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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.

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.…

Continue Reading Freddie Mac Springs New and Potentially Concerning Requirements on Servicers for Custodial Accounts

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.…

Continue Reading Fannie and Freddie Confirm Choice of SOFR as Replacement for LIBOR in Existing Mortgage Loans

On April 6, 2022, the Federal Housing Finance Agency (“FHFA”) announced that Fannie Mae and Freddie Mac will require servicers to suspend foreclosure activities for up to 60 days if the servicer has been notified that a borrower has applied for assistance from the Homeowner Assistance Fund (“HAF”). HAF was established by the American Rescue Plan Act of 2021, and the program is designed to distribute funds to states, tribes, and territories to help homeowners who have been financially impacted by the pandemic with housing-related costs. For example, among other uses, the funds may be used to reduce mortgage principal or pay arrearages so that homeowners can qualify for affordable loan modifications. The specific HAF programs available to borrowers and the required application procedures depend on the borrowers’ state or territory.

Many COVID-related borrower protections expired in 2021, including federal foreclosure moratoriums and the Consumer Financial Protection Bureau’s (“CFPB” or “Bureau”) temporary Regulation X restrictions on foreclosure initiations. However, the CFPB estimated that, as of March 1, 2022, over 700,000 borrowers remain in forbearances and are at risk of foreclosure. According to FHFA Acting Director Sandra L. Thompson, FHFA’s foreclosure suspension for borrowers who applied for HAF “will provide borrowers who need temporary mortgage assistance with additional time to be evaluated for relief through their state’s approved Homeownership Assistance Fund.”

Fannie Mae and Freddie Mac have issued guidance providing that servicers of loans sold to either entity must delay initiating any judicial or non-judicial foreclosure process, moving for a foreclosure judgment or order of sale, or executing a foreclosure sale for up to 60 days if the following criteria are met:…
Continue Reading FHFA Suspends Foreclosure for Borrowers Applying for HAF Assistance

The U.S. Federal Housing Finance Agency’s (“FHFA”) draft strategic plan, which we discussed in an earlier post, sets forth FHFA’s goals and objectives for the next four years. Unsurprisingly, FHFA’s recent focus on fair lending issues is reflected in the plan. Over the course of the past year, FHFA has made numerous strides in…

On February 9, 2022, the U.S. Federal Housing Finance Agency (“FHFA”) released its Draft FHFA Strategic Plan: Fiscal Years 2022-2026 (the “2022 Strategic Plan”) for public input.

This year, FHFA added a novel objective to this plan – to identify options for incorporating climate change into FHFA’s governance of the entities it regulates.

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Climate change is a serious threat to the US housing finance system. That is the conclusion reached by the Federal Housing Finance Agency (“FHFA”) in a December 27th statement. In the statement, Acting FHFA Director Sandra L. Thompson recognizes that Fannie Mae, Freddie Mac, and the Federal Home Loan Banks have an important leadership…

The set of federal agencies tasked with determining which residential mortgage loans may be exempt from credit risk retention in securitizations are continuing to think about it. Late last month, the Securities and Exchange Commission, Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve Board, Federal Housing Finance Agency (“FHFA”), and the Department of Housing and Urban Development (together, the “Agencies”) announced that they hope to have more answers by the end of this year. It seems likely those Agencies will continue to define those exempt mortgage loans (called “qualified residential mortgages,” or “QRMs”) in a manner that is fully aligned with the “qualified mortgage” (“QM”) definition of the Consumer Financial Protection Bureau (“CFPB”) (which interestingly is not among the Agencies tasked with the QRM/risk retention rules). If it were that easy, though, the Agencies probably would have done that by now. Of course, the CFPB’s QM definition has been a moving target itself.
Continue Reading Agencies Still Pondering QRM

Earlier this year, the Federal Housing Finance Agency (“FHFA”) issued a Request for Input (“RFI”) on the risks of climate change and natural disasters to the national housing finance markets. The RFI posed 25 questions on how FHFA can best identify, assess and respond to those risks for the entities FHFA regulates (Fannie Mae, Freddie…

The Consumer Financial Protection Bureau is finalizing its proposal to extend until October 1, 2022 the mandatory effective date of the new Qualified Mortgage definition based largely on a loan’s annual percentage rate (the “APR-Based QM”). For applications received prior to that date, lenders seeking to make QMs may opt for either the original QM…