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  • Lehman seeks to add indemnity claims against mortgage sellers

    Courts

    On October 1, Lehman Brothers Holdings Inc., the firm’s plan administrator, and certain subsidiaries moved to increase the indemnification claims brought against mortgage sellers, seeking to include obligations resulting from more than $2.45 billion in residential mortgage-backed securities (RMBS) trust claims. Lehman’s prior claims addressed indemnification claims held against roughly 3,000 counterparties involving more than 11,000 mortgage loans related to litigation settlements reached with Fannie Mae and Freddie Mac. Lehman now seeks to increase the indemnification claims to include claims from additional settlements reached earlier this year for an additional $2.45 billion in RMBS allowed claims. The proposed amended order does not seek to materially change existing procedures, but only seeks to add claims which had not accrued when the original order was entered pursuant to Federal Rule of Bankruptcy Procedure 9024. Lehman asserts the amendment is appropriate under Bankruptcy Rule 7015 and would benefit the creditors by “expediting the resolution and recovery on account of such claims and by increasing distributions to creditors.”

    Courts Bankruptcy Indemnity Claims Fannie Mae Freddie Mac Mortgages RMBS

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  • Freddie Mac announces temporary selling requirements related to Hurricane Florence

    Federal Issues

    On October 3, Freddie Mac issued Bulletin 2018-17 (Bulletin) to announce temporary revisions to its selling requirements for certain mortgages and borrowers impacted by Hurricane Florence. The Bulletin also reminds servicers that the previously announced temporary reimbursement process for property inspections conducted on or after August 29, 2017, of mortgaged premises located in “Eligible Disaster Areas,” remains in effect. Among other things, the temporary selling requirements: (i) provide that sellers who meet certain requirements will be reimbursed for property inspections completed on and before March 14, 2019; (ii) specify age of documentation requirements that will remain in effect for six months for certain mortgages and borrowers; (iii) provide specific collateral requirements and guidance, including sellers’ responsibilities with respect to property damage, appraisal waivers, and collateral representation and warranty relief—along with notice of updates to Loan Selling Advisor, Loan Quality Advisor, and Loan Product Advisor. The Bulletin notes that the Single-Family Seller/Servicer Guide will not be updated to include the temporary requirements and advises sellers and servicers that they must retain a copy of the Bulletin to ensure compliance with these requirements.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues Freddie Mac Selling Guide Disaster Relief Mortgages

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  • FHFA issues guidance for third-party provider relationships

    Federal Issues

    On September 28, FHFA released Advisory Bulletin AB 2018-08, which provides guidance to Fannie Mae and Freddie Mac, the Federal Home Loan Banks, and the Office of Finance (regulated entities) on the evaluation and management of risks associated with third-party provider relationships. (FHFA defines a third-party provider relationship as a “business arrangement between a regulated entity and another entity that provides a product or service.”)

    The bulletin sets forth the structure and describes the features of the third-party provider risk management programs that FHFA expects regulated entities to establish. With respect to governance, the bulletin recommends such programs address: (i) the responsibilities of the board and senior management; (ii) policies, procedures, and internal standards; and (iii) the implementation of a reporting system to ensure management and the board are adequately informed. The bulletin also specifies that an effective program include policies and procedures that cover each of the following phases of a third-party provider relationship life cycle: (i) Risk Assessment; (ii) Due Diligence in Third-Party Provider Selection; (iii) Contract Negotiation; (iv) Ongoing Monitoring; and (v) Termination. The bulletin suggests that regulated entities should ensure that their third-party risk management corresponds with the level of risk and complexity of their third-party relationships and notes that not every aspect of the bulletin may apply to every relationship.

    Federal Issues FHFA Third-Party Governance Fannie Mae Freddie Mac FHLB

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  • Fannie Mae and Freddie Mac issue servicing updates

    Federal Issues

    On September 26, Fannie Mae issued SVC-2018-07, which includes changes to the foreclosure and third party sale program. In order to encourage more third-party foreclosure sales, Fannie Mae is now requiring the use of Fannie Mae vendors for foreclosure sale marketing services in certain jurisdictions and encouraging the use of Fannie Mae vendors for public foreclosure auctions in certain jurisdictions. Servicers must implement the requirements for all sales scheduled on or after January 1, 2019. Additionally, effective October 28, Fannie Mae will now allow servicers to accept payment changes with future effective dates.

    Freddie Mac released Guide Bulletin 2018-16, which announces new and revised requirements to facilitate a secondary market for mortgages in support of affordable housing preservation and rural housing, including (i) allowing the sale of Community Land Trust Mortgages to Freddie Mac (effective November 5); (ii) updating requirements for mortgages secured by properties subject to resale restrictions (effective November 5); and (iii) revising the Home Possible mortgage requirements to permit sweat equity as a source of funds to cover the entire amount of cash to close for the down payment and/or closing costs (effective September 26).

    Federal Issues Fannie Mae Freddie Mac Servicing Guide Mortgages Mortgage Servicing Foreclosure

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  • Freddie Mac releases various selling updates in Guide Bulletin 2018-15

    Federal Issues

    On September 19, Freddie Mac released Guide Bulletin 2018-15, which announces selling updates, including revisions to requirements for authorized user accounts and super conforming mortgages. Specifically, when reviewing a borrower’s credit report for tradelines where a borrower is listed as an authorized user but is not the primary account holder, sellers only have to meet additional documentation requirements if they receive a feedback message containing further instructions. These changes are effective for submissions and resubmissions made on or after October 4. The Bulletin also states that effective for mortgages settled on or after December 19, Freddie Mac will no longer require the manual underwriting of super conforming mortgages with original loan amounts greater than $1 million.

    Additionally, starting October 15, enhancements to the automated cash specified payups process will take effect, which will, among other things, “include cash payups for fixed-rate [m]ortgages with certain specified loan attributes.” The Bulletin also eliminates the requirement for sellers to obtain additional documentation or evaluate the income or loss from secondary self-employment when none of this income is used for mortgage qualification purposes. Furthermore, as of September 9, as previously covered in InfoBytes, Bulletin 2018-13 updated the required time frame for evaluating credit report inquiries; it has been reduced from 120 days to 90 days.

    Federal Issues Freddie Mac Mortgages Credit Report Consumer Finance

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  • Fannie Mae, Freddie Mac update servicing guides

    Federal Issues

    On September 18, Fannie Mae issued SVC-2018-06, which updates the Servicing Guide to include, among other things, changes to reduce servicer costs and risks and simplify certain loan modification options. Updates include: (i) relieving servicers of the responsibility for paying property taxes and ground rents on acquired properties, effective October 1, and co-op fees on properties acquired on or after October 1; (ii) effective immediately, removing the requirement for servicers to receive Fannie Mae approval when modifying a Texas Constitution Section 50(a)(6) loan under the Cap and Extend Modification for Disaster Relief policy (does not apply to reverse mortgages); (iii) clarifying servicing and subservicing transfer requirements, effectively immediately (iv) revising evaluation notices and solicitation letters, in alignment with Freddie Mac (described below), that take effect immediately but must be implemented by January 1, 2019; (v) adjusting maximum allowable foreclosure attorney fees for certain loans secured by properties in New Mexico and Hawaii for matters active as of September 18; and (vi) consolidating and aligning policies related to project liability and fidelity insurance to be implemented no later than January 1, 2019.

    On the same day, Freddie Mac released Guide Bulletin 2018-14 announcing, among other things, servicing updates concerning (i) revised borrower evaluation notices and solicitation letters that take effect immediately but must be implemented by January 1, 2019; (ii) a new temporary servicer reimbursement process effective for property inspections related to insurance loss settlements conducted on or after September 1; (iii) changes to the Servicer Success Scorecard, effective July 1, 2019; and (iv) reporting requirements for third-party foreclosure sale redemptions, effective December 1.

    Federal Issues Fannie Mae Freddie Mac Mortgage Servicing Mortgages

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  • Freddie Mac releases Guide Bulletin with various selling updates

    Federal Issues

    On August 29, Freddie Mac released Guide Bulletin 2018-13, which announces selling updates, including the consolidation of Freddie Mac’s “Home Possible” and “Home Possible Advantage” mortgage programs into a single offering. The Bulletin compares the previous requirements of both programs with the new requirements of the consolidated program, which now allows non-occupant borrowers to be eligible for the program with a loan-to-value ratio less than or equal to 95%. The changes to the revised “Home Possible” mortgage program are effective October 29.

    The Bulletin also updates several mortgage eligibility and credit underwriting requirements, including (i) student loan debt payment calculations; (ii) cash back requirements for “no cash-out” refinance mortgages; and (iii) timelines for evaluating credit report inquiries. Additionally, the Bulletin provides an update to the requirements for property, flood, liability and fidelity or employee dishonesty insurance for condominium projects. 

     

    Federal Issues Freddie Mac Selling Guide Mortgages LTV Ratio

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  • 8th Circuit rules Fannie Mae, Freddie Mac net worth sweep payments acceptable under FHFA statutory authority

    Courts

    On August 23, the U.S. Court of Appeals for the 8th Circuit affirmed a lower court’s dismissal of claims brought by shareholders of Fannie Mae and Freddie Mac (GSEs) against the GSEs’ conservator, the Federal Housing Finance Agency (FHFA), alleging that FHFA exceeded its powers under the Housing and Economic Recovery Act (HERA) and “acted arbitrarily and capriciously” when it entered an agreement with the Treasury Department requiring the GSEs to pay their entire net worth, minus a small buffer, as dividends to the Treasury every quarter.  In so holding, the 8th Circuit joined the 5th, 6th, 7th, and D.C. Circuits, each of which has previously “rejected materially identical arguments” presented by other GSE shareholders. (See previous InfoBytes coverage on the 5th Circuit decision here.) The shareholders sought an injunction to set aside the so-called “net worth sweep,” asserting that “HERA’s limitation on judicial review does not apply when FHFA exceeds its statutory powers under the Act . . . [and] that the net worth sweep exceeds, and is antithetical to, FHFA’s statutory powers.” However, the appellate court agreed with the lower court and found, among other things, the net worth sweep payments to be acceptable because HERA “grant[s] FHFA broad discretion in its management and operation of Fannie and Freddie” and permits, but does not require, the agency “to preserve and conserve Fannie’s and Freddie’s assets and to return [them] to private operation.”  The court also noted that HERA “authorize[d] FHFA to act ‘in the best interests’ of either Fannie and Freddie or itself,” thus affording FHFA more discretion than common law conservators.   Finally, the appellate court held that HERA’s anti-injunction provision, which states that “no court may take any action to restrain or affect the exercise of powers or functions of the [FHFA] as a conservator or a receiver,” also precludes enjoining the Treasury Department from participating in the net worth sweep because doing so would “restrain or affect” FHFA.

    Courts Appellate Eighth Circuit GSE Fannie Mae Freddie Mac FHFA Single-Director Structure

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  • FHFA reports results of Fannie Mae, Freddie Mac annual stress tests

    Federal Issues

    On August 7, the Federal Housing Finance Agency (FHFA) published a report providing the results of the fifth annual stress tests conducted by government-sponsored enterprises Fannie Mae and Freddie Mac (GSEs). According to the report, Dodd-Frank Act Stress Tests Results – Severely Adverse Scenario—which provides modeled projections on possible ranges of future financial results and does not define the entirety of possible outcomes—the GSEs will need to draw between $42.1 billion and $77.6 billion in incremental Treasury aid under a “severely adverse” economic crisis, depending on how deferred tax assets are treated. The losses would leave $176.5 billion to $212 billion available to the companies under their current funding commitment agreements. Notably, the projected bailout maximum is lower this year than FHFA reported last year, which ranged between $34.8 billion and $99.6 billion.

    Federal Issues Lending Mortgages GSE Fannie Mae Freddie Mac Stress Test Dodd-Frank FHFA

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  • FHFA extends comment deadline for proposed rule on capital requirements for Freddie and Fannie

    Federal Issues

    On July 31, the Federal Housing Finance Agency announced a 60-day extension on the public comment period for a proposed rule that would implement a new regulatory capital framework for Freddie Mac and Fannie Mae. Among other things, the proposed rule would implement: (i) a new framework for risk-based capital requirements; and (ii) two alternative approaches to setting minimum leverage capital requirements. (Previously covered by InfoBytes here). The previous deadline for comments was September 17, and the deadline is now November 16.

    Federal Issues FHFA Fannie Mae Freddie Mac GSE Capital Requirements

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