InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Agencies issue disaster relief guidance for California wildfires
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.
Freddie Mac releases various selling updates in Guide Bulletin 2018-19
On October 31, Freddie Mac released Guide Bulletin 2018-19, which announces selling updates, including updates to the Settlement/Closing Disclosure Statement that sellers are required to use for mortgages with note dates on or after September 25, 2017. Effective immediately, Freddie Mac and Fannie Mae have jointly agreed that sellers “must create or obtain . . . the [c]losing [d]isclosure form for each [m]ortgage, regardless of whether another form might also be required by a [s]tate or local law.” Bulletin 2018-19 additionally states that, with the exception of certain servicing transactions, the Settlement/Closing Disclosure Statement means the closing disclosure required under TILA for mortgages subject to TRID rules, “whether or not the TRID rules apply to the transaction.”
Among other things, Bulletin 2018-19 also (i) updates certain rental income and documentation requirements; (ii) removes the special loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit TLTV ratio requirements for a “no cash-out” refinance of a mortgage owned or securitized by Freddie Mac with settlement dates on or after February 1, 2019; and (iii) removes the mandatory expiration date on Guide Form 960 (the Concurrent Transfer of Servicing Agreement), eliminating the need for sellers to submit a new guide form each year.
Bankruptcy judge approves Lehman’s motion to add indemnity claims against mortgage sellers
It has been reported that during a hearing on October 29, a judge for the U.S. Bankruptcy Court for the Southern District of New York approved Lehman Brothers Holdings, Inc.’s motion to amend and extend indemnification claims brought against mortgage sellers, allowing Lehman to include an additional $2.45 billion in residential mortgage-backed securities (RMBS) allowed claims from settlements reached earlier this year. As previously reported by InfoBytes, these claims had not yet accrued when the original order was entered pursuant to Federal Rule of Bankruptcy Procedure 9024. 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.
According to the report, the judge stated her decision to allow the amendments will not delay litigation, nor abridge defendants’ rights, as discovery has not yet commenced. The judge’s decision further requires the parties to reach an agreement concerning an alternative dispute resolution regarding the claims.
Fannie Mae issues mortgage industry alert to Southern California lenders
On October 16, Fannie Mae’s Mortgage Fraud Program issued an industry alert to mortgage companies operating in California identifying new, potentially false, employment information used by mortgage loan applicants in Southern California, Los Angeles County. As previously covered by InfoBytes, Fannie Mae issued industry alerts earlier this year covering “fictitious” employers whose existence could not be verified. This new alert provides common “red flags” to help lenders and originators identify potential mortgage fraud when reviewing employment information.
FHFA launches clearinghouse for mortgage industry to assist borrowers with limited English proficiency
On October 15, the Federal Housing Finance Agency (FHFA), Freddie Mac, and Fannie Mae announced the joint launch of the Mortgage Translations clearinghouse, a collection of online resources designed to help lenders and servicers assist borrowers with limited English proficiency. The clearinghouse currently provides Spanish-language resources, and will add resources in Chinese, Vietnamese, Korean, and Tagalog in the coming years. Mortgage Translations also includes a Spanish-English glossary developed in collaboration with the CFPB to help standardize translations across the mortgage industry.
Lehman seeks to add indemnity claims against mortgage sellers
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.”
Fannie Mae announces updates to Selling Guide
On October 2, Fannie Mae issued SEL-2018-08, announcing updates to its Selling Guide. Notably, Fannie Mae expanded its policy on the use of employment-related assets as qualifying income, increasing to 80 percent the maximum LTV, CLTV, and HCLTV ratios for loans held by asset owners who are at least 62 years old upon loan closing. With respect to jointly-owned assets, all owners must be listed as borrowers on the loan, but only the borrower whose employment-related asset is being used as income must meet the minimum age requirement. Fannie Mae indicates that, until Desktop Underwriter is updated to reflect this policy change, it will accept delivery of any loan that receives an Approve/Ineligible recommendation because of a ratio over 70 percent and has been confirmed compliant by the lender.
Effective immediately, other announced updates to the Selling Guide include: (i) clarifications to employment verification policies for union member borrowers employed in a series of short-term job assignments; (ii) changes intended to provide clarity to Fannie’s expectations for lenders managing third-party originators; and (iii) clarifications to comparable sales requirements for appraisers of MH Advantage homes.
FHFA issues guidance for third-party provider relationships
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.
Fannie Mae and Freddie Mac issue servicing updates
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).
Fannie Mae, Freddie Mac update servicing guides
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.