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Freddie Mac Issues Guidance on Reporting Imminent Default Data; Fannie Mae Updates Servicing Guide
On December 13, Freddie Mac issued Guide Bulletin 2017-27, providing updates and reminders to servicers regarding the imminent default evaluation requirements. The bulletin includes specifics on how servicers should process and report imminent default data using the “Workout Prospector” web-based application. According to the bulletin, servicers are must implement the new requirements by July 1, 2018. The bulletin also incorporates the additional non-discrimination guide language announced for sellers in Guide Bulletin 2017-26 (previously covered by InfoBytes here).
On December 13, Fannie Mae announced that it has updated its Servicing Guide. One such update includes the removal of requirements related to individual mortgage loan file records retention. Instead, the information will be available solely in Fannie Mae’s Selling Guide, which it expects to be updated on December 19. Another notable update is the Servicing Guide’s extension of the $30 maximum expense reimbursement “for each insured loss repair inspection required on a current or delinquent mortgage loan” to all mortgages, and not just those affected by disasters.
FHFA Increases Conforming Loan Limits for 2018
On November 28, the FHFA announced that it will raise the maximum conforming loan limits for mortgages purchased in 2018 by Fannie Mae and Freddie Mac from $424,100 to $453,100. The announcement marks the second time FHFA has increased the baseline loan limit since 2006. In high-cost areas, such as Los Angeles, New York, San Francisco, and Washington, D.C., the maximum loan limit will be $679,650. For a county-specific list of the maximum loan limits in the U.S., click here.
Freddie Mac Announces Guide Bulletin 2017-26 Covering Changes to Eligibility for Certain Mortgage Products
On November 15, Freddie Mac announced the issuance of Guide Bulletin 2017-26 (Bulletin), which, among other things, expands borrower options for mortgage financing, eases certain underwriting requirements, and adds non-discrimination language. Specifically, the Bulletin announces the availability of 5-year ARMs as a newly eligible product under “Home Possible,” “Freddie Mac Relief Refinance,” and “Financed Permanent Buydown” mortgage programs. Freddie Mac is also removing the requirement that all income reported on Home Possible Mortgage applications must be verified. Additionally, effective March 15, 2018, consistent with the FHFA Minority and Women Inclusion Amendments Final Rule, all covered sellers “must not discriminate on the basis of race, color, religion, sex, age, marital status, disability, veteran status, genetic information (including family medical history), pregnancy, parental status, familial status, national origin, ethnicity, sexual orientation, gender identity or other characteristics protected by law.”
Fannie and Freddie Introduce Extended Modifications for Disaster Relief
On November 2, at the direction of the Federal Housing and Finance Authority (FHFA), Fannie Mae introduced in Lender Letter LL-2017-09 (Letter) a temporary forbearance mortgage loan modification (Extend Mod) for servicers with mortgage loans affected by the recent disasters. The Letter covers the requirements for an Extend Mod, including outlining loan eligibility criteria. Among other requirements, the loan must (i) be located in a FEMA-Declared Disaster Area; (ii) be less than 31 days delinquent when the disaster occurred and complete the forbearance plan while between 31 days delinquent and 360 days delinquent; (iii) not be delinquent after being previously modified with an Extend Mod from the same disaster; (iv) not be insured or guaranteed by a federal government agency; and (v) not be subject to a recourse or indemnification arrangement, another workout option, or a current repayment plan that is performing. The Letter also provides information on disbursing hazard loss draft proceeds, reimbursement for property inspections, and payment records for borrower-initiated termination of mortgage insurance.
Under the same FHFA direction and in coordination with Fannie Mae, Freddie Mac issued Guide Bulletin 2017-25 announcing the servicing requirements for the Freddie Mac Extend Modification for Disaster Relief. Both Fannie and Freddie note the deadline for implementing the Extend Mod is February 1, 2018.
Find more InfoBytes disaster relief coverage here.
VA Extends Foreclosure Moratorium Following Hurricane Disasters; Federal Agencies Issue Appraisal Exceptions; Freddie Mac Extends Temporary Selling Requirements Related to Wildfire Areas
Hurricane Relief. The Department of Veterans Affairs (VA) is extending the foreclosure moratorium on properties affected by the recent hurricanes. For disaster areas impacted by Harvey, Irma, and Maria, the VA is updating the original circulars to change the 90-day moratorium to 180 days (a complete list of change notices can be found here).
On October 24, the FDIC, Federal Reserve, National Credit Union Administration, and the OCC issued a temporary exception to the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) appraisal requirements for areas affected by the recent hurricanes. More specifically, the FDIC's Financial institution Letter states that the agency will not require financial institutions to obtain appraisals for affected transactions, if (i) the properties involved are located in areas declared major disasters; (ii) there are binding commitments to fund the transactions within 36 months of the date the areas were declared major disasters; and (iii) the value of the real properties support the institutions' decisions to enter into the transactions.
California Wildfire Relief. On October 25, Freddie Mac released Guide Bulletin 2017-24 extending the temporary selling requirements applied to hurricane disaster areas to eligible disaster areas impacted by the California wildfires. As previously covered by InfoBytes, Freddie Mac is requiring servicers to suspend foreclosure sales and eviction activities and has agreed to reimburse sellers for certain property inspections for property located in eligible disaster areas.
Here is a complete list of InfoBytes disaster relief coverage.
Freddie Mac Announces Guide Bulletin 2017-23 Concerning Debt Payment-to-Income Calculations and Appraisals
On October 18, Freddie Mac announced the issuance of Guide Bulletin 2017-23 (Bulletin), which changes selling requirements related to, among other things, student loan monthly debt payment-to-income (DTI) ratio calculations and appraisals. Specifically, for student loans in repayment, sellers must use the greater of the following in calculating DTI ratios, as listed on a borrower’s credit report: (i) the monthly payment amount, or (ii) 0.5 percent of the original loan balance or outstanding balance (one percent for loans in deferment or forbearance). The revisions also remove the requirement that a seller must “obtain documentation if a monthly payment amount is not reported on the credit report.” Further, the Bulletin stipulates certain DTI ratio exclusions, which include specific contingent liabilities.
Revisions to appraisal requirements include: (i) no longer requiring a “new appraisal when the settlement date is more than 120 days after the note date,” and (ii) accepting appraisal updates “performed by an unlicensed or trainee (or similar classification) appraiser if a supervisory appraiser signs the appraisal update.” While the revisions are applicable for mortgages with settlement dates on or after January 18, 2018, Freddie Mac also permits immediate implementation.FHFA Includes a Language Preference Question in the Universal Residential Loan Application
On October 20, the Federal Housing Finance Agency (FHFA) announced that it would include a language preference question on its updated Universal Residential Loan Application (URLA). The question will allow borrowers to indicate if they prefer to communicate in a language other than English and to identify that language. In response to industry concerns, in the preferred language question text, FHFA includes disclosure language that informs borrowers their response will not negatively affect their application, indicates a preferred language does not mean the lender agrees to communicate in that language, and provides language assistance resources.
FHFA plans to issue the new URLA form later this year, which will go into effect beginning in July 2019. The form will be mandatory for loans made by Fannie Mae and Freddie Mac beginning in February 2020.
Fannie Mae and Freddie Mac Update Servicing Guides
On October 11, Fannie Mae and Freddie Mac announced updates to their respective Servicing Guides.
Fannie Mae. Servicing Guide Announcement SVC-2017-09 highlights recent updates to the Servicing Guide, including topics related to the management of electronic transactions such as: (i) confirmation that sellers and servicers may originate, service, and modify loans using electronic records (electronic promissory notes require special approval); (ii) streamlined language clarifying requirements for the accuracy of information in electronic records; (iii) specification that paper records are not required for recorded mortgages and deeds of trust; (iv) clarification that all electronic signatures must comply with ESIGN, UETA, and other applicable laws; and (v) the removal of requirements for document custodians from the Servicing Guide that were duplicative of requirements set forth in Fannie Mae’s Requirements for Document Custodians. Additional updates address changes made to the reimbursement of foreclosure sale publication costs for costs incurred on or after January 1, 2018, and specific guidance for servicers pertaining to mortgage liens (to be implemented by December 1, 2017).
Freddie Mac. Freddie Mac issued Bulletin 2017-22 announcing servicing updates concerning (i) modifications to imminent default evaluation and process requirements (jointly developed with Fannie Mae) that will take effect July 1, 2018; and (ii) provisions under the Servicemembers Civil Relief Act (SCRA) related to compliance time frames for servicers when responding to, or submitting requests for, interest rate reductions, along with updates that take effect February 1, 2018, concerning Guide Exhibit 71 used by servicers to report eligible SCRA interest rate subsidized loans. The updates also eliminate the manual property condition certificate process and modify time frame requirements for cancelling property insurance policies on real estate owned properties.
FHFA Director Provides Update on GSE Conservatorship to House Financial Services Committee
On October 3, the Director of the Federal Housing Finance Agency (FHFA), Melvin L. Watt, testified at a hearing before the House Financial Services Committee. The testimony provided an update on FHFA’s conservatorship of Fannie Mae and Freddie Mac (GSEs) and Watt’s views on housing financing reform. In his prepared remarks, Watt informed the Committee that the GSEs’ financial performance has improved significantly over the course of the FHA’s conservatorship and that the GSEs continue to provide liquidity to the housing finance market. Nonetheless, Watt stressed that in less than three months, both Fannie Mae and Freddie Mac’s taxpayer-financed capital buffer will run out, and any loss the GSEs experience after that would require additional money from taxpayers. Watt warned that any additional draw of taxpayer support could erode investor confidence in the GSEs, which could result in reduced liquidity in the mortgage-backed securities market and increase the cost of credit for borrowers.
Second Circuit Upholds Large Monetary Judgment Against International Bank
On September 28, the U.S. Court of Appeals for the Second Circuit affirmed a New York District Court’s 2015 ruling, which requires a major international bank to pay $806 million for selling allegedly faulty mortgage-backed bonds to Fannie Mae and Freddie Mac. In the original suit brought by the Federal Housing Finance Agency (FHFA), FHFA alleged that the bank overstated the reliability of the loans for sale. In upholding the lower court’s decision, the Second Circuit concluded that the marketing prospectus used to sell the mortgage securities to Fannie and Freddie between 2005 and 2007 contained “untrue statements of material fact.” Specifically, the prospectus falsely stated that the loans were compiled with the underwriting standards described therein, including standards related to assessing the creditworthiness of the borrowers and appraising the value of properties.