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Financial Services Law Insights and Observations

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  • FHFA Announces New Refinance Offering for High LTV Borrowers; Extends HARP through September 2017

    Lending

    On August 25, FHFA announced that the GSEs will implement a new refinancing offering for borrowers having high LTVs who meet certain criteria. The new offering contains a number of similarities to the Home Affordable Refinance Program (HARP), including not subjecting eligible borrowers to a minimum credit score, not establishing a maximum debt-to-income ratio or maximum LTV, and often not requiring an appraisal. Dissimilarities from HARP include not imposing eligibility cut-off dates and allowing borrowers to use the offering more than once to refinance their mortgage. Borrowers will not have access to the new offering until October 2017. As such, the FHFA directed the GSEs to extend HARP through September 30, 2017, ensuring that “high LTV borrowers who are eligible for HARP will not be without a refinance option while the new refinance offering is being implemented."

    Freddie Mac Fannie Mae HAMP / HARP FHFA

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  • FHFA Extends Fannie and Freddie's Participation in HAMP and HARP

    Consumer Finance

    On May 8, FHFA Director Mel Watt spoke at the 22nd Annual Economic Summit, focusing on the agency’s conservatorship activities with Fannie Mae and Freddie Mac (GSEs). Most significantly, Director Watt announced that the agency is extending the GSEs’ participation in HAMP and HARP until the end of 2016. Since their 2009 inception, the two programs have relieved many borrowers of high monthly payments. HARP, allowing borrowers who regularly make their mortgage payments to refinance their loans and take advantage of low income rates, and HAMP, providing significant payment reductions tied to borrowers’ income, have prevented a number of foreclosures. Since HARP and HAMP were never intended to be permanent programs, this will be FHFA’s final extension of the GSEs’ participation. Looking forward, the agency plans to “consider how best to build on the lessons of HAMP for 2017 and beyond,” exploring possible streamlined modifications and refinance solutions for borrowers.

    Freddie Mac Fannie Mae HAMP / HARP FHFA

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  • FHFA Launches New HARP Outreach Efforts

    Lending

    On June 25, the FHFA announced that it is taking new steps to expand the reach of HARP. As part of that effort, FHFA Director Mel Watt will participate in a series of town hall-style events to discuss the benefits of HARP and encourage eligible borrowers to participate in the program. The FHFA also launched an interactive online map​ that provides the number of estimated borrowers eligible for HARP in every zip code, county, and metropolitan statistical area in the country.

    HAMP / HARP FHFA Refinance

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  • Treasury Department Opposes HARP Expansion, Use Of Eminent Domain

    Lending

    On January 22, Michael Stegman, Treasury Department Counselor for Housing Finance Policy stated in remarks to an industry conference that the Treasury Department opposes expansion of the Home Affordable Refinance Program (HARP) to include loans originated after the current May 31, 2009 cut-off date. Treasury believes that few loans originated after that date are underwater, and that expanding the eligibility date would only prolong market and investor uncertainties. Treasury also does not support efforts by some local jurisdictions to employ eminent domain to seize and restructure underwater mortgages, stating that the administration instead supports legislation to increase refinancing opportunities. Dr. Stegman also discussed housing finance reform generally—he expressed support for the ongoing Senate efforts to reform Fannie Mae and Freddie Mac, and indicated that the Treasury Department plans to facilitate reform of the private label securities sector by holding “a series of conversations with relevant regulators, market participants, and other stakeholders.”

    HAMP / HARP Department of Treasury Eminent Domain Housing Finance Reform

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  • FHFA Launches HARP Education Campaign

    Lending

    On September 23, the FHFA launched a nationwide campaign to educate borrowers about HARP. The FHFA explains that the campaign is designed to encourage homeowners who have been making their mortgage payments, but who owe more than their home is worth, to contact their current lender or any other mortgage lender offering HARP refinances to review their refinancing options. As part of this campaign, FHFA has launched a new website and is working with mortgage companies across the U.S. to help reach homeowners who may qualify.

    HAMP / HARP FHFA

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  • Federal Agencies Announce Two-Year HAMP Extension

    Lending

    On May 30, the FHFA announced that Fannie Mae and Freddie Mac will extend the Home Affordable Modification Program (HAMP) through December 31, 2015. Concurrently, the Treasury Department and HUD announced an extension of the HAMP deadline for non-Fannie Mae and Freddie Mac loans to harmonize with the FHFA extension. The programs were set to expire at the end of 2013. In addition, the FHFA extended from August 2015 through the end of 2015 its streamlined modification initiative.

    Freddie Mac Fannie Mae HUD HAMP / HARP FHFA

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  • New York Appeals Court Overturns Sanction Requiring Bank To Accept Terms of Trial Loan Modification

    Lending

    On May 1, the Supreme Court of the State of New York, Appellate Division, overturned a lower court’s order requiring a lender to modify a borrower’s loan agreement under the terms employed in the trial period as the penalty for failing to negotiate with the borrower in good faith during the required settlement conference. Wells Fargo Bank, N.A. v. Meyers, No. 34632/09, 2013 WL 1811781 (N.Y. Sup. Ct. App. Div. May 1, 2013). On appeal, the appellate court held that the HAMP trial agreement is not a proper agreement regarding the real property and cannot be enforced as an agreement. Moreover, the appellate court held that a court may not rewrite a contract that the parties freely entered into upon a finding that one of those parties failed to satisfy its obligation to negotiate in good faith during the settlement conference. Further, the court held that because the lender was not given notice that the trial court was considering such a remedy, the sanction violated the lender’s due process rights. The appellate court overturned the trial court’s order and remanded the case for further proceedings.

    HAMP / HARP

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  • FHFA Announces Two-Year HARP Extension

    Lending

    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.

    Freddie Mac Fannie Mae Mortgage Servicing HAMP / HARP FHFA

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  • Fannie Mae, Freddie Mac Announce Additional Storm Relief Measures

    Lending

    On November 9, Fannie Mae and Freddie Mac announced that effective immediately servicers can suspend for 90 days evictions and foreclosures involving borrowers affected by Hurricane Sandy in order to assess the borrowers’ situations. In addition, next week Fannie Mae and Freddie Mac will issue guidance to servicers to expand the options they can offer to homeowners impacted by the hurricane. Under the new Fannie Mae guidance, servicers will be authorized to (i) extend forbearance for up to 12 months, where appropriate, (ii) provide loan modifications, once the homeowner is able to resume monthly mortgage payments, (iii) waive any late payment charges, (iv) suspend credit reporting for any homeowner for whom relief is granted, and (v) delay the initiation of any foreclosure action to determine the condition of the property and the borrower’s employment and income status. Freddie Mac’s policy changes will authorize servicers to (i) automatically suspend for 90 days evictions and foreclosure sales for borrowers with homes secured by Freddie Mac owned-or guaranteed mortgages and located in eligible disaster areas, (ii) verbally grant 90-day forbearances to all borrowers in eligible disaster areas, including borrowers with mortgages modified under HAMP or who are currently in a HAMP or Standard Modification Trial Period Plan, and (iii) expedite the distribution of insurance proceeds on storm damage claims. Additionally, Freddie Mac will maintain pricing that was in place at the time of the storm for mortgages that are secured by homes in eligible disaster areas and delivered through Freddie Mac's bulk guarantor channel.

    Foreclosure Freddie Mac Fannie Mae Mortgage Servicing HAMP / HARP Disaster Relief Mortgages Mortgage Modification

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  • FHFA Decides Fannie Mae and Freddie Mac Will Not Offer Principal Forgiveness; Updates Other Borrower Assistance Efforts

    Lending

    On July 31, FHFA announced that it will not direct Fannie Mae and Freddie Mac to offer principal reduction assistance to troubled borrowers, concluding that a principal forgiveness policy does not “clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today.” The Treasury Department immediately objected, countering that FHFA’s cost concerns could be alleviated with Treasury assistance to pay for additional administrative implementation costs. With its announcement, FHFA released correspondence to members of Congress explaining FHFA’s decision and providing a detailed assessment of the principal forgiveness policy option. FHFA also reported that it is working with Fannie Mae and Freddie Mac on a series of other borrower assistance efforts including (i) an update to Freddie Mac's refinance program to align it with Fannie Mae’s policy for refinancing mortgages with loan-to-value ratios equal to or less than 80%, (ii) new requirements expected in September related to representations and warranties, which will shift the loan quality review closer to the time of loan origination, (iii) a single, aligned short sale program for Fannie Mae and Freddie Mac with more flexible terms, (iv) a new set of adjustments to guarantee fee pricing, expected to be announced in August and to take effect later in the year, and (v) closing on the first set of REO pilot transactions in August.

    Freddie Mac Fannie Mae Mortgage Servicing HAMP / HARP FHFA Department of Treasury

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