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Fannie Mae updates Reverse Mortgage Loan Servicing Manual
On September 18, Fannie Mae updated the Reverse Mortgage Loan Servicing Manual with changes related to a servicer’s responsibilities for paying escrow-related expenses for certain properties in Fannie Mae’s REO inventory. According to RVS-2018-03, Fannie Mae will now pay property taxes for all acquired proprieties in REO inventory and servicers are no longer required, except when directed by Fannie Mae, to pay co-op fees and assessments or ground rents for certain properties in REO inventory. The update applies to all property taxes and ground rents for all acquired properties effective on October 1, and applies to co-op fees and assessments for all acquired properties with a foreclosure sale or mortgage release date occurring on or after October 1.
California updates foreign language disclosure requirements for mortgage modifications
On September 11, the California governor approved SB 1201, which amends the state civil code to, among other things, require any supervised financial institution that negotiates a mortgage loan modification with a borrower primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean and offers the borrower a final loan modification in writing, to deliver to the borrower at the same time, a specified form summarizing the modified terms in the same language as the negotiation. The amendments require the California Department of Business Oversight (CDBO) to make available—using CFPB and Fannie Mae forms as guidance—certain disclosures and forms in those specified languages.
The amendments are generally effective on January 1, 2019, with the amendments relating to the new written disclosures to become operative 90 days following the issuance of forms by the CDBO, but not before January 1, 2019.
Fannie Mae announces updates to Selling Guide
On September 4, Fannie Mae issued SEL-2018-07, which announces updates to its Selling Guide including, among other things, the introduction of rural high-needs appraisal waivers. The rural high needs appraisal waiver is contingent on obtaining a home inspection to confirm safety, soundness, and structural integrity consistent with Fannie’s property condition guidelines. The waiver is available on a limited basis for purchase transactions containing certain characteristics, such as borrowers with income at or below 100 percent of the area median income and property located in designated rural-high needs areas, as defined by Fannie’s “Duty to Serve” obligations. Additionally, the Selling Guide includes updates to (i) the name of the property inspection and property field work waivers; (ii) liability and fidelity/crime insurance for projects; (iii) single-entity ownership of co-op projects; and (iv) the approved mortgage insurers list and mortgage insurance forms.
8th Circuit rules Fannie Mae, Freddie Mac net worth sweep payments acceptable under FHFA statutory authority
On August 23, the U.S. Court of Appeals for the 8th Circuit affirmed a lower court’s dismissal of claims brought by shareholders of Fannie Mae and Freddie Mac (GSEs) against the GSEs’ conservator, the Federal Housing Finance Agency (FHFA), alleging that FHFA exceeded its powers under the Housing and Economic Recovery Act (HERA) and “acted arbitrarily and capriciously” when it entered an agreement with the Treasury Department requiring the GSEs to pay their entire net worth, minus a small buffer, as dividends to the Treasury every quarter. In so holding, the 8th Circuit joined the 5th, 6th, 7th, and D.C. Circuits, each of which has previously “rejected materially identical arguments” presented by other GSE shareholders. (See previous InfoBytes coverage on the 5th Circuit decision here.) The shareholders sought an injunction to set aside the so-called “net worth sweep,” asserting that “HERA’s limitation on judicial review does not apply when FHFA exceeds its statutory powers under the Act . . . [and] that the net worth sweep exceeds, and is antithetical to, FHFA’s statutory powers.” However, the appellate court agreed with the lower court and found, among other things, the net worth sweep payments to be acceptable because HERA “grant[s] FHFA broad discretion in its management and operation of Fannie and Freddie” and permits, but does not require, the agency “to preserve and conserve Fannie’s and Freddie’s assets and to return [them] to private operation.” The court also noted that HERA “authorize[d] FHFA to act ‘in the best interests’ of either Fannie and Freddie or itself,” thus affording FHFA more discretion than common law conservators. Finally, the appellate court held that HERA’s anti-injunction provision, which states that “no court may take any action to restrain or affect the exercise of powers or functions of the [FHFA] as a conservator or a receiver,” also precludes enjoining the Treasury Department from participating in the net worth sweep because doing so would “restrain or affect” FHFA.
Fannie Mae updates Servicing Guide with streamlined mortgage insurance claims processing
On August 15, Fannie Mae issued SVC-2018-05, which updates the Servicing Guide to include, among other things, a streamlined mortgage insurance (MI) claims process with certain mortgage insurers to “reduce the operational burden and cost associated with the process for servicers.” While servicers will continue to submit claims in accordance with the MI policy, participating mortgage insurers will now process all claims using an algorithm named the “MI Factor.” Effective October 1, claims settled using the MI Factor will not be subject to the curtailment billing process and servicers will not be required to submit supplemental claim submissions and claim appeals to the mortgage insurer. Fannie Mae also updated its Servicing Guide to include (i) clarification of the servicer’s responsibilities for addressing urgent property conditions; (ii) policy reminders regarding insured loss repay inspection reimbursements; and (iii) notification thresholds and timing requirements regarding the transfer of default-related matters between law firms within a single state.
Fannie Mae issues updated mortgage industry alert in California
Recently, Fannie Mae’s Mortgage Fraud Program issued an industry alert to mortgage companies operating in California regarding the use of false employment information by mortgage loan applicants. (See previous coverage in InfoBytes here). Fannie Mae extended its alert to Northern California and identified additional employers whose existence could not be verified by Fannie Mae. The alert provides “red flags” to help lenders and originators identify potential mortgage fraud when reviewing employment information.
Fannie Mae, Freddie Mac issue forbearance relief to homeowners affected by California wildfires
On August 8, Freddie Mac extended its disaster relief options to homeowners affected by ongoing California wildfires who have access to federal individual assistance programs in FEMA-declared disaster areas. The relief suspends foreclosures by providing forbearance for up to 12 months. Penalties and late fees will also be waived. Freddie Mac also reminded servicers to consider borrowers who work in eligible disaster areas but have homes outside the affected area for standard relief policies. Moreover, servicers may leverage Freddie Mac forbearance programs to provide immediate mortgage relief to those affected by the wildfires in areas where FEMA has not made individual assistance available.
On August 7, Fannie Mae issued a notice to mortgage servicers reminding them that homeowners impacted by the California wildfires are eligible to stop making mortgage payments for up to 12 months, during which time late fees will not be incurred nor delinquencies reported to the credit bureaus. Furthermore, servicers may immediately suspend or reduce mortgage payments for up to 90 days without any contact with homeowners believed to have been affected by the wildfires. Additionally, foreclosures and other legal proceedings must be suspended for impacted homeowners.
Find continuing InfoBytes coverage on disaster relief here.
Fannie Mae issues Selling Guide updates, removes requirement to use Market Conditions Addendum for appraisals
On August 7, Fannie Mae issued Selling Guide update SEL-2018-06, which announces, among things, the removal of the requirement to use the Market Conditions Addendum (Form 1004MC) for appraisals and clarification of the policies regarding disbursement of HomeStyle Renovation funds. Specifically, effective immediately, the Selling Guide provides that lenders are no longer required to use Form 1004MC for appraisals as the agency’s Collateral Underwriter program provides market trend information for lenders and Fannie Mae to measure and manage market risks. However, appraisers remain responsible for analyzing market conditions and reporting them in the Neighborhood section of Fannie Mae’s appraisal forms. The update also clarifies that for HomeStyle Renovation funds disbursed using a wire transfer, the lender must obtain written consent to release the funds. Additionally, the update clarifies that all mechanics liens must be cleared or waived by the final disbursement of funds—a lien waiver is not required at each disbursement stage. The announcement also notes that the previously released information regarding Fannie Mae’s high loan-to-value refinance option (covered by InfoBytes here) is now available in the Selling Guide.
FHFA reports results of Fannie Mae, Freddie Mac annual stress tests
On August 7, the Federal Housing Finance Agency (FHFA) published a report providing the results of the fifth annual stress tests conducted by government-sponsored enterprises Fannie Mae and Freddie Mac (GSEs). According to the report, Dodd-Frank Act Stress Tests Results – Severely Adverse Scenario—which provides modeled projections on possible ranges of future financial results and does not define the entirety of possible outcomes—the GSEs will need to draw between $42.1 billion and $77.6 billion in incremental Treasury aid under a “severely adverse” economic crisis, depending on how deferred tax assets are treated. The losses would leave $176.5 billion to $212 billion available to the companies under their current funding commitment agreements. Notably, the projected bailout maximum is lower this year than FHFA reported last year, which ranged between $34.8 billion and $99.6 billion.
FHFA extends comment deadline for proposed rule on capital requirements for Freddie and Fannie
On July 31, the Federal Housing Finance Agency announced a 60-day extension on the public comment period for a proposed rule that would implement a new regulatory capital framework for Freddie Mac and Fannie Mae. Among other things, the proposed rule would implement: (i) a new framework for risk-based capital requirements; and (ii) two alternative approaches to setting minimum leverage capital requirements. (Previously covered by InfoBytes here). The previous deadline for comments was September 17, and the deadline is now November 16.