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  • FHFA proposes new process for validating, approving credit score models

    Agency Rule-Making & Guidance

    On December 13, the Federal Housing Finance Agency (FHFA) issued a proposed rule to establish new requirements for the verification of credit score models used by Fannie Mae and Freddie Mac (the Enterprises), as mandated by Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act). Under the proposed rule, the Enterprises will use a four-phase process to validate and approve credit score models including: (i) soliciting applications from credit score model developers; (ii) reviewing submitted applications for completeness, which includes the receipt of all required fees; (iii) conducting a credit score assessment, which would require the Enterprises to evaluate each credit score model for “accuracy, reliability and integrity, independent of the use of the credit score in the Enterprise’s systems, as well as any other requirements established by the Enterprise”; and (iv) assessing the model in conjunction with the Enterprises’ business systems. Additionally, the FHFA stated it will not require either of the Enterprises to use a third-party credit score model; however, any credit score used by the Enterprises as a condition to purchase of a loan “must be produced by a model that has been validated and approved by the Enterprise based on the standards and criteria in the [EGRRCPA] and FHFA regulations.” Comments will be due 90 days after publication in the Federal Register.

    As previously covered by InfoBytes, the FHFA stated in July that it would set aside an ongoing initiative to evaluate the potential impact of a new credit score model on “access to credit, safety and soundness, operations in the mortgage finance industry, and competition in the credit score market,” in order to focus on implementing Section 310.

    Agency Rule-Making & Guidance FDIC Mortgages GSE FHA Fannie Mae Freddie Mac EGRRCPA

  • HUD issues FHA loan limits for 2019

    Federal Issues

    On December 14, HUD issued two Mortgagee Letters (here and here) providing the mortgage limits for FHA-insured forward mortgage case numbers and for FHA-insured Home Equity Conversion Mortgages (HECMs) for 2019. Beginning on January 1, 2019, FHA’s nationwide forward mortgage limit “floor” and “ceiling” for a one-unit property are $314,827 and $726,525, respectively, and the HECM maximum nationwide claim will be $726,525.

    Federal Issues HUD FHA Mortgages Reverse Mortgages HECM

  • HUD-OIG report examines top management challenges

    Federal Issues

    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.

    Federal Issues HUD FHA Ginnie Mae Disaster Relief Mortgages

  • FDIC updates Affordable Mortgage Lending Guide

    Agency Rule-Making & Guidance

    On December 6, the FDIC issued FIL-84-2018 announcing updates to the Affordable Mortgage Lending Guide, Part I: Federal Agencies and Government Sponsored Enterprises (Guide), which reflect current information available about mortgage products offered through Fannie Mae and Freddie Mac. The Guide covers federal programs targeted to a variety of communities and individuals including rural, Native American, low- and moderate-income, and veterans, and is designed to provide community banks resources “to gain an overview of a variety of products, compare different products, and identify next steps to expand or initiate a mortgage lending program.” Updates to the Guide include, among other things, (i) revisions to the Program Matrix; (ii) changes to student loan debt in FHA, Fannie Mae, and Freddie Mac programs; and (iii) updates to certain FHA loan insurance products, USDA single family housing programs, and various Fannie Mae and Freddie Mac products.

    Agency Rule-Making & Guidance FDIC Mortgages GSE FHA Fannie Mae Freddie Mac Community Banks

  • FHA’s second appraisal requirement for reverse mortgages now fully automated

    Federal Issues

    On November 29, FHA announced that the protocols in place for the second appraisal requirement for certain reverse mortgage transactions are now fully automated. As previously covered by InfoBytes, in September, FHA announced that it would require a second appraisal for certain Home Equity Conversion Mortgage (HECM) transactions (also known as “reverse mortgages”) to mitigate the risk that valuation of the collateral poses to FHA borrowers and the Mutual Mortgage Insurance Fund, according to Mortgagee Letter 2018-06. FHA will perform a collateral risk assessment of the appraisal prepared for use in all reverse mortgage originations; whether a second appraisal is required will depend on the results of the assessment. Now, once an appraisal is logged into the system, a lender will immediately receive a message indicating whether a second appraisal is required or not required.

    Federal Issues FHA Reverse Mortgages Appraisal HECM Mortgage Origination

  • U.S. hits law firm with FHA violations; loan modifications discriminated against Hispanic borrowers

    Lending

    On October 30, the U.S. Attorney for the Middle District of Florida filed a lawsuit against a Florida legal services provider and two of its officers (defendants) for allegedly violating the Fair Housing Act by “intentionally discriminating against Hispanic homeowners by targeting them with a predatory mortgage loan modification and foreclosure rescue services scheme.” Specifically, the complaint alleges that the defendants, among other things, (i) targeted borrowers through the use of Spanish-language advertisements that allegedly promised to cut mortgage payments in half; (ii) promised payments would be lowered “in a specific timeframe in exchange for thousands of dollars of upfront fees and continuing monthly fees of as much as $550,” without delivering the promised loan modifications; (iii) instructed borrowers to stop making monthly mortgage payments and to stop communicating with their lenders; and (iv) had borrowers sign English-language contracts while only translating the provisions regarding payment. The complaint seeks to enjoin the defendants from participating in discriminatory activities on the basis of national origin, and requests monetary damages and civil penalties.

    Lending Predatory Lending FHA DOJ Mortgages

  • FHA streamlines claim payment requirements for HECM program

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance FHA Reverse Mortgages Insurance HECM HUD

  • FHA to require second appraisal for certain reverse mortgages

    Federal Issues

    On September 28, FHA announced that it will require a second appraisal for certain reverse mortgage transactions. The purpose of this requirement, according to Mortgagee Letter 2018-06, is mitigation of the risk that valuation of the collateral poses to FHA borrowers and the Mutual Mortgage Insurance Fund. FHA will perform a collateral risk assessment of the appraisal prepared for use in all Home Equity Conversion Mortgage (HECM) originations (also known as “reverse mortgages”); whether a second appraisal is required will depend on the results of the assessment. A mortgagee may not approve or close a transaction until a second appraisal, if required, is obtained. If the second appraisal provides a lower value, the mortgagee must use the lower value in the origination of the HECM. The new requirements are effective for all HECM originations with FHA case numbers assigned on or after October 1 through September 30, 2019. FHA will evaluate these program changes at six and nine months to determine if it should extend the requirements beyond the current end date.

    Federal Issues FHA Reverse Mortgages Appraisal

  • Court preliminarily approves $30 million settlement for post-payment interest charges on FHA mortgages

    Courts

    On August 22, the U.S. District Court for the Northern District of California preliminarily approved a $30 million settlement resolving allegations that a national bank improperly collected post-payment interest on FHA-insured mortgages but did not use the FHA-approved form to provide the disclosures to consumers before doing so. The settlement covers a nationwide class of borrowers who, between June 1996 and January 2015, obtained an FHA-insured mortgage loan. The settlement requires the bank to pay $30 million.

    Courts Class Action Settlement FHA Mortgages

  • FHA updates loss mitigation options for mortgages in certain areas of Puerto Rico and the U.S. Virgin Islands

    Federal Issues

    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.

    Federal Issues FHA HUD Disaster Relief Loss Mitigation Mortgages Foreclosure

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