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Freddie Mac Announces Numerous Servicing Requirements
On June 14, Freddie Mac issued Bulletin 2013-10 to announce servicing policy changes with regard to Hurricane Sandy, foreclosure and alternatives to foreclosure, and other servicing issues. The Bulletin announces that servicers must submit any Hurricane Sandy exterior property inspection reimbursements by September 16, 2013, using a new template included in the Bulletin. Regarding foreclosures, the Bulletin, among other things, (i) sets the parameters under which servicers may utilize bulk trial foreclosures as an alternative foreclosure process in Florida, (ii) updates requirements for requests related to the preservation of deficiency rights, (iii) revises FICO score seasoning requirements for standard short sales and deeds-in-lieu of foreclosure (DILs), (iv) revises property inspection and closing requirements for DILs and adds a MLS requirement for short sales, and (v) removes, in most instances, the requirement that a servicer obtain a copy of a borrower’s tax transcript or most recent signed federal income tax return to be evaluated for HAMP. Among numerous other servicing policy updates, the Bulletin also (i) specifies that Freddie Mac does not reimburse for credit reports obtained in servicing activities, and (ii) requires servicers to notify Freddie Mac within 24 hours of blocking or rejecting a mortgage or mortgage transaction based on a valid match to the OFAC list of Specially Designated Nationals and Blocked Persons.
Fannie Mae Amends Bifurcated Mortgage Loan Obligations, Announces Miscellaneous Servicing Guide Updates
On June 12, Fannie Mae issued two Servicing Guide Announcements relating to bifurcated mortgages, mortgage payments, valuations, and processing IRS forms. Announcement SVC 2013-12 clarifies and adds numerous obligations for servicers and responsible parties in connection with bifurcated mortgage loans – loans or properties for which the current servicer is not the responsible party for the selling representations and warranties and/or for the prior servicing responsibilities or liabilities. The announcement addresses, among other topics, (i) issuance of repurchase requests and statements, requests for a make whole payment, or requests for indemnification, (ii) remittance of bifurcated repurchase price and appeal process, (iii) hiring of a servicer and a servicer’s failure to comply, (iv) mortgage loan files, record retention, and release of records, and (v) disputes between responsible parties and servicers. All of the policy changes in 2013-12 take effect on September 1, 2013. Announcement SVC 2013-11 describes policy changes regarding (i) processing and applying mortgage loan payments, (ii) obtaining a property valuation for Fannie Mae conventional mortgage loan modifications, and (iii) processing IRS Form 4506-T and Form 4506T-EZ. While servicers are encouraged to implement the changes noted in 2013-11 immediately, servicers are not required to do so until October 1, 2013.
Nevada Enacts Homeowner's Bill of Rights
On June 3, Nevada enacted a Homeowner’s Bill of Rights, SB 321, to establish protections from foreclosure for owner-occupied property securing residential mortgage loans. The Nevada bill, among other things, (i) requires that at least 30 calendar days before recording pre-foreclosure documents or commencing a judicial foreclosure action and at least 30 calendar days after a borrower’s default, the mortgage servicer, mortgagee or beneficiary of the deed of trust must provide to the borrower certain information concerning the borrower’s account, the available foreclosure prevention alternatives, and a statement of the facts supporting the right of the mortgagee or beneficiary to foreclose, (ii) requires that an institution contact, or attempt to contact, the borrower before filing pre-foreclosure documents or commencing a foreclosure, (iii) prohibits dual tracking, (iv) establishes “single point of contact” rules, and (v) allows borrowers in a judicial foreclosure action to elect to participate in a state foreclosure mediation program. These new requirements apply to notices of default and elections to sell that are recorded on or after October 1, 2013. The bill exempts institutions that foreclosed on 100 or fewer owner-occupied homes in the preceding annual reporting period, as established by their primary regulator.
Florida Enacts Fast-Track Foreclosure Bill
On June 7, Florida enacted HB 87 to immediately expedite the state’s judicial foreclosure process, including with regard to pending cases. The bill amends the state’s alternative foreclosure procedure to, among other things, (i) allow any lienholder, not only the mortgagee, to initiate the procedure, and (ii) establish new fast-track court procedures. The bill also (i) reduces the statute of limitations for deficiency judgments on a foreclosure action from five years to one year, (ii) requires the foreclosing party to provide information upon case filing regarding a lost, destroyed, or stolen promissory note, (iii) defines “adequate protections” in cases where there is a lost, destroyed, or stolen note, and (iv) adds protections for purchasers of property at a foreclosure sale. The bill took effect immediately.
CFPB Publishes Additional Mortgage Rule Compliance Guides, Launches Mortgage Rule Implementation Web Page
On June 7, the CFPB published a loan originator rule compliance guide and a mortgage servicing rules compliance guide. As with other prior guides it has released, the CFPB cautioned that the guides are not substitutes for the rules and the Official Interpretations, and that the guides do not consider other federal or state laws that may apply to the origination or servicing of mortgage loans. On June 13, the CFPB announced a new web page that provides, in one location, the various compliance guides and other mortgage rule implementation materials prepared by the CFPB.
Oregon Supreme Court Rulings Allow Nonjudicial Foreclosures to Proceed
On June 6, the Oregon Supreme Court issued a pair of rulings resolving issues around the role of MERS in the non-judicial foreclosure process and allowing such foreclosures to move forward. In Brandrup v. ReconTrust Company, N. A. S060281, slip op. (Oregon Jun. 6, 2013) and Niday v. GMAC Mortgage LLC, SC S060655, 2013 WL 2446524 (Oregon Jun. 6, 2013), the court answered a series of certified questions related to the role of an electronic mortgage registry as the beneficiary listed on trust deeds and applied those answers to the appeal of a state foreclosure action. The court held that, under the Oregon Trust Deed Act: (i) a mortgage registry that is neither a lender nor successor to a lender may not be a beneficiary of a trust deed; (ii) a mortgage registry is not eligible to serve as beneficiary where the trust deed provides that the registry holds only the legal title to the interests granted by the borrower, but, if necessary to comply with law or custom, the registry has the right to exercise any or all of those interests; (iii) assignments of a trust deed that result from the transfer of the secured obligation are not required to be recorded; and (iv) a mortgage registry cannot hold and transfer legal title to a trust deed as nominee for the lender, after the note secured by the trust deed is transferred from the lender to a successor or series of successors. The court also explained that, “even if MERS lacks authority to act as the trust deed's beneficiary, it may have authority to act on behalf of the beneficiary if it can demonstrate that it has an agency relationship with the beneficiary and that the agency agreement is sufficiently expansive.” The court added that this would apply equally to the issue of the registry’s authority to foreclose the trust deed. Effectively allowing nonjudicial foreclosures involving MERS as the beneficiary on trust deeds to proceed, the Court stated that “[i]n either case, MERS' authority to act as the beneficiary's agent depends on who succeeded to the lender's rights, whether those persons manifested consent that MERS act on their behalf and subject to their control, and whether MERS has agreed to so act.”
Oregon Expands Foreclosure Mediation Program
On June 4, Oregon enacted SB 558, which creates a foreclosure mediation program for judicial foreclosures. In 2012, Oregon enacted a law that required for nonjudicial foreclosures that a beneficiary (i) enter into mediation with a grantor for the purpose of negotiating a foreclosure avoidance measure, and (ii) notify a grantor if they are not eligible for any foreclosure avoidance measure or if the grantor has not complied with the terms of a foreclosure avoidance measure. The new law expands that program to cover judicial foreclosures and makes changes to the structure of the overall mediation program.
Hawaii Expands Authority to Investigate Mortgage Servicers, Increases Servicer Licensing Fees
On June 3, Hawaii enacted SB 1070, a bill related to the supervision and licensing of mortgage servicers. The bill grants the Commissioner of Financial Institutions additional authority to conduct investigations and examinations of mortgage servicers. The bill allows the Commissioner to (i) subpoena or otherwise obtain access to servicer accounts, records, documents and other information; (ii) hire investigations staff and retain outside consultants, and (iii) charge examination or investigation fees and expenses. The bill also increases initial servicer application fees from $500 to $675 and renewal fees from $250 to $425. The bill took effect immediately.
Freddie Mac Extends Deadline for Servicer Law Firm Selection, Retention Requirements
On May 28, Freddie Mac issued Bulletin 2013-9, which extends for two months the date by which servicers must adhere to certain new requirements related to the management of law firms for default servicing, bankruptcies, and related litigation. Servicers now have until August 1, 2013 to comply with the changes related to selection and retention of firms, firm minimum requirements, training and contracting, referral of default-related legal matters, prohibitions, and use of connectivity and invoice-processing systems.
Minnesota Adds Loss Mitigation Requirements, Prohibits Dual Tracking
On May 24, Minnesota enacted SF 1276, which adds pre-foreclosure requirements for most mortgage servicers. Effective August 1, 2013, servicers must notify a borrower in writing of available loss mitigation options before referring the loan for foreclosure. Servicers also must, after receiving a modification or loss mitigation request, exercise reasonable diligence in obtaining documents and information from the mortgagor to complete a loss mitigation application, facilitate the submission and review of loss mitigation applications, and give the mortgagor a reasonable amount of time to provide the required documents. The law further requires servicers to timely review and offer a modification to eligible mortgagors, or timely offer other loss mitigation options for which the mortgagor is eligible. Effective October 31, 2013, except under certain circumstances, servicers generally are prohibited from (i) referring a loan to foreclosure while a loss mitigation or modification request is pending, and (ii) moving for a foreclosure order on loans that already have been referred if the servicer subsequently receives a loss mitigation application. The law also requires servicers to halt foreclosure sales in some instances and prohibits a servicer from moving for a foreclosure order if a mortgagor is in compliance with the terms of a modification or if a short sale has been approved.