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Earlier this fall, the HUD Office of Inspector General (HUD-OIG) published an annual report, which examines top management challenges facing the agency in 2019 and beyond. According to HUD-OIG, the six top challenges are a result of “critical unaddressed internal or external risks” that impede the success of HUD’s programs. Identified challenges impacting HUD’s performance relate to (i) the availability of safe, affordable housing; (ii) the ability to protect FHA’s mortgage insurance funds due to, among other things, a lack of sufficient safeguards, losses due to home equity conversion mortgages, increases in Ginnie Mae’s nonbank issuers, and emerging digital mortgage risks attributed to technology and information security problems; (iii) the inability to implement and institute adequate monitoring and oversight of its operations and program participants; (iv) identified inefficiencies in administering disaster recovery assistance; (v) a failure to modernize technology and properly oversee the information technology infrastructure, which leaves the agency vulnerable to data breaches; and (vi) the ability to institute sound financial management governance, internal controls, and systems due to a “lack of strong, consistent leadership over an extended period.” HUD-OIG states it will continue to identify challenges and assist in implementing solutions to remediate weaknesses.
On November 13, the OCC, Fannie Mae, Freddie Mac, and HUD issued disaster relief guidance related to the California wildfires. The OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by wildfires and high winds “for as long as deemed necessary for bank operation or public safety.” In issuing the proclamation, the OCC noted that it expects that only those bank offices directly affected by potentially unsafe conditions will close and that they should make every effort to reopen as quickly as possible to address the banking needs of their customers. The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on natural disasters and other emergency conditions.
Fannie Mae reminded servicers of available mortgage assistance options for homeowners impacted by the wildfires: (i) qualifying homeowners are eligible to stop making mortgage payments for up to 12 months without incurring late fees and without having delinquencies reported to the credit bureaus; (ii) servicers may immediately suspend or reduce mortgage payments for up to 90 days without any contact with homeowners believed to have been affected by a disaster; and (iii) servicers must suspend foreclosures and other legal proceedings for homeowners believed to be impacted by a disaster. Freddie Mac similarly reminded servicers of these mortgage relief options.
HUD announced an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is further making FHA insurance available to those victims whose homes were destroyed or severely damaged.
Find continuing InfoBytes coverage on disaster relief here.
On October 22, the Federal Housing Administration (FHA) issued Mortgagee Letter 2018-08, streamlining documentation requirements for Home Equity Conversion Mortgage (HECM) servicers when assigning FHA-insured reverse mortgages to HUD for claims payments. Effective immediately, servicers may now submit alternative supporting documentation, such as (i) documentation from a current hazard insurance provider in lieu of a declaration page; and (ii) alternative evidence of a borrower’s death, such as an obituary or healthcare documents in lieu of a death certificate. Servicers must now also submit evidence that any mobile home is “real property” under the laws of the particular state for which the home is located. FHA reminds servicers that claims for insurance benefits must be filed within 60 calendar days after receiving preliminary title approval, and notes that servicers must now provide a detailed explanation of all pre-due and payable corporate advances in the compliance package, including the date of the disbursement, the expense that was paid, and any information related to received repayments. According to a FHA’s press release, streamlining the requirements and reducing the documentation burden will help accelerate the claim payments process for servicers.
On August 20, 17 state Attorneys General in a comment letter urged HUD to not make any changes to its 2013 Disparate Impact Regulation (regulation), which implements the Fair Housing Act’s disparate impact standard, as well as the 2016 Application of the Fair Housing Act’s Discriminatory Effects Standard to Insurance (supplement). The comment letter responded to HUD’s June advance notice of proposed rulemaking (ANPR), which sought comments on whether the 2013 regulation and the 2016 supplement are consistent with the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Covered by a Buckley Sandler Special Alert.)
In the letter, the Attorneys General state that the regulation “strikes the proper balance between promoting an integrated society and protecting housing providers from unmeritorious discrimination claims” and is “entirely consistent” with the Supreme Court decision. The letter cites to multiple federal and state court decisions, which have held that the regulation is “‘adopted’ by, or consistent with, the Supreme Court decision” and emphasizes that, to their awareness, no court has held the regulation to be inconsistent. Conversely, even if the Supreme Court decision left room for revisions to the regulation, the letter notes that the issues of segregation and discrimination in the housing and lending market have not dissipated in the five years since the regulation was finalized and therefore, no revisions are warranted. Lastly, among other points, the Attorneys General conclude that any revisions would “reduce clarity and add uncertainty because any revision would likely fail to rely on the half century of disparate impact case law.”
The letter was led by North Carolina Attorney General, Josh Stein. The other state Attorneys General included California, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington as well as the District of Columbia.
FHA updates loss mitigation options for mortgages in certain areas of Puerto Rico and the U.S. Virgin Islands
On August 15, the Federal Housing Administration (FHA) released Mortgagee Letter 2018-05 (ML 2018-05), which updates loss mitigation options for certain FHA-insured mortgages located in Puerto Rico or Virgin Islands. The properties must be located in Presidentially-Declared Major Disaster Areas (PDMDAs) as a result of Hurricane Maria. In adition, FHA is also instituting a 30-day foreclosure moratorium on certain properties located in Puerto Rico or the Virgin Islands that FEMA has declared to be eligible for individual assistance. (As previously covered by InfoBytes, ML 2018-03 had extended an existing moratorium through August 16.) Additionally, in order to reduce foreclosures and minimize losses to the Insurance Fund, ML 2018-05 provides updated loss mitigation options “designed to provide greater alternatives to foreclosure for mortgagees to use with borrowers in the designated PDMDAs.” The new options supersede the previous ones offered in ML 2018-01 and rearrange the loss mitigation waterfall in order to provide expedited permanent loss mitigation solutions by considering “Disaster Standalone Partial Claims” earlier. This option would allow borrowers, among other things, to maintain their pre-disaster monthly payment of principle and interest and does not change interest rate and term of the mortgage. These loss mitigation options must be implemented by September 15 and expire May 1, 2019. The foreclosure mortgage moratorium is effective immediately and applies to the initiation of foreclosures and foreclosures already in process.
On August 13, HUD announced an advance notice of proposed rulemaking (ANPR) seeking comment on potential amendments to its 2015 Affirmatively Furthering Fair Housing (AFFH) regulations. As previously covered by InfoBytes, AFFH was aimed at helping communities who receive HUD funding meet their fair housing obligations to provide affordable housing in more communities; however, HUD now states that the rule “proved ineffective, highly prescriptive, and effectively discouraged the production of affordable housing.” The ANPR requests public comment on changes that will, among other things, (i) minimize regulatory burden; (ii) create a process focused on accomplishing positive results; (iii) provide for greater local control; (iv) encourage actions that will increase housing choice; and (v) efficiently utilize HUD resources. The ANPR also details a list of substantive questions HUD is interested in commenters responding to, including “[w]hat type of community participation and consultation should program participants undertake in fulfilling their AFFH obligations?” and “[h]ow should HUD evaluate the AFFH efforts of program participants?” Comments on the ANPR must be received by October 15.
On July 3, the Department of Housing and Urban Development (HUD) published in the Federal Register an interpretive rule regarding the loan-seasoning requirement for Ginnie Mae mortgage-backed securities from the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), S.2155/ P.L. 115-174. The interpretive rule establishes that (i) any VA refinance mortgage that does not meet the requirements of the Act is not eligible to serve as collateral for Ginnie Mae mortgage-backed securities; (ii) any VA refinance mortgage that does not meet the Act’s requirements, but was guaranteed before the Act’s enactment are unaffected; and (iii) the Act does not prohibit Ginnie Mae from guaranteeing Multiclass Securities where the trust assets consist of certificates previously lawfully guaranteed with underlying VA refinance loans that may not meet the requirements of the Act. Comments on the interpretive rule must be submitted by August 2.
As previously covered by InfoBytes, Ginnie Mae issued All Participants Memorandum APM 18-04, which establishes (in accordance with the Act) that in order to be eligible for Ginnie Mae securities, the date of the VA refinance loan must be on or after the later of (i) 210 days after the date of the first payment made on the loan being refinanced; and (ii) the date of the sixth monthly payment made on the loan being refinanced.
On June 25, the House passed H.R. 435, the “The Credit Access and Inclusion Act of 2017.” The bill would amend the Fair Credit Reporting Act to include a section allowing a person or the Department of Housing and Urban Development to furnish information to credit reporting agencies relating to the payment performance of a residential lease agreement, contract for a utility, or contract for a telecommunications service. The bill does not allow an energy utility to furnish information related to the usage of utility services or information related to an outstanding consumer balance if the consumer has entered into a payment plan and is meeting the obligations of the payment plan. Civil liability for violations of the Consumer Credit Protection Act do not apply to violations of the bill.
On June 20, HUD published an advance notice of proposed rulemaking (ANPR) in the Federal Register seeking comment on potential amendments to its the 2013 Disparate Impact Regulation, which implements the Fair Housing Act’s disparate impact standard, as well as the 2016 Application of the Fair Housing Act’s Discriminatory Effects Standard to Insurance (supplement). The notice requests comments on whether the 2013 regulation and the 2016 supplement are consistent with the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Covered by a Buckley Sandler Special Alert.) While HUD is seeking feedback on any potential changes to the regulation, the agency is particularly interested in, among other things, (i) whether the burden-shifting framework appropriately assigns burdens of production and persuasion; and (ii) whether the regulation should provide defenses or safe harbors to claims of liability. Comments on the notice are due by August 20.
On May 10, the Department of Housing and Urban Development announced its intention to seek public comment on whether the 2013 Disparate Impact Regulation (Regulation), which provides a framework for establishing legal liability for facially neutral practices that have a discriminatory effect under the Fair Housing Act (FHA), is consistent with the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Covered by a Buckley Sandler Special Alert.) The Supreme Court upheld the use of a disparate impact theory to establish liability under the Fair Housing Act, but according to HUD’s announcement, the Court only referenced the Regulation in its ruling but did not directly rule upon it.
As previously covered by InfoBytes, in October 2017, the Treasury Department called on HUD to reconsider the Regulation as it relates to the insurance industry – specifically, to homeowner’s insurance.
- Jonice Gray Tucker to discuss "Trends in regulatory enforcement" at the American Bar Association Banking Law Committee Meeting
- Jessica L. Pollet to discuss "Your career is impacting your life..." at the Ark Group Women Legal Conference
- Jon David D. Langlois to discuss "Successors in interest updates" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo