InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
GSEs Provide Guidance Regarding TRID Compliance
On October 6, Fannie Mae and Freddie Mac issued guidance stating that both GSEs, under the direction of the FHFA, “will not conduct routine post-purchase loan file reviews for technical compliance with the TRID Rule,” providing a “transitional period” for lenders to update their operational systems to adhere to the Rule’s requirements. However, the GSEs cautioned lenders that they “expect lenders to make good faith efforts to comply with TRID” and will evaluate whether lenders issued the new required disclosure during the mortgage origination process. Moreover, the guidance explains that “failure to use a TRID-required form” will be viewed as a violation, subjecting the loan to all contractual remedies, including repurchase.
Fannie Mae Announces New Mortgage Product for Low- and Moderate-Income Borrowers
On August 25, Fannie Mae announced that it will begin offering HomeReady, a mortgage loan product featuring new flexibilities for lower to moderate income borrowers. For the first time, income from a non-borrower household member can be considered as a means to qualify for a Fannie loan. In addition, borrowers can include funds received from other sources, such as income from non-occupant parents or rental income from a basement apartment, to satisfy income requirements. Both first-time and repeat homebuyers can qualify for a HomeReady mortgage with a down payment as low as 3 percent. The new product requires borrowers to complete an online housing-counseling course. Fannie Mae is expecting to begin accepting deliveries under the HomeReady guidelines towards the end of 2015, and will soon issue additional details to assist lenders through a Selling Guide announcement.
FHFA Releases Fannie and Freddie's New Eligibility Requirements for Seller/Servicers
On May 20, the FHFA announced that Fannie Mae and Freddie Mac released updates to their operational and financial eligibility requirements for single-family mortgage Seller/Servicers. Because of changes in the servicing industry, the FHFA directed Fannie and Freddie to update their Seller/Servicer standards to “help ensure the safe and sound operation of the Enterprises and provide greater transparency, clarity and consistency to industry participants and other stakeholders and reflect feedback received over the past several months.” Fannie Mae’s revised operational standards will take effect by September 1, 2015, and Servicers must implement the financial eligibility changes by December 31, 2015. Operational standards for Freddie Mac Servicers will take effect August 18, 2015; financial eligibility revisions must be in place by December 31, 2015.
FHFA Extends Fannie and Freddie's Participation in HAMP and HARP
On May 8, FHFA Director Mel Watt spoke at the 22nd Annual Economic Summit, focusing on the agency’s conservatorship activities with Fannie Mae and Freddie Mac (GSEs). Most significantly, Director Watt announced that the agency is extending the GSEs’ participation in HAMP and HARP until the end of 2016. Since their 2009 inception, the two programs have relieved many borrowers of high monthly payments. HARP, allowing borrowers who regularly make their mortgage payments to refinance their loans and take advantage of low income rates, and HAMP, providing significant payment reductions tied to borrowers’ income, have prevented a number of foreclosures. Since HARP and HAMP were never intended to be permanent programs, this will be FHFA’s final extension of the GSEs’ participation. Looking forward, the agency plans to “consider how best to build on the lessons of HAMP for 2017 and beyond,” exploring possible streamlined modifications and refinance solutions for borrowers.
National Non-Profit Fair Housing Organization Files Complaint Against Fannie Mae Alleging Racial Discrimination
On May 12, 2015, the National Fair Housing Alliance (NFHA) and 19 local fair housing organizations (collectively, the “Complainants”) filed a fair housing discrimination complaint with the U.S. Department of Housing & Urban Development against Fannie Mae alleging a pattern of maintaining and marketing its foreclosed houses in white areas better than in minority areas. The complaint is the result of a five year investigation where investigators visited and documented the conditions of the foreclosed properties that Fannie Mae owns in 34 metro areas. In each of the investigated metropolitan areas, the Complainants allege that Fannie Mae engaged in the practice of maintaining and marketing its REO properties in a state of disrepair in communities of color while maintaining and marketing REO properties in predominantly White communities in a materially better condition. Fannie Mae REO properties in White communities were far more likely to have a small number of maintenance deficiencies or problems than REO properties in communities of color, while REO properties in communities of color were far more likely to have large numbers of such deficiencies or problems compared to those in White communities. As a result, the Complainants allege that Fannie Mae violated the Fair Housing Act, Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Amendments Act of 1988, including but not limited to 42 U.S.C. §§ 3604(a)-(d). The housing advocacy groups are calling for Fannie Mae to clean up the neglected properties and spend "millions" of dollars on grants or other compensation for those trying to buy foreclosed houses and people living in communities affected by them.
FHFA Announces Fannie and Freddie's Revised Requirements for Private Mortgage Insurances Companies
On April 17, the FHFA announced that Fannie and Freddie have revised the requirements for private mortgage insurance companies insuring mortgage loans that Fannie and Freddie either own or guarantee. By setting financial and operational standards for the mortgage insurers seeking approval with Fannie and Freddie, the new requirements are designed to reduce risk to the GSEs. The new requirements are effective immediately for new applicants and will become effective December 31, 2015 for existing insurers already approved by Fannie and Freddie.
FHFA OIG: Continued Enterprise Profitability Is Not Assured
On March 18, the FHFA Inspector General released a white paper detailing the challenges faced by the government-sponsored enterprises (GSEs) that could adversely affect their future profitability. According to the white paper, the GSEs’ return to profitability in 2012 was linked significantly to non-recurring sources of income such as the release of valuation allowances against deferred tax assets, settlements of disputed representation and warranty claims, and settlements of legal claims relating to mortgage-backed securities. Specifically, the OIG reported that non-recurring sources accounted for 60% and 45% of net income in 2013 and 2014 respectively. In addition, the white paper cites the GSEs’ requirement to decrease its retained portfolio annually by 15%, requirements to pay a quarterly dividend to Treasury, the possibility of lower guaranty fees, congressional inaction to adopt housing finance reform, and market conditions such as changes in interest rates and home prices as factors that could force the GSEs to draw on the Department of Treasury for a taxpayer-funded bailout.
House Financial Services Committee Approves Agenda for 114th Congress
On January 21, the Committee on Financial Services, in a voice vote, agreed to a new oversight plan that identifies the areas that the Committee and its subcommittees plan to oversee during the 114th Congress. Notable sections of the oversight plan include: (i) examining the governance structure and funding mechanism of the CFPB; (ii) reviewing recent rulemakings by the CFPB and other agencies on a variety of mortgage-related issues; (iii) examining the effects of regulations promulgated by Dodd-Frank on community financial institutions; and (iv) examining proposals to modify the GSEs.
Fannie and Freddie Announce Low Down Payment Programs for First-Time Homebuyers
On December 8, Fannie Mae and Freddie Mac announced new loan programs allowing for a down payment as low as three percent intended to “remove barriers for creditworthy borrowers to get a mortgage” and provide them with “a responsible path to homeownership.” The “97 percent LTV” program launched by Fannie Mae targets first-time home buyers, while the Home Possible Advantage program introduced by Freddie Mac offers mortgage loans to low- and moderate-income borrowers. The recently announced options further the agencies’ efforts to establish a more stable mortgage market.
FHFA Issues Advisory Bulletin, Tightens Oversight of Single-Family Servicers and Sellers
On December 1, the FHFA issued an advisory bulletin highlighting its supervisory expectation that Fannie and Freddie maintain the safety and soundness of their operations by closely assessing the risk profile of lenders and servicers. Under the new framework, any new lender or servicer that enters into a contract with Fannie or Freddie will undergo a thorough assessment of their capital levels, business models and whether they would be able to fulfill certain responsibilities under economic downturns. This includes buying back faulty mortgages or being able to work with borrowers to avoid foreclosure. Other risks, such as potential legal troubles, will also be examined.