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On May 15, 2020, the House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions Act (H.R. 6800, or the “HEROES Act”). The legislation is a controversial behemoth. It would provide another round of stimulus checks and student loan forgiveness, impose a 12-month eviction moratorium, expand mortgage forbearance relief, provide a

All participants in the housing industry are grappling with the effects of COVID-19, from borrowers to originators to servicers.  The emergency has influenced all facets of the mortgage origination and servicing business, prompting additional restrictions in some instances while triggering flexibilities and relaxed requirements in others.  Flood insurance requirements, which are usually strict and inflexible, have not been immune.

On March 28, 2020, the Assistant Administrator for the Federal Insurance and Mitigation Administration of the Federal Emergency Management Agency (“FEMA”) released a memorandum notifying National Flood Insurance Program (“NFIP”) insurers of an extension of the NFIP premium payment grace period.  Under normal circumstances, an insurer must receive the payment to renew an NFIP policy within 30 days of expiration.  However, recognizing the difficulties experienced by many policyholders (including loss of income and potential disruptions in employment), the administrator has extended the 30-day grace period to 120 days for all policies with expiration dates between February 13, 2020 and June 15, 2020.
Continue Reading Flood Insurance Policy Renewal Grace Period Extended by FEMA, and One Regulator Applies this Grace Period to Force Placement Notices

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.
Continue Reading Fannie and Freddie to Relax Servicer Advance Requirements for Loans in Forbearance

Each day, new jurisdictions issue orders for businesses to cease operations and for residents to stay at home. The orders typically exempt “essential businesses,” including certain businesses and workers in the financial sector. Those jurisdictions recognize that consumer financial services businesses provide essential access to deposits, credit, and payment systems. Often, though, the orders’ terminology

In February, the Department of Defense (“DoD”) amended its interpretation of the Military Lending Act (“MLA”). The amendment should make it easier for many lenders to provide guaranteed asset protection (“GAP”) insurance or other credit insurance in connection with auto loans to covered servicemembers or their dependents.

MLA and “Q&A #2”

The MLA prohibits creditors

We recently discussed the efforts of the Alternative Reference Rates Committee (ARRC) to prepare for the upcoming discontinuance of LIBOR as an index rate for residential mortgage and consumer loans. Our alert examined ARRC’s recommendations regarding an appropriate substitute rate (the Secured Overnight Financing Rate, or SOFR) and ARRC’s recommended changes to implement SOFR.  We

On February 6, 2019, Mayer Brown’s Kris Kully will participate on a panel to discuss lingering questions about mortgage loan originator compensation, at HousingWire’s engage.talent event in Dallas. The event features experts sharing tools for attracting and retaining top-tier mortgage executives, branch managers, loan officers, and underwriters.

The Federal Housing Finance Agency is continuing to consider how Fannie Mae, Freddie Mac, and the Federal Home Loan Banks should address Property Assessed Clean Energy (“PACE”) programs. PACE programs are established by state and local governments to allow homeowners to finance energy-efficient projects through special property tax assessments. The obligation to repay results, in

According to the Mortgage Bankers Association, the Consumer Financial Protection Bureau intends to revise its Qualified Mortgage definition by moving away from a debt-to-income ratio threshold, and instead adopting a different test, such as one based on the loan’s pricing. The CFPB also apparently indicated it may extend, for a short time, the temporary QM

The agencies responsible for the securitization credit risk retention regulations and qualified residential mortgages (“QRMs”) are asking for public input as part of their periodic review of those requirements. Comments on the review are due by February 3, 2020.

Five years ago, in response to the Dodd-Frank Act, an interagency final rule provided that a securitizer of asset-backed securities (“ABS”) must retain not less than five percent of the credit risk of the assets collateralizing the securities. Sponsors of securitizations that issue ABS interests must retain either an eligible horizontal residual interest, vertical interest, or a combination of both. The Act and the rule establish several exemptions from that requirement, including for ABS collateralized exclusively by residential mortgages that qualify as “qualified residential mortgages,” as defined in the rule.

The Act provides that the definition of QRM can be no broader than the definition of a “qualified mortgage” (“QM”), as that term is defined under the Truth in Lending Act (“TILA”) and applicable regulations. QMs are a set of residential mortgage loans deemed to comply with the requirement for creditors to determine a borrower’s ability to repay. The Office of the Comptroller of the Currency (“OCC”), Federal Reserve Board, Federal Deposit Insurance Corporation (“FDIC”), Securities and Exchange Commission (“SEC”), Federal Housing Finance Agency (“FHFA”), and Department of Housing and Urban Development (“HUD”) decided to define a QRM in full alignment with the definition of a QM. The agencies concluded that alignment was necessary to protect investors, enhance financial stability, preserve access to affordable credit, and facilitate compliance. Their rule also includes an exemption from risk retention for certain types of community-focused residential mortgages that are not eligible for QRM status but that also are exempt from the TILA ability-to-pay rules under the TILA. The credit risk retention requirements became effective for securitization transactions collateralized by residential mortgages in 2015, and for other transactions in 2016.

The agencies of the credit risk retention regulations committed to reviewing those regulations and the definition of QRM periodically, and in coordination with the CFPB’s statutorily mandated assessment of QM.
Continue Reading Agencies to Review QRM / Securitization Credit Risk Retention Rule