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Fannie Mae Releases Loan Performance Data
On April 30, Fannie Mae released loan performance data on a portion of its single-family mortgage loans, which includes a subset of Fannie Mae’s 30-year, fully amortizing, full documentation, single-family, conventional fixed-rate mortgages. The initial population is comprised of loans acquired between January 1, 2000 and March 31, 2012 with corresponding monthly performance data as of December 31, 2012. The loan performance data is divided into two files for each acquisition quarter: (i) the “Acquisition file” includes static data at the time of a mortgage loan’s origination and delivery to Fannie Mae; and (ii) the “Performance” file contains monthly performance data of each mortgage loan from the time of Fannie Mae’s acquisition up until its current status as of the previous quarter, until the mortgage loan has been liquidated, or until it has become 180 days or more delinquent. Fannie Mae expects to update the acquisitions data each quarter to include a new quarter of acquired mortgage loans as of the prior year in addition to updated performance data as of the previous quarter. Certain data attributes also will be updated to reflect new terms, if applicable, as a result of a modification.
HUD Updates FHA Flood Zone Guidance, Issues Lender Insurance Program Guidance
On April 11, HUD issued Mortgagee Letter 2013-11, which amends prior guidance related to the origination and servicing of FHA-insured loans in declared disaster areas. The letter stresses that prior guidance requiring a moratorium on foreclosures of properties in disaster areas for 90 days applies to the initiation of foreclosures and foreclosures already in process. The letter outlines steps servicers should take to determine the appropriate course of action for each borrower, including a review of individual facts and circumstances to determine whether to offer forbearance and other loss mitigation alternatives. The letter details such loss mitigation options and servicer requirements. The policy changes took effect immediately.
On April 9, HUD issued Mortgagee Letter 2013-10 to explain enhancements to the Lender Insurance program that allows high-performing mortgagees to conduct pre-endorsement reviews and insure loans. Those enhancements were implemented by a January 2012 HUD rule. The letter summarizes changes made by that rule, reviews mortgagee eligibility requirements for participation in the Lender Insurance program, and outlines the initial application process. Among other things, the letter also discusses the conditions under which a mortgagee’s lender insurance authority can be terminated or suspended and explains how mortgages with such authority are subject to a revised indemnification policy.
State Law Update: Tennessee, Kansas Update Mortgage-Related Provisions
Tennessee Makes Minor Changes to Mortgage Licensing Rules. On April 11, Tennessee enacted HB 160, a bill that makes certain minor changes to the state’s mortgage licensing law. The bill removes current licensing exemptions for (i) a person who owns a vacant tract of real property which the person subsequently subdivides and sells the tracts, regardless of the number of individual tracts sold and the number of ultimate purchasers of such tracts of real property, and (ii) a person or agent engaged solely in commercial real estate lending or who provides financing on property which is not intended to be owner-occupied by the person receiving the financing. The bill continues to allow licensed real estate brokers to include in any contract, mortgage terms agreed upon by the parties without having to obtain mortgage licenses, but clarifies that such communications cannot include the offering or negotiating of any terms of a residential mortgage loan. The changes took effect immediately.
Kansas Increases Mortgage Interest Rate Cap. On April 4, Kansas enacted SB 52, which increases the maximum annual interest rate for certain mortgages from 1.5 percentage points to no more than 3.5 percentage points above a specified monthly floating rate set by Freddie Mac.
CFPB Publishes QM Rule Compliance Guide
On April 10, the CFPB published a guide to help small entities comply with its ability-to-repay/qualified mortgage rule. As required by the Small Business Regulatory Enforcement Fairness Act, the guide highlights issues for small creditors to consider when implementing the rule. More broadly, the CFPB believes the guide provides an “easy-to-use” summary of the rule for all creditors, as well as secondary market participants, software providers, and other vendors and creditor business partners. However, the CFPB notes that the guide is not a substitute for the rule and the Official Interpretations, and the guide does not consider other federal or state laws that may apply to the origination of mortgage loans. The CFPB also has prepared a chart that compares the general ability-to-repay requirements with requirements for originating qualified mortgages.
FDIC Announces Teleconference Series on CFPB Mortgage Rules
On April 9, the FDIC announced a series of nationwide banker teleconferences focused on the CFPB’s final mortgage rules. The first teleconference call is scheduled for May 2, 2013 and will focus on the ability-to-repay/qualified mortgage rule, the new escrow requirements, and certain aspects of the loan originator compensation rule. The second call is scheduled for May 15, 2013 and will address the CFPB’s final rule on mortgage servicing. The final call is scheduled for June 6, 2013 and will focus on the loan originator compensation rule and HOEPA amendments. The sessions are free, but individuals are required to register.
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.
CSBS Urges CFPB to Adopt Rural Designation Petition Process
On April 2, the CSBS released a letter it sent to encourage the CFPB to adopt an additional procedural mechanism for the CFPB to utilize when determining whether an area should be defined as “rural.” The CSBS explains that the Dodd-Frank Act confers Qualified Mortgage benefits on balloon loans if they are made in rural or underserved areas and that the CFPB has elected to utilize the USDA Economic Research Service’s Urban Influence Codes as the basis of their definition of “rural.” The letter identifies inconsistencies with the existing rural classification systems, and suggests that the CFPB adopt a petition process whereby institutions can seek a determination that a specific area be considered rural for purposes of certain Truth in Lending rural requirements.
HUD Announces Reverse Mortgage Program Changes, Increases Mortgage Insurance Premiums, Alters Underwriting Requirements
On January 30, HUD announced that for FHA case numbers assigned on or after April 1, 2013, FHA will use a consolidated pricing option for its home equity conversion mortgages, as explained in more detail in Mortgagee Letter 2013-01. Separately, HUD also announced that effective April 1, 2013, the mortgage insurance premiums for most new mortgages will increase by 10 basis points, and by 5 basis points for jumbo mortgages. To further support the stability of the Mutual Mortgage Insurance Fund, FHA also issued Mortgagee Letter 2013-04 to require most borrowers to continue paying annual premiums for the life of their mortgage loan, reversing a policy adopted in 2001 under which FHA cancelled premium requirements on loans when the outstanding principal balance reached 78 percent of the original principal balance. FHA also will (i) require lenders to manually underwrite loans for which borrowers have a decision credit score below 620 and a total debt-to-income ratio greater than 43 percent, (ii) increase from 3.5 to 5 percent the minimum down payment for jumbo loans, and (iii) increase its enforcement for FHA-approved lenders with regard to aggressive marketing to borrowers with previous foreclosures. Separately, HUD issued Mortgagee Letter 2013-02, which updates the certification language for all late endorsement requests for reverse mortgages. Finally, through Mortgagee Letter 2013-03, HUD extended to March 15, 2013 the date by which lenders must begin to assess borrowers in default under a new loss mitigation priority order and policies, as outlined in Mortgagee Letter 2012-22.
CFPB Plans Release of Mortgage Loan Originator Rule
On January 18, the CFPB announced that it will release a final rule regarding mortgage loan originator compensation and qualifications on Sunday, January 20. According to its press release, the rule will (i) prohibit steering incentives, (ii) prohibit “dual compensation,” and (iii) set qualification and screening standards for loan originators, but it will not require, as proposed, that mortgage loan originators make available a loan option with no upfront discount points or origination fees, if they were making available one with upfront discount points or origination fees. The press release states that while the majority of the loan originator rule will take effect in January 2014, certain provisions related to mandatory arbitration restrictions will take effect in June 2013. BuckleySandler will review the rule once it is released and provide additional analysis.
FDIC Approves Joint-Agency Appraisal Rule for Higher-Risk Mortgages
On January 18, the Federal Reserve Board, the OCC, the FDIC, the NCUA, the FHFA, and the CFPB issued a final rule to implement Dodd-Frank Act amendments to TILA that require creditors to meet certain appraisal conditions before making a higher-risk loan. The rule uses the term “higher-priced mortgage loan,” which covers: (i) a loan for which the APR exceeds the average prime offer rate (an average market rate) by 1.5 percent for a first-lien loan, (ii) 2.5 percent for a first-lien jumbo loan, and (iii) 3.5 percent for a subordinate-lien loan. For such loans, the final rule requires that a creditor obtain a written appraisal from a certified or licensed appraiser that is based on a physical property visit of the interior of the property. During the application process, the creditor must issue a disclosure stating (i) the purpose of the appraisal, (ii) that the creditor will provide the applicant a copy of any written appraisal, and (iii) that the applicant may choose to have a separate appraisal conducted at his or her own expense. The creditor must provide the borrower with a free copy of any written appraisals at least three business days before closing. Additional appraisal requirements apply under certain circumstances. As did the proposed rule, and consistent with the statute, the final rule exempts loans that are considered “qualified mortgages,” as recently defined by the CFPB, as well as reverse mortgages, loans secured by manufactured homes, and certain other loans.
On the same day, the CFPB issued a related rule to implement a Dodd-Frank Act provision that adds similar appraisal requirements to ECOA. The final rule generally mirrors the rule as proposed and requires that for any loan to be secured by a first lien on a dwelling, a creditor must (i) notify applicants within three business days of receiving an application of their right to receive a free copy of written appraisals and valuations and (ii) provide applicants a free copy of all written appraisals and valuations promptly after receiving them, but in no case later than three business days prior to closing on the mortgage. The rule prohibits creditors from charging additional fees for providing a copy of written appraisals and valuations, and allows applicants to waive the three day requirement, provided a copy of all written appraisals and valuations are provided at or prior to closing. Together, the revisions to TILA and ECOA, as implemented by these rules, require creditors to provide two appraisal disclosures to consumers applying for a higher-risk loan secured by a first lien on a borrower’s principal dwelling. The rules take effect January 18, 2014.