InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Freddie Mac Announces Numerous Servicing Policy Updates
On April 15, Freddie Mac issued Bulletin Number 2013-6, which announces numerous revisions to servicing requirements. The bulletin updates the allowable amounts for attorney fees for default-related legal services and details changes to the reimbursement process for such fees. Freddie Mac also reminds servicers about changes to foreclosure sale bidding on first lien mortgages. The bulletin explains that because Freddie Mac may need to verify directly with mortgage insurers the presence and nature of mortgage insurance coverage, servicers and sellers are required to direct mortgage insurers in writing to release data to Freddie Mac upon request. In addition, the bulletin (i) reminds servicers of the reporting activities they must undertake after extending trial periods for borrowers who subsequently file for bankruptcy during the trial period plan and provides requirements on reporting the optional interim month, (ii) revises Servicing Success Program requirements related to Servicer Success File Reviews and the Servicer Performance Profile, (iii) updates the Guide to reflect the retirement of the Freddie Mac Home Affordable Foreclosure Alternatives initiative, and (iv) announces other miscellaneous form and Guide updates.
Fannie Mae Revises Execution of Legal Documents Policy, Changes Bidding Instructions Format
On April 17, Fannie Mae issued Servicing Guide Announcement SVC-2013-09, which revises Fannie Mae’s execution of legal documents policy related to (i) quitclaim deeds, (ii) limited power of attorney, (iii) execution of assumptions, and (iv) releases of security. The policy changes are effective immediately. Also on April 17, Fannie Mae issued a servicing notice to inform servicers of a change in the format for bidding instructions to help clarify the situations in which specific bidding instructions must be used.
FHFA Announces Two-Year HARP Extension
On April 11, the FHFA announced that Fannie Mae and Freddie Mac will extend the Home Affordable Refinance Program (HARP) to December 31, 2015. The program was set to expire at the end of 2013. In addition, the FHFA plans to launch a nationwide campaign to educate consumers about HARP. The FHFA announcement also includes HARP frequently-asked-questions and eligibility criteria for a HARP refinance.
Fannie Mae Updates Delinquency Status Reporting Policies
On April 10, Fannie Mae issued Servicing Guide Announcement SVC-2013-08, which introduces a delinquency status code hierarchy and updates delinquency status code definitions. The hierarchy requires servicers to report the most appropriate delinquency status code based on priority level, using a six level priority hierarchy. The announcement explains that when multiple delinquency status codes are applicable to an individual loan, the servicer must use the appropriate delinquency status code in the highest priority, though Priority Level 1 through 3 status codes are mutually exclusive. The changes will take effect for the February 2014 delinquency status code reporting cycle (for January 2014 activity), though Fannie Mae encourages servicers to implement the new policies as soon as possible.
Bank Regulators Announce First Foreclosure Review Payments
On April 9, the Federal Reserve Board and the OCC announced that payments to borrowers impacted by allegedly improper foreclosure practices would begin on April 12, 2013. The planned payments range from $300 to $125,000, and will be sent to certain borrowers whose mortgages were serviced by 11 of the 13 mortgage servicers subject to recently amended consent orders that replaced requirements related to the Independent Foreclosure Review process with $3.6 billion in cash payments and $5.7 billion in other assistance to 4.2 million borrowers. Payments to borrowers with mortgages serviced by two other servicers will be announced later. The payments will be sent in several waves, with the last wave expected to be sent in mid-July 2013. The announcement notes that the regulators categorized borrowers according to the stage of their foreclosure process and the type of possible servicer error. Then, amounts were determined for each category using the financial remediation matrix published in June 2012 as guidance, but also incorporating input from various consumer groups. The Board and the OCC also published a chart of payment amounts and the number of borrowers identified for each category.
State Law Update: Indiana Amends Lien Release Provisions
On April 1, Indiana enacted a bill to retroactively amend certain lien release provisions. The bill, HB 1079, provides that if the record of a mortgage or vendor's lien was created before July 1, 2012 and does not show the due date of the last installment, the mortgage or vendor's lien expires 20 years after the date of execution of the mortgage or vendor's lien. If the execution date is omitted, the lien expires 20 years after the lien is recorded. Prior to this change, all liens expired after 10 years. The bill also (i) makes exceptions to the expiration period if a foreclosure action is brought not later than the expiration period, and (ii) removes language that prohibits a person from maintaining an action to foreclose a mortgage or enforce a vendor's lien if the last installment of the debt secured by such lien has been due more than 10 years.
FDIC Announces Teleconference Series on CFPB Mortgage Rules
On April 9, the FDIC announced a series of nationwide banker teleconferences focused on the CFPB’s final mortgage rules. The first teleconference call is scheduled for May 2, 2013 and will focus on the ability-to-repay/qualified mortgage rule, the new escrow requirements, and certain aspects of the loan originator compensation rule. The second call is scheduled for May 15, 2013 and will address the CFPB’s final rule on mortgage servicing. The final call is scheduled for June 6, 2013 and will focus on the loan originator compensation rule and HOEPA amendments. The sessions are free, but individuals are required to register.
State Law Update: North Dakota Amends Mortgage Late Payment Fee Restrictions
Last month, North Dakota enacted SB 2136, which altered provisions related to late mortgage payment fees. Effective August 1, 2013, a charge for a late payment penalty may be imposed only if the amount of the late charge or the method of calculation of the late charge has been agreed to by the parties in the loan documents that are signed by the borrower. Under current law, servicers can charge up to $15 or 15% of the late payment, whichever is less, unless otherwise agreed to in the real estate note or mortgage. The new law also removes language stating that any contract attempting to make the rate of interest higher after maturity is void as to the increase of interest. Instead, the new law will allow parties to agree in writing to a different rate of interest after maturity.
Fannie Mae Announces Numerous Servicing Policy Changes
On April 3, Fannie Mae issued Servicing Guide Announcement SVC-2013-07, which outlines policy updates regarding (i) lender-placed property insurance requirements, (ii) military indulgence reporting and reimbursement processes, and (iii) scheduled/schedule remittance payoffs. Effective immediately, the announcement retracts the lender-placed insurance requirements introduced in Announcement SVC-2012-04, but the hazard insurance claims processing requirements in that 2012 announcement remain in effect. Fannie Mae also replaced in its entirety the sections of Part III, Chapter 1, Exhibit 1: Military Indulgence, that relate to reporting to Fannie Mae and requesting reimbursement for advances. The announcement includes an attachment with the new section, and notes that servicers also must retain the servicemember's orders and the completed Request for Military Indulgence (Form 180) in the individual mortgage loan file as long as the military indulgence remains in effect. Finally, also effective immediately, the announcement allows a subservicer greater flexibility in deciding whether it will consider any full payoff received on the first business day of a month as though it was received in the prior calendar month. Subservicers may either select one option for all loans serviced on behalf of Fannie Mae or elect the option based on its individual agreement with the servicer for which is it subservicing Fannie Mae mortgage loans.
Housing Counselor Survey Alleges Banks Fail to Comply with National Mortgage Settlement.
On April 3, a California borrower advocacy organization published the results of its survey of housing counselors, which the organization claims reveals that problems persist with the implementation of the national servicing settlement’s servicing standards, including with regard to single points of contact, dual tracking, timelines, and documentation. The report also claims that borrowers of color and other groups face additional challenges to obtaining relief under the settlement. The report recommends that (i) the National Mortgage Settlement Monitor and state attorneys general collect, analyze and report the race, ethnicity, gender, and census tract of those who have received assistance and those who have not; (ii) the OCC and the Federal Reserve Board collect, analyze and make public the same data beyond the national settlement, and include all loss mitigation activity; (iii) the CFPB promptly issue a rule to establish new HMDA categories; (iv) the Monitor impose penalties on outliers; (v) the Monitor, the CFPB, and state AGs tighten rules around “complete loan mod app”, servicing transfers, and widows; (vi) regulators prioritize in the revamped Independent Foreclosure Review process principal reduction relief, keeping people in their homes, and restoring wrongful foreclosure victims to their homes by forcing servicers to go back through their files, rescind improper foreclosure sales, and fix mistakes; (vii) authorities provide more financial support for housing counseling and legal services; and (viii) regulators ensure that servicers have sufficient capacity and training to work with homeowners at risk of foreclosure.