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Financial Services Law Insights and Observations

Fannie Mae Announces Private Transfer Fee Covenant Policy, Revises Loan Modification Agreement

Fannie Mae Mortgage Origination Mortgage Servicing RMBS

Lending

On June 19, Fannie Mae issued the Selling Guide Announcement SEL-2012-05, which states that effective July 12, 2012, Fannie Mae will not purchase or securitize mortgages on properties encumbered by private transfer fee covenants that were created on or after February 8, 2011, with some exceptions. The policy follows a rule finalized by FHFA on March 16, 2012 that prohibits Fannie Mae and Freddie Mac from purchasing or investing in any properties or securities backed by such mortgages. In light of the new policy, mortgages on affected properties must be purchased by Fannie Mae as whole loans no later than July 13, 2012, or must be delivered no later than July 13, 2012 into MBS pools with issue dates of July 1, 2012 or later.  The policy requires lenders to establish their own policies and procedures to ensure compliance. On June 20, Fannie Mae published a Servicing Notice to advise servicers to begin using a new Loan Modification Agreement that was updated to include a line for the date of the lender’s signature. The new form must be used for all Trial Period Plans beginning on or after September 1, 2012.