicers must submit any Hurricane Sandy exterior property inspection reimbursements by September 16, 2013, using a new template included in the Bulletin. Regarding foreclosures, the Bulletin, among other things, (i) sets the parameters under which servicers may utilize bulk trial foreclosures as an alternative foreclosure process in Florida, (ii) updates requirements for requests related to the preservation of deficiency rights, (iii) revises FICO score seasoning requirements for standard short sales and deeds-in-lieu of foreclosure (DILs), (iv) revises property inspection and closing requirements for DILs and adds a MLS requirement for short sales, and (v) removes, in most instances, the requirement that a servicer obtain a copy of a borrower’s tax transcript or most recent signed federal income tax return to be evaluated for HAMP. Among numerous other servicing policy updates, the Bulletin also (i) specifies that Freddie Mac does not reimburse for credit reports obtained in servicing activities, and (ii) requires servicers to notify Freddie Mac within 24 hours of blocking or rejecting a mortgage or mortgage transaction based on a valid match to the OFAC list of Specially Designated Nationals and Blocked Persons.
Fannie Mae Amends Bifurcated Mortgage Loan Obligations, Announces Miscellaneous Servicing Guide Updates
On June 12, Fannie Mae issued two Servicing Guide Announcements relating to bifurcated mortgages, mortgage payments, valuations, and processing IRS forms. Announcement SVC 2013-12 clarifies and adds numerous obligations for servicers and responsible parties in connection with bifurcated mortgage loans – loans or properties for which the current servicer is not the responsible party for the selling representations and warranties and/or for the prior servicing responsibilities or liabilities. The announcement addresses, among other topics, (i) issuance of repurchase requests and statements, requests for a make whole payment, or requests for indemnification, (ii) remittance of bifurcated repurchase price and appeal process, (iii) hiring of a servicer and a servicer’s failure to comply, (iv) mortgage loan files, record retention, and release of records, and (v) disputes between responsible parties and servicers. All of the policy changes in 2013-12 take effect on September 1, 2013. Announcement SVC 2013-11 describes policy changes regarding (i) processing and applying mortgage loan payments, (ii) obtaining a property valuation for Fannie Mae conventional mortgage loan modifications, and (iii) processing IRS Form 4506-T and Form 4506T-EZ. While servicers are encouraged to implement the changes noted in 2013-11 immediately, servicers are not required to do so until October 1, 2013.
Nevada Enacts Homeowner's Bill of Rights
On June 3, Nevada enacted a Homeowner’s Bill of Rights, SB 321, to establish protections from foreclosure for owner-occupied property securing residential mortgage loans. The Nevada bill, among other things, (i) requires that at least 30 calendar days before recording pre-foreclosure documents or commencing a judicial foreclosure action and at least 30 calendar days after a borrower’s default, the mortgage servicer, mortgagee or beneficiary of the deed of trust must provide to the borrower certain information concerning the borrower’s account, the available foreclosure prevention alternatives, and a statement of the facts supporting the right of the mortgagee or beneficiary to foreclose, (ii) requires that an institution contact, or attempt to contact, the borrower before filing pre-foreclosure documents or commencing a foreclosure, (iii) prohibits dual tracking, (iv) establishes “single point of contact” rules, and (v) allows borrowers in a judicial foreclosure action to elect to participate in a state foreclosure mediation program. These new requirements apply to notices of default and elections to sell that are recorded on or after October 1, 2013. The bill exempts institutions that foreclosed on 100 or fewer owner-occupied homes in the preceding annual reporting period, as established by their primary regulator.
Florida Enacts Fast-Track Foreclosure Bill
On June 7, Florida enacted HB 87 to immediately expedite the state’s judicial foreclosure process, including with regard to pending cases. The bill amends the state’s alternative foreclosure procedure to, among other things, (i) allow any lienholder, not only the mortgagee, to initiate the procedure, and (ii) establish new fast-track court procedures. The bill also (i) reduces the statute of limitations for deficiency judgments on a foreclosure action from five years to one year, (ii) requires the foreclosing party to provide information upon case filing regarding a lost, destroyed, or stolen promissory note, (iii) defines “adequate protections” in cases where there is a lost, destroyed, or stolen note, and (iv) adds protections for purchasers of property at a foreclosure sale. The bill took effect immediately.
CFPB Publishes Additional Mortgage Rule Compliance Guides, Launches Mortgage Rule Implementation Web Page
On June 7, the CFPB published a loan originator rule compliance guide and a mortgage servicing rules compliance guide. As with other prior guides it has released, the CFPB cautioned that the guides are not substitutes for the rules and the Official Interpretations, and that the guides do not consider other federal or state laws that may apply to the origination or servicing of mortgage loans. On June 13, the CFPB announced a new web page that provides, in one location, the various compliance guides and other mortgage rule implementation materials prepared by the CFPB.
Oregon Supreme Court Rulings Allow Nonjudicial Foreclosures to Proceed
On June 6, the Oregon Supreme Court issued a pair of rulings resolving issues around the role of MERS in the non-judicial foreclosure process and allowing such foreclosures to move forward. In Brandrup v. ReconTrust Company, N. A. S060281, slip op. (Oregon Jun. 6, 2013) and Niday v. GMAC Mortgage LLC, SC S060655, 2013 WL 2446524 (Oregon Jun. 6, 2013), the court answered a series of certified questions related to the role of an electronic mortgage registry as the beneficiary listed on trust deeds and applied those answers to the appeal of a state foreclosure action. The court held that, under the Oregon Trust Deed Act: (i) a mortgage registry that is neither a lender nor successor to a lender may not be a beneficiary of a trust deed; (ii) a mortgage registry is not eligible to serve as beneficiary where the trust deed provides that the registry holds only the legal title to the interests granted by the borrower, but, if necessary to comply with law or custom, the registry has the right to exercise any or all of those interests; (iii) assignments of a trust deed that result from the transfer of the secured obligation are not required to be recorded; and (iv) a mortgage registry cannot hold and transfer legal title to a trust deed as nominee for the lender, after the note secured by the trust deed is transferred from the lender to a successor or series of successors. The court also explained that, “even if MERS lacks authority to act as the trust deed's beneficiary, it may have authority to act on behalf of the beneficiary if it can demonstrate that it has an agency relationship with the beneficiary and that the agency agreement is sufficiently expansive.” The court added that this would apply equally to the issue of the registry’s authority to foreclose the trust deed. Effectively allowing nonjudicial foreclosures involving MERS as the beneficiary on trust deeds to proceed, the Court stated that “[i]n either case, MERS' authority to act as the beneficiary's agent depends on who succeeded to the lender's rights, whether those persons manifested consent that MERS act on their behalf and subject to their control, and whether MERS has agreed to so act.”
Oregon Expands Foreclosure Mediation Program
On June 4, Oregon enacted SB 558, which creates a foreclosure mediation program for judicial foreclosures. In 2012, Oregon enacted a law that required for nonjudicial foreclosures that a beneficiary (i) enter into mediation with a grantor for the purpose of negotiating a foreclosure avoidance measure, and (ii) notify a grantor if they are not eligible for any foreclosure avoidance measure or if the grantor has not complied with the terms of a foreclosure avoidance measure. The new law expands that program to cover judicial foreclosures and makes changes to the structure of the overall mediation program.