While residential mortgage lenders are facing tough headwinds driven by rising interest rates and low housing volume, the current market presents opportunities for savvy investors looking at mortgage servicing rights (“MSRs”). The current mortgage market is supported by non-bank mortgage originators and servicers who lack the same access to capital and liquidity as traditional banks.
Freddie Mac Springs New and Potentially Concerning Requirements on Servicers for Custodial Accounts
Residential mortgage servicers are obligated to indemnify Freddie Mac for loss of funds in custodial accounts or delays in access to the funds in custodial accounts, even when they comply with all of their obligations to Freddie Mac, based on Freddie Mac Bulletin 2023-10, issued on April 12, 2023. The Bulletin is an apparent response to recent bank failures, and – in less of a surprise – also includes new standards for eligible banks and rules for titling and use of clearing accounts. The Bulletin is immediately effective, however, and therefore may require prompt action, depending on whether or a not a servicer’s accounts already meet the new requirements.
Mayer Brown Page for Silicon Valley and Signature Bank Bank Legal Issues
Mayer Brown has established a web page through which interested persons can access resources and content related to the recent collapses of Silicon Valley Bank (SVB) and Signature Bank, and the impacts on depositors, borrowers and the market. The main page is here, and direct access to recent webinars is available under the “Events”
Fannie and Freddie Confirm Choice of SOFR as Replacement for LIBOR in Existing Mortgage Loans
Although the transition from LIBOR interest rates has been planned for quite some time now, Fannie Mae and Freddie Mac recently provided additional details of the necessary changes to outstanding adjustable rate mortgage loans that currently are linked to LIBOR indices. As expected, these changes largely mirror the changes mandated in the recently enacted LIBOR Act, described below, as well as current practice for new Fannie Mae and Freddie Mac loans. Consequently, loan servicers can now solidify plans for adjustments to the rate calculations this summer, but should take care to do so accurately.
CFPB Report on Servicers’ COVID-19 Response Signals Enforcement Priorities
On August 10, 2021, the CFPB’s Office of Supervision Policy published a report titled Mortgage Servicing COVID-19 Pandemic Response Metrics: Observations from Data Reported by Sixteen Servicers (“Servicing Metrics Report”). Although the Servicing Metrics Report doesn’t allege any compliance deficiencies in the servicers’ performance, the topics addressed in the report and the CFPB’s accompanying press release indicate areas of focus for the CFPB, and servicers should take note.
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Supreme Court Invalidates Debt-Related Provision Of The Telephone Consumer Protection Act Under The First Amendment
The Telephone Consumer Protection Act of 1991 (TCPA) prohibits most automated calls or texts to cell phones, but it makes an exception for calls or texts that seek to collect on U.S. government debts. Today, the Supreme Court held that this exception violates the First Amendment because it applies to only certain types of speech.
CFPB Issues Guidance for Transfers of Residential Mortgage Servicing
Against the backdrop of the COVID-19 pandemic and the economic stress it is imposing on residential mortgage borrowers, lenders and servicers, the Consumer Financial Protection Bureau recently released a compliance bulletin and policy guidance regarding the handling of information and documents in mortgage servicing transfers. While not specifically motivated by the COVID-19 crisis, Bulletin 2020-02
Fannie and Freddie to Relax Servicer Advance Requirements for Loans in Forbearance
Today, the Federal Housing Finance Agency (“FHFA”) announced an eagerly awaited policy allowing Fannie Mae and Freddie Mac (the “Agencies”) to address one aspect of the liquidity crisis for mortgage servicers facing mounting advance obligations due to forbearances. Going forward, once a servicer of single-family mortgage loans pooled into an Agency mortgage-backed security has advanced four months of missed payments on a loan in forbearance, it will have no further obligation to advance scheduled payments of principal and interest.[1] The FHFA reports that this applies to all Agency servicers.
This answers one of the four main questions that servicers have asked about forbearance required under the CARES Act in the context of Agency servicing advances.
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PTAP/C19 – The “Last Resort” for Ginnie Mae Issuers Facing a Liquidity Crunch
Residential mortgage loan servicers, trade associations and various members of Congress have been urging the Department of Treasury and the Federal Reserve Board to provide a dedicated servicing advance facility. On April 10, 2020, Ginnie Mae did just that, announcing the terms of its much-anticipated Pass-Through Assist Program for Issuers of mortgage-backed securities that are
Federal Reserve’s Updated TALF Program Excludes Support for Mortgage Servicing Advance Financing
As the residential mortgage community is aware, loan servicers are facing significant financial burdens from the servicing advance obligations associated with the loan forbearance mandates of the CARES Act. Over the past few days, there has been considerable reporting and reaction to the statements by the Director of the Federal Housing Finance Agency that Fannie Mae and Freddie Mac will not provide financial assistance to servicers facing these burdens. On the heels of those statements, the Federal Reserve has unfortunately eliminated another potential source of support for those servicers.
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