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Indiana Enacts Foreclosure and Loan Administration Bills
On March 16, Indiana Governor Mitch Daniels signed House Bill 1238, which includes provisions allowing a mortgage creditor to file a petition to have a state court determine whether a property is abandoned. The bill also sets forth criteria and procedures for use by the court in making its determination. A finding from the court that a property is abandoned allows for an expedited foreclosure process.
Recently, Indiana enacted Senate Bill 298. The new law provides that if a mortgage or vendor's lien does not show the due date of the last installment, the mortgage or lien expires 10 years after the date of execution of the mortgage or lien instead of 20 years under the current law. The bill makes exceptions to the expiration period if a foreclosure action is brought prior to the expiration. It also provides for civil actions concerning an omitted party's interest in a property and sets forth factors that the court must consider in determining any rights of redemption. Lastly, the bill provides that: (i) the senior lien on which the foreclosure action was based is not extinguished by merger with the title to the property conveyed to a purchaser at the judicial sale until the interest of any omitted party has been terminated; and (ii) until an omitted party's interest is terminated, the purchaser at the judicial sale is the equitable owner of the senior lien.
West Virginia Establishes Rights for Tenants in Foreclosed Properties
On March 15, West Virginia enacted House Bill 3177, which will permit the owner of a residential rental property purchased at foreclosure to terminate an existing tenancy after giving the tenant 90 days notice, or not less than 30 days notice before the expiration of the lease, whichever is shorter. Tenants with month-to-month leases need only be provided with 30 days notice. The law details the content and method of delivery for the notices. The new provisions take effect January 1, 2013.
Wisconsin Streamlines Foreclosures on Abandoned Properties
On March 21, Wisconsin enacted Senate Bill 307 relating to foreclosures on abandoned properties. Under the new law, the redemption period for abandoned property is reduced from two months to five weeks from the date a judgment of foreclosure is entered. The length of time that a sheriff must publish the notice of a sale in a newspaper is reduced from six successive weeks to three successive weeks before the sale. The law also (i) adds a new provision that provides that in addition to the parties to an action to enforce a mortgage lien, a representative of the municipality where the property is located may also provide evidence or testimony to the court as to whether the property has been abandoned and (ii) delineates the specific factors a court must consider in determining whether a property is abandoned. The changes take effect April 5, 2012.
Freddie Mac Issues Selling System Conversion Reminder
On March 23, Freddie Mac issued a reminder that on April 23, 2012, the selling system will be updated to reflect Uniform Loan Delivery Dataset named fields and layout. To assist sellers and provide information as to what is changing in the system, Freddie Mac issued a job aid identifying, among other things, (i) what to do before the system conversion, (ii) changes to export functionality, and (iii) expectations for historical data conversion.
Utah Enacts Multiple Bills Related to Mortgages and Default Servicing
Recently, Utah enacted several bills to amend the state’s mortgage licensing and servicing requirements, and to support enforcement of mortgage fraud. On March 19, the state enacted House Bill 191, the majority of which takes effect May 8, 2012. The bill makes numerous adjustments to the state’s mortgage and real estate practices and licensing statutes, including revisions to certain definitions, licensing and renewal requirements, prohibited conduct, and record keeping and reporting requirements. House Bill 164, enacted on March 19, establishes new servicing requirements, including (i) requiring servicers to appoint a single contact person for residential properties in default and establishing responsibilities for the contact person, (ii) requiring notice to a default trustor before a notice of default is filed, and (iii) allowing a default trustor to seek foreclosure relief. Enacted on March 22, House Bill 280, extends for two years, through the end of 2014, an existing provision requiring a notice for residential rental property that is being foreclosed. Also enacted on March 22 was Senate Bill 281. That bill creates a mortgage and financial fraud unit within the state’s Attorney General’s office. Beginning July 1, 2012, the Attorney General’s office will have a $2 million appropriation to establish the new unit to work with other state and local agencies to prevent, investigate, and prosecute mortgage and other financial fraud.
FHFA IG Issues Report on Fannie and Freddie Conservatorship
On March 28, the Inspector General (IG) for the Federal Housing Finance Agency (FHFA) published a white paper that provides a general assessment of the FHFAs conservatorship of Fannie Mae and Freddie Mac (the enterprises). The report provides background on the FHFA's oversight regime noting that it has evolved from one that strictly supervised the enterprises activities, to one that allows more operational decision-making at the enterprise level. The IG argues that the FHFA should assume a more active role in managing the enterprises and specifically notes that the FHFA (i) does not independently test and validate enterprise decision-making and (ii) is not sufficiently proactive in its oversight and enforcement of enterprise activity. The white paper acknowledges the significant challenges that the FHFA faces in its mission and provides a discussion of the tensions presented by FHFAs dual role as conservator and regulator.
Fannie Mae Reminds Servicers About Documentation Request Limits
On March 21, Fannie Mae issued a notice reminding servicers that in processing a borrower request for a foreclosure prevention alternative evaluation, servicers may only request limited documentation from a borrower. Specifically, a servicer may only request (i) a completed Uniform Borrower Assistance Form (Form 710), (ii) income documentation as outlined in Form 710 based on income type, (iii) hardship documentation as outlined in Form 710 based on hardship type, and (iv) a Short Form Request for Individual Tax Return Transcript (IRS Form 4506T-EZ) or a Request for Transcript of Tax Return (IRS Form 4506-T) signed by the borrower. Servicer requests for additional documentation are limited only to instances in which the servicer must reconcile inconsistencies in the documentation provided by the borrower, but such instances should be rare. Further, servicers may not request federal income tax returns unless the borrower is self-employed or the borrower has rental income, as outlined in Form 710.
FHFA IG Releases Results of Three Reviews
On March 22, the Office of Inspector General for the Federal Housing Finance Agency (FHFA IG) released the results of the following audit and surveys: (i) an audit of Fannie Maes single-family underwriting standards, (ii) a survey of FHFAs oversight of the charitable activities of Fannie Mae and Freddie Mac, and (iii) a survey of FHFAs oversight of Fannie Maes and Freddie Macs expenses related to the 2011 Mortgage Bankers Association Convention. The FHFA IG found that FHFAs oversight of Fannie Maes underwriting is limited, so FHFA should strengthen and formalize its processes for reviewing underwriting standards and variances. With regard to charitable contributions, the FHFA IG found that there is no need to conduct further evaluations because these contributions are scheduled to end by 2015. Similarly, the FHFA IG concluded that FHFAs new directive on conference sponsorships and expenditures for food will be sufficient if properly implemented.
Arizona Alters Financial Institution and Loan Originator Licensing Provisions
On March 16, Arizona enacted Senate Bill 1014, which make changes to fees and definitions affecting financial institutions. The new law sets a maximum fee of $250 that the Department of Financial Institutions (DFI) can charge to change the licensee name on a financial institution or enterprise license. The law tightens an exception to the definition of loan originator such that loan originators that originate five or fewer mortgage loans per calendar year are exempt only if the source of the prospective financing also makes five or fewer mortgage loans per calendar year. The new law now requires the Superintendent of the DFI to deny a license from an individual who (i) has been convicted of, pled guilty to, or pled no lo contere to a felony seven years prior to the application, (ii) has been convicted of, pled guilty to, or pled no lo contere to a felony involving fraud, dishonesty, a breach of trust, or money laundering at any time, or (iii) lacks the responsibility, experience, or competency to adequately serve the public. These changes take effect 90 days after the state legislature adjourns this year, which it is expected to do on or around April 17, 2012.
Wyoming Prohibits Private Transfer Fees
On March 15, Wyoming enacted House Bill 0025, which ends the use of private transfer fee obligations for a specified period. Pursuant to the law, new private transfer fee obligations—which require the payment of a fee upon the subsequent transfer of a real property—entered into between April 1, 2012 and July 1, 2014 are not enforceable against subsequent owners, purchasers, or mortgagees. To enforce a private transfer fee obligation created prior to April 1, 2012, the payee must record a notice in the county clerk’s office where the property is located. However, the law contains no prohibition of enforcement of private transfer fees absent the required recording. This law became effective March 15, 2012.