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.
Fannie Mae
FHFA Outlines 2013 Goals for Fannie and Freddie
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 and Fannie Mae Reach $10 Billion Settlement Agreement
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.
CFPB Rules on Ability-to-Repay and Qualified Mortgages
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.
Court Denies Challenge to FHFA Loan Sampling Methodology
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.
FHFA Request for Comment on State-Level Guarantee Fee Pricing
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.
FHFA, Fannie and Freddie Launch Representation and Warranty Framework
On September 11, the FHFA announced that Fannie Mae and Freddie Mac are launching a new representation and warranty framework for conventional loans sold or delivered on or after January 1, 2013. The framework’s objective is to clarify lenders’ repurchase exposure and liability on future deliveries. Under the new framework: (i) lenders will be relieved of some repurchase obligations for loans that meet specific payment requirements; (ii) HARP loans will be eligible for representation and warranty relief after 12 months’ of acceptable payment history; (iii) information about exclusions from representation and warranty relief will be detailed; and (iv) Fannie Mae and Freddie Mac will make available for lenders a range of tools to improve loan quality. FHFA Release.
Increase in Fannie Mae and Freddie Mac Guarantee Fees
On August 31, the FHFA announced that it has directed Fannie Mae and Freddie Mac to raise guarantee fees on single family mortgages by an average of 10 basis points. For loans exchanged for mortgage-backed securities, the increases will be effective with settlements starting December 1. For loans sold for cash, the increases will be effective with commitments starting November 1. FHFA Release.
Fannie Mae and Freddie Mac Short Sale Guidelines
On August 21, the FHFA announced that Fannie Mae and Freddie Mac are issuing guidelines to mortgage servicers to consolidate existing short sales programs into one standard program. The guidelines go into effect on November 1. The guidelines: (i) offer a streamlined approach for borrowers most in need; (ii) enable servicers to quickly and easily qualify certain borrowers who are current on their mortgages for short sales; (iii) provide for Fannie Mae and Freddie Mac to waive the right to pursue deficiency judgments in exchange for a financial contribution when a borrower has sufficient income or assets to make cash contributions or sign promissory notes; (iv) offer special treatment for military personal with permanent change of station orders; (v) consolidate existing short sales programs into a single unified program; (vi) provide servicers and borrowers with clarity on processing a short sale when a foreclosure is pending; and (vii) provide that Fannie Mae and Freddie Mac will offer up to $6,000 to second lien holders to expedite a short sale. FHFA Release.
Steps to Expedite Wind Down of Fannie Mae and Freddie Mac
On August 17, Treasury announced modifications to the Preferred Stock Purchase Agreements between Treasury and the FHFA to expedite the wind down of Fannie Mae and Freddie Mac. The modifications include: (i) the accelerated wind down of the retained mortgage investment portfolios at Fannie Mae and Freddie Mac; (ii) an annual taxpayer protection plan; and (iii) a full income sweep of all future Fannie Mae and Freddie Mac earnings to benefit taxpayers. Treasury Release. FHFA Release.