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Fannie and Freddie Extend Foreclosure Suspension for Puerto Rico and U.S. Virgin Islands
On December 20, Fannie Mae, in Lender Letter LL-2017-11, and Freddie Mac, in Guide Bulletin 2017-29, extended the suspension of foreclosure sales through March 31, 2018 of mortgaged properties in FEMA-declared disaster areas in Puerto Rico and the U.S. Virgin Islands due to Hurricanes Irma and Maria. The extension does not apply to any other jurisdictions similarly designated.
Find continuing InfoBytes coverage on Disaster Relief here.
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.
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.
Fannie Mae Updates Selling Guide
On October 31, Fannie Mae issued Announcement SEL-2017-09, highlighting recent updates to its Selling Guide, that generally affirm the ability to conduct activity using electronic records. Among other things, the update (i) confirms that sellers and servicers are authorized to originate, service, and modify loans using electronic records; (ii) requires that validation and security measures be put in place for systems generating electronic records; (iii) specifies that recorded mortgages and deeds of trust are not required to be maintained in paper form; and (iv) clarifies that all electronic signatures must comply with ESIGN, the Uniform Electronic Transactions Act (UETA), and other applicable laws. The updates are effective immediately.
Additional changes address the (i) introduction of Fannie Mae’s Servicing Execution Tool and Servicing Marketplace, which are designed to improve transfers of servicing; (ii) clarification that property owned by inter vivos revocable trusts qualify as eligible collateral; and (iii) updates to policies related to mortgage debts paid by parties other than the borrower.
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.
Fannie Mae Updates Servicing Guidelines for Multifamily Residences
On September 29, Fannie Mae released updates to its servicing guidelines for multifamily residences, effective October 2. Fannie Mae is updating provisions concerning Asset Management and Watchlist Management. Changes include:
- removing color descriptions that previously corresponded to defined Mortgage Loan rating classifications;
- updating the rating classification descriptions and/or characteristics to conform to regulatory definitions for Pass/Watch and Special Mention Assets; and
- requiring Servicers provide an explanation and status of the issues causing an Asset to be reported on the Servicer Watchlist.
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.