When, if at all, should a mortgage lender or servicer be required to conduct business in a language other than English when the consumer has expressed a preference that language? The Federal Housing Finance Agency (FHFA) is seeking input on actions Fannie Mae and Freddie Mac could take to promote access to mortgage credit for qualified borrowers with limited English proficiency, and to ensure those borrowers have access to information to understand the mortgage process.  This newest effort by the FHFA follows earlier efforts by that agency and others in the industry, but concerns about increased costs, legal risk, regulatory consequences continue to arise.

Mayer Brown’s latest Legal Update discusses the FHFA’s request and many of the complexities that quickly arise when considering how to access LEP borrowers.

On the theory that Fannie Mae and Freddie Mac cannot remain in conservatorship forever, on April 20, 2017, the Mortgage Bankers Association (MBA) issued a proposal for reform of Fannie Mae and Freddie Mac, titled “GSE Reform: Creating a Sustainable, More Vibrant, Secondary Mortgage Market” (accessible at the MBA’s GSE Reform web page). While the ultimate fate of any GSE reform effort in the current political environment is uncertain, there is at least a consensus that the Congress and the Trump administration should undertake such an effort, and each has promised to do so.  The MBA’s proposal is intended to provide a voice for the mortgage banking industry in that process.

The proposal includes a mixture of changes to the GSE system as it exists today, and maintenance of existing processes and structures the MBA believes work well. It proposes a replacement or conversion of the GSEs with “Guarantors,” which would guaranty mortgage backed securities (MBS).  The Guarantors would be structured as “private utilities”, meaning that they would be privately owned, but established through a government charter for the primary or exclusive purpose of providing the MBS guaranty, and heavily regulated.  Think of a privately owned electric company, that is granted the right to participate in the electricity market, on the condition that it complies with various regulatory requirements and oversight, including rate approvals.  The proposal even quotes from a paper regarding investor-owned electrical utilities.  The expectation, as stated in the proposal, is that the Guarantors would be “low-volatility companies that would pay steady dividends over time, not growth companies that aggressively seek to expand market share or generate above-market returns.”  Guarantors’ MBS guaranty would then be supplemented with an explicit government guaranty of the MBS, which would only be used if a Guarantor failed, and would only be used to support the MBS, not the Guarantors and their private investors.

The following is an outline of key elements of the MBA’s proposal, divided into elements reflecting changes to the current system, and those reflecting continuation of the current system in a similar form. Continue Reading MBA Issues Proposal on GSE Reform