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

In a development that industry observers may have overlooked amid more pressing concerns caused by the COVID-19 pandemic, the Idaho legislature enacted a measure that will require mortgage servicers to be licensed by July 1, 2020, unless the date is extended. With last month’s enactment, Idaho joins the majority of states that license mortgage servicing and provides a useful reminder that, when things eventually return to some degree of normalcy, non-pandemic-related compliance obligations will remain. This blog post discusses Idaho’s new mortgage servicer licensing obligation and other pertinent provisions of the legislation.

The New Mortgage Servicer Licensing Obligation

Idaho House Bill 401 (“H401” or the “Bill”) amends the Idaho Residential Mortgage Practices Act (Idaho Code §§ 26-31-101 et seq.) (the “RMPA” or the “Act”) to include mortgage servicing among the activities that trigger licensing under the Act. Continue Reading Regulatory Life Goes On—Idaho Legislature Remained in Session During COVID-19 Pandemic to License Mortgage Servicers

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

Since Mayer Brown issued a Legal Update describing guidance issued by Fannie Mae, Freddie Mac (together with Fannie Mae, the “GSEs”), the Federal Housing Administration and the Veterans Administration (“VA”) relaxing requirements with respect to appraisals and income/employment verification during the COVID-19 emergency, the agencies have continued to revise their guidance as the market adjusts to the challenges encountered by mortgage lenders. The GSEs and the VA have all issued revised letters, and the US Department of Agriculture (“USDA”) issued new guidance to provide relief in connection with guaranteed single-family loans. Below we describe the USDA’s guidance regarding appraisals and employment verifications performed in connection with RHS loans and provide updates on the changes made by the GSEs and the VA to their appraisal guidance. Continue Reading The GSEs and Other US Federal Agencies Issue New and Revised Guidance for Appraisals and Verifications of Employment

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 in need of funding for the increased amount of servicer advances due to the COVID-19 pandemic.  Referred to as “PTAP/C19” for short, according to Ginnie Mae this program will “support Issuers in their administration of borrower relief measures, such as extended forbearance and moratoriums on foreclosures and evictions, announced by the federal agencies providing the mortgage insurance or guaranty.”

Read more in Mayer Brown’s Legal Update.

 

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.

Continue Reading Federal Reserve’s Updated TALF Program Excludes Support for Mortgage Servicing Advance Financing

Nevada requires nonexempt persons making unsecured or other non-real estate secured commercial or business loans, or non-real estate-secured consumer loans, to obtain a license under the state’s Installment Loan and Finance Act (the “Nevada Act”), administered by the state’s Division of Financial Institutions (the “Division”). Shortly after enactment of the federal Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which, among other provisions, authorized the Small Business Administration (“SBA”) to guarantee $349 billion in deferrable, forgivable loans to struggling small businesses under the Paycheck Protection Program (“PPP”), we sought relief from licensing under that Nevada Act for non-bank lenders making those SBA loans. (Banks are exempt from the licensing obligations of this Nevada Act.)

Thursday night, April 9th, we received an email reply to our request from the Division’s Deputy Commissioner informing us that the Division had approved a temporary waiver from the licensing obligation of the Nevada Act for lenders making SBA PPP loans. The lender must complete the Nevada PPP Exemption Request for the Division’s approval. Once approved, the waiver from licensing to make PPP loans will be effective until June 30, 2020 (the last day on which PPP loans may be made) or funds appropriated for the PPP are exhausted. If Congress extends the PPP, we will check with the Division to see if the relief from licensing also is extended. Should you need any help in completing the form, please let us know.

How do documents get signed and notarized when the parties signing the documents are faced with stay-at-home orders?  While both the federal Electronic Signatures In Global And National Commerce Act and state-enacted versions of the Uniform Electronic Transactions Act authorize notaries to perform electronic notarizations, electronic notarization is different than remote online notarization (RON).  Without a state law authorizing the use of RONs, state notary laws require the document signer to be physically present before the notary.  In this Alert we address the status of federal and state laws authorizing RONs.

Continue reading in Mayer Brown’s Legal Update.

Any day now, maybe even today, Ginnie Mae will announce the details on its Pass-Through Assistance Program (“PTAP”), through which Ginnie Mae will provide a liquidity facility for issuers that need help meeting their obligation as issuers to pass-through payments of regularly scheduled payments of principal and interest, regardless of whether the loans are subject to forbearance.  While quickly trying to finalize PTAP program documents, on Monday April 7th, Ginnie Mae announced that it would recognize servicing advance financing facilities under its Acknowledgement Agreement. Previously, Ginnie Mae would not recognize a servicing advance receivable as  an independent component of mortgage servicing rights related to loans pooled into Ginnie Mae securities (“MSRs”).  This new recognition improves the ability of servicers to finance a valuable income stream, which has proven increasingly costly as the COVID-19 pandemic has greatly challenged liquidity in the housing market. But this recognition comes with limitations, which we detail below. Continue Reading Modest Improvements: Ginnie Mae’s Servicing Advance Facility Recognition

For many of us who have been around for a while, it seems as if we have seen this movie before.  An economic downturn leads to increased borrower delinquencies on mortgage loans with a progressively increasing obligation for the servicers of those mortgage loans to make principal and interest advances to cover the delinquencies.

But this time, the actors are different and the plot will develop much more quickly.

Last time, delinquencies rose as economic circumstances progressively deteriorated, almost like rising floodwaters breaking out of their riverbank. Along with rising delinquencies, prepayments slowed progressively, gradually putting pressure on nonbank mortgage servicers’ needs to keep advancing into the deals they serviced to keep principal and interest payments current without the ability to borrow from prepayments to do so. Most servicers had commercial bank lines set up to fund their advances as they became “net borrowers” in order to meet their advancing obligations. At that time, nonbank servicers were primarily servicing private-label securitizations and so the GSE overlay, although present, was much less significant.

Continue reading https://www.nationalmortgagenews.com/opinion/the-case-for-supporting-nonbank-mortgage-servicers

Reprinted from National Mortgage News.