On May 6, the FHFA announced that it is directing Fannie Mae and Freddie Mac to limit future mortgage acquisitions to loans that fall under the requirements for a qualified mortgage. Starting on January 10, 2014, Fannie and Freddie will no longer be able to purchase a mortgage loan that is subject to the “ability to repay” requirements under the Dodd-Frank Act if the loan: (i) is not fully amortizing; (ii) has a term of longer than 30 years; or (iii) includes points and fees in excess of 3% of the total loan amount (or such other limits for low balance loans as set forth in the rule). FHFA Release. Fannie Mae Letter. Freddie Mac Letter.
On April 5, the United States Court of Appeals for the Second Circuit affirmed the decision of the district court denying UBS’s motion to dismiss the complaint brought by the FHFA. FHFA sued UBS as conservator of Fannie Mae and Freddie Mac, alleging fraud and misrepresentation in connection with the sale of $6.4 billion in RMBS. The court held that the action was timely because it commenced within three years after FHFA was appointed conservator of Freddie Mac and Fannie Mae. The court also held that FHFA had standing to bring the action, rejecting UBS’s argument that the appointments of the FHFA’s Acting Directors were unconstitutional because the Directors had not been confirmed by the Senate. Decision.
On April 11, the FHFA announced that Fannie Mae and Freddie Mac will extend the Home Affordable Refinance Program (HARP) by two years until December 31, 2015. The program was set to expire on December 31 of this year. FHFA Release.
On March 27, the FHFA announced that Fannie Mae and Freddie Mac will offer a new streamlined loan modification initiative. Beginning July 1, servicers of Fannie and Freddie mortgage loans will be required to offer modifications to borrowers who are at least 90 days delinquent. FHFA Release. Fannie Mae Guidance. Freddie Mac Guidance.
On March 4, the FHFA released the 2013 Conservatorship Scorecard for Fannie Mae and Freddie Mac. The Scorecard details specific priorities for the GSEs in 2013 that build upon the strategic goals announced in 2012, including: (i) build a new securitization infrastructure; (ii) contract the GSEs’ dominant presence in the marketplace; and (iii) maintain foreclosure prevention activities and credit availability. FHFA Release.
Bank of America announced on January 7 that it would pay $3.6 billion to Federal National Mortgage Association (Fannie Mae) and repurchase for $6.75 billion certain residential mortgage loans sold to Fannie Mae. The agreement, which covers loans with an aggregate original principal balance of approximately $1.4 trillion and an aggregate outstanding principal balance of approximately $300 billion, resolves all outstanding and future representation and warranty claims associated with substantially all residential mortgage loans sold directly to Fannie Mae by Bank of America or Countrywide from January 1, 2000 through December 31, 2008. Press Release.
On January 10, the CFPB issued a final rule, effective January 10, 2014, requiring mortgage lenders to consider consumers’ ability to repay mortgage loans and regarding the “qualified mortgage” (QM) definition. The rule sets forth underwriting factors that must be considered (at a minimum) in making ability-to-repay determinations, which are: (i) current or reasonably expected income or assets; (ii) current employment status; (iii) the monthly payment on the covered transaction; iv) the monthly payment on any simultaneous loan; (v) the monthly payment for mortgage-related obligations; (vi) current debt obligations, alimony, and child support; (vii) the monthly debt-to-income ratio or residual income; and (viii) credit history. In addition, the rule implements product-feature prerequisites and affordability underwriting requirements for qualified mortgages, including that a consumer must have a total (back-end) DTI ratio of less than or equal to 43%. CFPB Release. CFPB Final Rule. CFPB Summary of Final Rule. CFPB Fact Sheet.
In addition, on January 10, the CFPB issued a concurrent proposed rule amendment to the ability-to-repay rule which would, among other things, include exemptions for: (i) certain nonprofit creditors; (ii) certain homeownership stabilization programs; and (iii) certain Fannie Mae and Freddie Mac refinancing programs. Comments on the proposed rule must be submitted by February 25. CFPB Proposed Rule.
On December 3, Judge Denise Cote of the Southern District of New York denied a joint motion by all defendants across fifteen related RMBS actions brought against major financial institutions by the Federal Housing Finance Agency, as conservator for Fannie Mae and Freddie Mac (“GSEs”). The claims in the case arise out of certificates purchased by the GSEs from 449 different securitizations backed by roughly 1.1 million mortgage loans. The FHFA plans to reunderwrite a sample of those loans and seeks to extrapolate the results of that sample to the entire loan pools; the defendants’ motion sought an order excluding the results of the sampling from evidence at the trial of the actions, challenging the methodology that the FHFA intends to use to select the sample. The Court rejected the defendants’ arguments, finding that at most they raised questions about the evidentiary weight that should be assigned to the samples, rather than the question whether they should be admitted into evidence. Order.
On September 20, the FHFA released a notice presenting an approach to adjust the guarantee fees that Fannie Mae and Freddie Mac charge on single-family mortgages in states where costs related to foreclosure practices are statistically higher than the national average. FHFA expects to direct Fannie and Freddie to implement pricing adjustments in 2013. Comments must be submitted within 60 days after publication in the Federal Register. FHFA Release. Federal Register Notice.