Freddie Mac is an outlier among the three primary secondary market investors with its mid-month investor reporting cycle. In an effort to standardize the marketplace, Freddie Mac is joining Fannie Mae and Ginnie Mae by shifting its investor reporting cycle to the beginning of each month. In this regard, Freddie Mac is implementing the following changes: (i) the investor reporting cycle will run from the first day of each calendar month to the last day of such month; (ii) Freddie Mac is encouraging daily loan-level reporting, with reporting of at least one loan level-transaction detailing activity submitted no later than the 15th calendar day of each month (or next business day) (the “P&I Determination Date”); (iii) servicers will report the actual principal received and the forecasted scheduled interest based on unpaid principal balance reported at the end of the current one-month period; (iv) Freddie Mac will draft principal and interest from the servicer’s custodial account two business days after the P&I Determination Date; (v) on the fifth business day following a payoff, Freddie Mac will draft payoff proceeds, provided such payoff was reported within two business days of the payoff date, subject to certain requirements; and (vi) Freddie Mac will process and settle loan modifications on a daily basis.
Last week the Bureau of Consumer Financial Protection (“BCFP” or “Bureau”) issued guidance on the operations of financial institutions and other supervised entities in the wake of major disasters and emergencies. The guidance explains that supervised entities have flexibility under the existing regulatory framework to take action that could benefit affected consumers.
This is not the first time the Bureau has issued guidance on this topic. Last year, the Bureau released a statement on Hurricanes Harvey and Irma and another on Hurricane Maria. Unlike the prior guidance, the statement released last week does not address a particular emergency or disaster but applies to emergencies in general.
The new guidance echoes prior guidance by providing examples in which regulations allow flexibility. For instance:
- Although RESPA’s Regulation X generally prohibits residential mortgage servicers from offering a loss mitigation option to borrowers based on an evaluation of an incomplete application, the guidance notes servicers may nonetheless offer short-term loss mitigation options. Because it could be difficult for consumers impacted by a disaster to obtain and submit the necessary documents to complete a timely application, this exception may allow servicers to better assist those borrowers.
- Although ECOA’s Regulation B generally requires creditors to provide first-lien loan applicants with copies of appraisals or other written valuations promptly upon completion, or three business days prior to consummation or account opening, whichever is earlier, the guidance notes that the applicant generally may waive that timing requirement and agree to receive the copy at or before consummation or account opening (except where otherwise prohibited by law). That exception may allow supervised entities to give consumers impacted by a disaster quicker access to credit.
Unlike prior guidance that expressly “encouraged” supervised entities to take these steps, this latest guidance only states that supervised entities are permitted to use the flexibility. Continue Reading BCFP Releases New Guidance on Major Disasters and Emergencies
The ABA Business Law Section is holding its 2018 Annual Meeting in Austin, Texas on September 13-15, 2018. The Meeting will offer over 80 CLE programs and many more committee meetings and events, and will feature several Mayer Brown panelists.
Financial Services Regulatory & Enforcement (FSRE) partner Laurence Platt will participate in a panel discussion on the future of housing finance.
FSRE partner Marc Cohen will participate in a panel discussion on what the Anti-Terrorism Act and Alien Tort Statute mean for banks.
FSRE associate Eric Mitzenmacher will participate in a panel on current developments in consumer financial services.
Stuart Litwin, co-head of Structured Finance and Capital Markets, will moderate a panel on the transition away from LIBOR and similar rates.
FSRE partner David Beam will moderate a panel on the differences between P2P and interbank payment systems.
FSRE associate Matthew Bisanz will moderate a panel discussion on current trends in banking enforcement actions against individuals.
Fannie Mae and Freddie Mac (the “agencies”) have developed new uniform instruments for use with Texas home equity loans beginning January 1, 2018. Those forms will reportedly be available on the agencies’ web sites as that date approaches. In addition, the agencies are imposing a temporary moratorium on purchasing Texas home equity loans while lenders transition to new disclosures.
As we described here, Texas voters recently ratified amendments to the state constitution’s strict requirements for equity loans secured by homestead property. Among other topics, the amendments addressed fee restrictions for those loans, and loosened the limitation that a home equity loan can only be refinanced into another home equity loan that is subject to all the same strict requirements. Those amendments become effective in connection with loans made on and after January 1, 2018.
In addition, the agencies announced that they will not purchase any Texas home equity loans closed during the period of January 1 through January 12, 2018. The reason for the moratorium relates to a 12-day waiting period until closing that starts when the lender provides the borrower a mandatory disclosure describing the borrower’s rights and protections in connection with Texas home equity loans. That disclosure has been amended to reflect the recent amendments. That 12-day waiting period represents a conundrum in connection with loans for which the application process spans the new year. Accordingly, the agencies will temporarily decline to purchase Texas home equity loans closed during the first 12 days of January.
The agencies also, as expected, remind lenders that they must comply with all state law requirements, including the revised requirements for Texas home equity loans.
The Federal Housing Finance Agency (FHFA) rejected the pleas of many in the mortgage industry by adding a question about the applicant’s language preference to the future Fannie Mae/Freddie Mac Uniform Residential Loan Application (URLA) (Form 1003/65). While the FHFA is seeking to promote access to credit for consumers with limited English skills, lenders remained concerned that the revisions will raise the risk of confusing or misleading those consumers. Read more about the FHFA’s upcoming changes in Mayer Brown’s latest Legal Update.
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