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Compliance Calendar for June 2019

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​Eligibility Requirements for Manually Underwritten Loans

Effective: June 1, 2019
Industry: Mortgage Lending
Source: Fannie Mae   SEL-2019-02 →
Tag: Underwriting
Details

As a result of the adjustment to the credit risk assessment in Desktop Underwriter® (DU®) Version 10.3, we are making corresponding updates to our eligibility requirements for manually underwritten loans. These updates address loans with multiple risk factors, such as lower credit scores and higher debt-to-income ratios. The changes reflect our continued effort to deliver access and affordability while maintaining sustainable homeownership. 

These changes did not impact any topics in the Selling Guide; however, we have updated the Eligibility Matrix (which is incorporated by reference into the Guide). For ease of reference, we have shaded the rows where changes were made in the two matrices that apply to manually underwritten loans in Attachment 2 of this Announcement. Refer to the updated Eligibility Matrix for complete details. 

Lenders may implement these changes immediately but are required to do so for loans with application dates on or after June 1, 2019 and may deliver loans meeting the prior requirements through August 19, 2019.

Single Security Initiative

Effective: June 3, 2019
Industry: Mortgage Lending
Source: Freddie Mac   Freddie Mac Selling Guide Bulletin 2018-24 →
Tag: Certification, Endorsement, and Delivery
Details

Effective for contracts taken out on or after April 19, 2019 with Settlement Dates on or after June 3, 2019

In support of the Single Security Initiative ("Initiative"), Freddie Mac is updating its Guide to reflect changes required by the Initiative, including new naming conventions for the securities Freddie Mac will issue beginning June 3, 2019 and the payment delay for these securities.

Under the Initiative, Freddie Mac and Fannie Mae ("GSEs") will issue a common to-be-announced (TBA)-eligible Mortgage-backed security backed by fixed-rate Mortgages on one- to four-unit single-family properties. This new security, the Uniform Mortgage-Backed SecurityTM (UMBSTM), will combine key components of Freddie Mac's Participation Certificates (PCs) and Fannie Mae's mortgage-backed securities (MBS). The goal of the Initiative is to increase the liquidity of the TBA market and to reduce the disparities in trading value that exist today between Freddie Mac's and Fannie Mae's single-class mortgage-backed securities.

As part of the Initiative, Freddie Mac is adopting the 55-day payment delay for all of its new issues of single-family fixed-rate securities. As a result, Freddie Mac will no longer issue Gold PCs beginning June 3, 2019.

Additional changes include:

  • Freddie Mac's TBA-eligible fixed-rate securities will be referred to as UMBS and non-TBA-eligible securities will be referred to as MBS
  • Re-securitizations of UMBS under the Guide will be referred to as SupersTM
  • Introduction of a new 10-year fixed-rate security for TBA-eligible pools

The naming convention for WAC ARM PCs will not change and these securities will continue to have a payment delay of 75 days.

These changes are summarized in the following table:


Current and future Freddie Mac securities under the Guide*

Level of securitization

Current

New products with the implementation of the Single Security Initiative

Notes

Level 1

Gold PCs (45-day, fixed-rate, TBA eligible and non-TBA eligible

  • UMBS (55-day, fixed-rate, TBA eligible)
  • MBS (55-day, fixed-rate, non-TBA eligible)

Freddie Mac will stop issuing Gold PCs beginning on June 3, 2019

WAC ARM PCs (75-day, adjustable rate)

N/A

Freddie Mac will continue to issue WAC ARM PCs (75-day, adjustable-rate)

Level 2

Giant PCs (45-day, fixed-rate, TBA eligible)

Supers** (55-day, fixed-rate, TBA eligible)

**Supers is a re-securitization of UMBS

Freddie Mac will stop issuing Giant PCs under the Guide beginning on June 3, 2019

*This table presents only the securities available for issuance under the Guide

With this Bulletin, we are incorporating the new naming conventions described above. Impacted terms of business (TOBs) will be updated to align with the Guide changes described in this Bulletin. This Bulletin serves as notice to Sellers that impacted TOBs in their contracts will be amended by April 19, 2019. In addition to the Guide and TOB changes, the new naming conventions will be reflected in Freddie Mac's documentation, disclosures and marketing materials with the implementation of the Initiative.

In preparation for the Initiative, we are making the following Guide changes:

  • Removing most references to specific fixed-rate Mortgage maturities (i.e., 15-year, 20-year, 30-year) and referring to the Mortgages as either "fixed-rate Mortgages" or "fixed-rate fully amortizing Mortgages" which will include, where eligible and appropriate, 10-year fixed-rate Mortgages backing the new 10-year fixed-rate security. Where necessary, some sections will retain references to individual maturities and will now include a specific reference to the "10-year" maturity.
  • Removing references to "PC" in most instances, except for "WAC ARM PC" and related references
  • Replacing generic "PC" references related to security types with UMBS, MBS, Supers or WAC ARM PC, as appropriate
  • Adding new Glossary terms (e.g., UMBS, MBS and Supers), revising existing Glossary terms (e.g., WAC ARM PC and other PC-related terms) and deleting Glossary terms that are no longer applicable

To help ensure a smooth transition to this new market, Sellers should:

  • Identify impacted systems, tools and business processes that use TBA pricing and security references that will need to change
  • Develop plans to absorb naming convention changes, new prefixes and a new 10-year fixed-rate security into their hedging, best execution, pricing, pooling, risk management and reporting processes
  • Determine their approach for Freddie Mac PC dollar rolls before the transition to the UMBS

Sellers will be able to take out guarantor contracts, including the new 10-year guarantor contract, in Loan Selling Advisor® to deliver Mortgages into a UMBS or an MBS beginning on April 19, 2019 for Mortgages with Settlement Dates on or after June 3, 2019. Sellers will be able to take out Gold PC contracts for Mortgages with Settlement Dates before June 3, 2019.

For 10-year Mortgages that are sold through Cash-Released XChangeSM, participating Servicers will be able to bid for the Servicing Contract Rights based on 10-year cash pricing. At this time, 15-year pricing applies to 10-year Mortgages. Servicers participating in Cash-Released XChange should incorporate this change to their pricing and business processes as appropriate.

Additional resources and Guide impacts

Sellers should refer to the Seller/Servicer Readiness Checklist for important dates and additional resources.

Refer to the Guide Updates Spreadsheet for the impacted Guide provisions.

Uniform Mortgage-Backed Securities

Effective: June 3, 2019
Industry:
Source: Fannie Mae   SEL-2019-04 →
Tag: Secondary
Details

In further preparation of the implementation of the Single Security initiative, we are updating the Selling Guide to include references to TBA-eligible Uniform Mortgage-Backed Securities (UMBS), where applicable. Changes to the Guide include the following: 

▪ a new definition of UMBS to the glossary; and 

▪ an explanation of the structured transaction “Supers,” or the pass-through securities backed by groups of existing UMBS or other existing Supers. 

We also made updates to reflect the changes to interest rate spreads and servicing fees as previously announced in LL2019-03. For additional information on the forward trading of UMBS, you may also refer to this Selling Notice. 

In addition to these UMBS updates, we added a reference to the availability of lenders’ MBS trade details via Fannie Mae’s electronic trading platform and removed outdated policies regarding stated-structure ARM MBS. 

Effective Date 

These changes are effective June 3, 2019 with the implementation of UMBS.

Freddie Mac Selling Bulletin 2019-7

Effective: June 3, 2019
Industry: Mortgage Lending, Mortgage Servicing
Source: Freddie Mac   SINGLE SECURITY INITIATIVE →
Tags: Certification, Endorsement, and Delivery, Servicing Transfers
Details

On February 28, 2019, the FHFA issued a final rule supporting the Uniform Mortgage-Backed Security (UMBS™). As outlined in the final rule, the FHFA instructed Freddie Mac and Fannie Mae to modify and align their pooling practices for fixed-rate Mortgages to enhance UMBS fungibility.

As a result, on March 5, 2019, Freddie Mac issued an Industry Letter announcing changes to the Note Rate to Coupon spreads and a reduction in the maximum Servicing Spread for Mortgages serving as collateral for UMBS and MBS, effective for Mortgages sold under Freddie Mac's fixed-rate Guarantor or MultiLender Swap program with Settlement Dates on or after June 3, 2019. This Bulletin updates the Guide to reflect these required changes.

The FHFA has also instructed Freddie Mac and Fannie Mae to monitor the Weighted Average Coupon (WAC) of MBS and take actions as appropriate such that MBS WAC would be generally consistent with historical WAC levels. The FHFA, Freddie Mac and Fannie Mae are working to determine an appropriate target MBS WAC, such as 80 basis points or slightly higher (given current guarantee fees and minimum servicing levels).

As a reminder, Bulletin 2018-24 communicated that effective for contracts taken out on or after April 19, 2019 for Mortgages with Settlement Dates on or after June 3, 2019, Sellers will be able to take out guarantor contracts, including the new 10-year guarantor contract, in Loan Selling Advisor® to deliver Mortgages into a UMBS or an MBS. Sellers will be able to take out Gold PC contracts for Mortgages with Settlement Dates prior to June 3, 2019. For more information on the Loan Selling Advisor changes, refer to the April 3, 2019 Single-Family News Center article.

For more information on the Single Security Initiative ("Initiative"), refer to the Single Security and the Common Securitization Platform web page and Bulletin 2018-24 that announced Guide updates reflecting other Initiative required changes, including new naming conventions for the securities Freddie Mac will issue beginning June 3, 2019 and the payment delay for these securities.

Guide impacts: Sections 6201.3, 6202.3, 6203.3, 6203.7, 6205.3, 6205.7 and 8105.1

Tax Reform Legislation Policy

Effective: June 5, 2019
Industry: Mortgage Lending
Source: Fannie Mae   Selling Guide Announcement SEL-2019-05 →
Tags: Underwriting, Income
Details
  • A limited number of policies that reference specific IRS tax forms have been updated to incorporate changes made to 2018 IRS forms as a result of the Tax Cuts and Jobs Act. 
  • This includes new references to Schedule 1, filed as part of IRS Form 1040 effective with reporting of 2018 income for tax filing purposes.
  • In addition, the reference to the Adjusted Gross Income Approach has been removed as it no longer serves to provide guidance in completion of Fannie Mae’s Cash Flow Analysis (Form 1084). 
  • The Form 1084 has also been updated to remove a reference to “entertainment” to align with changes to the IRS tax forms.

Signature Requirement for Initial Uniform Residential Loan Application (URLA) (Form 1003)

Effective: June 5, 2019
Industry: Mortgage Lending
Source: Fannie Mae   Selling Guide Announcement SEL-2019-05 →
Tags: Application, Closing
Details
  • With this update we removed the requirement that the initial Form 1003 be signed by the borrower and retained in the loan file. 
  • The exceptions that currently apply when a power of attorney is used to sign the loan documents remain and have been further clarified. 
  • The final signed version of the Form 1003 will continue to be required. 

Electronic Records, Signatures, and Transactions

Effective: June 5, 2019
Industry: Mortgage Lending
Source: Fannie Mae   Selling Guide Announcement SEL-2019-05 →
Tag: Secondary
Details

We are introducing a new special feature code (SFC) 861 that must be delivered on all loans that have documents that were remotely notarized as part of an electronic notarization. 

Lenders may begin using SFC 861 immediately; but must do so for loans delivered on or after September 1, 2019. The Special Feature Codes list has been updated to include SFC 861.

HomeReady Income Limits

Effective: June 5, 2019
Industry: Mortgage Lending
Source: Fannie Mae   Lender Letter LL-2019-06 →
Tags: Underwriting, Income
Details

On July 3, 2019 the Selling Guide will be updated to reflect the HomeReady 80% AMI limit. 

The new limits and the 80% AMI change will apply to manually underwritten loans with application dates on or after July 20, 2019.

  • To better align with our housing goals, we are changing the income limit requirements for all HomeReady loans to not exceed 80% AMI for the property’s location. (This includes properties in low-income census tracts.)

Freddie Mac Selling Bulletin 2019-11

Effective: June 5, 2019
Industry: Mortgage Lending
Source: Freddie Mac   View Source →
Tags: Condominiums, Underwriting, Insurance
Details

This Guide Bulletin announces:

Condominiums

  • Changes to our requirements for Condominium Projects, including:
    • Ineligible Condominium Projects
    • Condominium Project reviews
    • Delivery requirements
    • Condominium Projects with commercial parking facilities - September 5, 2019

Credit underwriting and Mortgage eligibility

  • Revisions to recovery period requirements for Manually Underwritten Mortgages for Borrowers with history of Chapter 12 bankruptcy
  • Updates to allow the delivery of Mortgages secured by Manufactured Homes with land contract or contract for deed pay offs
  • Updated language specifying that monthly bridge loan payments must be included in debt payment-to-income ratio calculations

Private flood insurance

  • Updates to clarify our acceptance of private flood insurance

Form 65 – Demographic Information Addendum

  • Adding an authorized change to Form 65 to permit the use of the Demographic Information Addendum

Mortgages with Electronic Documentation

  • The addition of eMortgage requirements to the Guide – June 12, 2019 (New)
  • Delivery instruction updates for Mortgages with Electronic Documentation – June 12, 2019 (New)

UMBS and MBS with Coupons not divisible by 0.5% and fixed-rate assumable products

  • Eligibility of odd coupons and fixed-rate assumable products – July 1, 2019

Additional Guide updates

  • Further updates as described in the Additional Guide updates section of this Bulletin

EFFECTIVE DATE

All of the changes announced in this Bulletin are effective immediately unless otherwise noted.

See Bulletin 2019-11 for specific details.

Freddie Mac Selling Update

Effective: June 6, 2019
Industry: Mortgage Lending
Source: Freddie Mac   Selling Update 2019-5 →
Tags: Underwriting, Assets
Details

LENDER INCENTIVES

Effective for Mortgages with Settlement Dates on or after June 6, 2019

Currently, we do not place any restrictions on lender incentives (e.g., gift cards given by the Seller to the Borrower before, at or after Mortgage closing) except when the Mortgage is a Freddie Mac Relief Refinance MortgageSM.

We are revising our requirements for all Mortgages, except Relief Refinance Mortgages – Same Servicer and Relief Refinance Mortgages – Open Access, to state that lender incentives will only be permitted when the following requirements are met:

  • The amount of the incentive does not exceed $500
  • No repayment is required, and
  • The amount of the incentive is documented in the Mortgage file

The incentive is not considered cash out to the Borrower and does not have to be included in the calculation of the proceeds of the Mortgage.

Guide impacts: Sections 4304.6, 5501.1 and 5501.6

West Virginia Regulated Consumer Loans

Effective: June 7, 2019
Industry: Mortgage Lending, Mortgage Servicing
Source: West Virginia   Alert →
Tags: West Virginia, Licensing, Fees
Details

Amends the requirements for regulated consumer lending in the state to provide that a person making or taking assignment of consumer loans, or “undertaking direct collection of payments,” must first be licensed by the state’s Commissioner of Banking. 

Among other things, the act also adjusts the threshold amounts “for which certain finance charges can be imposed” on consumer loans, including revolving loan accounts. For instance, (i) on loans less than $3,500 that are not secured by real property, the finance charge “may not exceed 31 percent per year on the unpaid balance of the principal amount”; and (ii) on loans between $3,500 and $15,000, the finance charge “may not exceed 27 percent per year on the unpaid balance of the principal amount.” 

The act also provides restrictions relating to when finance charges may be imposed again, and states that, in certain cases, the “financing of [] charges is permissible and does not constitute charging interest on interest.” 

The act further clarifies that the new licensing provisions exclude “any collection agencies as defined and licensed by the West Virginia Collection Agency Act of 1973.”

Mandatory cash contract extensions

Effective: June 10, 2019
Industry: Mortgage Lending
Source: Freddie Mac   Selling Guide Bulletin 2019-9 →
Tag: Secondary
Details

In response to Seller feedback, we are introducing an automated process in Loan Selling Advisor to provide Sellers with the capability to extend the expiration date for Mandatory Cash Contracts. Section 6101.3(f) describes the requirements for extending a Mandatory Fixed-Rate Cash Contract and Section 6102.4(f) for Mandatory WAC ARM Cash Contract extensions.

In addition, for Best Efforts Contracts, relock functionality will be available in Loan Selling Advisor. Requirements for performing a Best Efforts Contract relock are described in Section 6101.4(e).

The Best Efforts extension language for contracts that are unfulfilled for more than 30 days is being deleted from Section 6101.4(d) as it is no longer permitted.

Guide Forms 900 and 900SA are being updated to clarify existing, and reflect added functionality, as applicable, to the Secondary Analyst and Cash SMO user roles.

For additional information refer to the April 23, 2019, Single-Family News Center article. Guide impacts: Sections 6101.3, 6101.4, 6102.4, Forms 900 and 900SA

Updated Prior Approval Loan Procedures

Effective: June 11, 2019
Industry: Mortgage Lending
Source: VA   Circular 26-19-13 →
Tag: Underwriting
Details
  • Under current policy, lenders have been submitting loans to VA for prior
    approval when two or more unmarried Veterans are using their home loan entitlement.   
  • Effective immediately, lenders with automatic authority may underwrite and close loans for two or more unmarried Veterans who are each using the home loan entitlement. 

Fannie Mae Servicing Guide Announcement

Effective: June 12, 2019
Industry: Mortgage Servicing
Source: Fannie Mae   SVC-2019-04 →
Tags: Payoffs-Reconveyances, Servicing, Foreclosure, Loss Mitigation
Details

Simplification of Partial Releases

To simplify requirements related to evaluating partial release requests and to reduce case submissions requiring our approval, D1-1-01, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan, and the related procedures in F-1-04, Processing a Request for the Release of Property Securing a Mortgage Loan, have been updated to clarify eligibility and documentation requirements. Additionally,

  • An appraisal is now required to evaluate each partial release request and to determine the amount of any required principal curtailment, as applicable.
  • Partial release requests that increase the LTV ratio of a mortgage loan may now be approved without requiring a principal curtailment to maintain the pre-release LTV ratio, provided the post-release LTV ratio is less than 60%. Principal curtailment is still required when the post-release LTV ratio is greater than or equal to 60%.
  • The requirements related to three additional request types have been incorporated into the policy:
    • Requests for the Addition of Land,
    • Requests to Lease Property for the Installation of a Semi-Permanent Structure, and
    • Requests for the Subdivision of Real Property.

The Application for Release of Security (Form 236) has also been streamlined for easier use.

Servicers evaluating a borrower request for release or partial release related to reverse mortgage loans must obtain approval from their Reverse Mortgage Loan Servicing Representative (see Reverse Mortgage Loan Servicing Manual 7-03, List of Contacts).

Effective Date Servicers are encouraged to implement these policy changes immediately, but must do so for all release requests received on or after October 1, 2019.

Miscellaneous Revisions

Updating Internal Records After a Regular or Special Servicing Option MBS Mortgage Loan Reclassification. Currently, F-1-26, Reclassifying or Voluntary Repurchasing an MBS Mortgage Loan requires that after an MBS mortgage loan has been reclassified, servicers must update their internal records to reflect the remittance type as actual/actual as of the first day of the month in which the reclassification event takes place. However, after a regular or special servicing option MBS mortgage loan has been reclassified, servicers are also currently updating their internal records to adjust

  • the pass-through rate (PTR) to include any guaranty fee;
  • our required margin to equal the mortgage loan margin less the servicing fee, if applicable; and
  • the PTR floor and ceiling to equal the lifetime interest rate floor and ceiling less the servicing fee, if applicable.

We have updated the Guide to reflect these specific actions.

Determining the New PTR after an Adjustable Rate Mortgage (ARM) Adjustment. Investor Reporting Manual 5-02, Calculations Related to Pass-through Rates has been updated to state that when determining the minimum PTR using the “bottom-up” calculation method, in the absence of a stated PTR floor, our required margin becomes the PTR floor. While the Selling Guide states the mortgage interest rate may never decrease to less than the ARM’s margin and because the PTR is a byproduct of the mortgage interest rate, we received feedback that this clarification in the “bottom-up” calculation would benefit servicers.

Reminder of Fannie Mae Extend Modification for Disaster Relief

With LL-2017-09, Fannie Mae Extend Modification for Disaster Relief and Other Clarifications for Mortgage Loans Impacted by Disaster Events, we introduced the Fannie Mae Extend Modification for Disaster Relief (Extend Mod), developed jointly with Freddie Mac at the direction of the Federal Housing Finance Agency (FHFA). While most policies introduced in LL-2017-09 have since been incorporated into the Guide, servicers are reminded that the policy related to Extend Mod remains in effect until we provide further notice.

Freddie Mac Servicing Bulletin

Effective: June 12, 2019
Industry: Mortgage Servicing
Source: Freddie Mac   Bulletin 2019-12 →
Tags: Bankruptcy, Foreclosure, Loss Mitigation, Delinquent Loans, Servicing, Escrow-Impounds
Details

EDR CODES

Servicers will no longer be required to report EDR default action code 20 to reinstate a loan except when Servicers accept a partial reinstatement and need to change the mortgage status from "Foreclosure" to "Delinquent." We also are renaming the code to EDR default action code 20 (Reinstatement (Partial)).

EDR default action code TM

We are removing references to EDR default action code TM (Alternative Modification Trial Period). Servicers are reminded that they should use EDR default action code BF (Freddie Mac Standard Modification Trial Period) to report all Trial Period Plans, including those for the Freddie Mac Flex Modification® that were offered under streamlined eligibility criteria.

EDR default action code H5

We are updating references to EDR default action code H5 (Complete Borrower Response Package Received). Servicers will no longer be required to use this code to notify Freddie Mac of receipt of a complete Borrower Response Package, but are still encouraged to do so.

SUBSEQUENT TRANSFERS OF SERVICING REQUIREMENTS

We are updating the Guide to include requirements for Subsequent Transfers of Servicing for a Mortgage registered with MERS®. The requirements that apply to Concurrent Transfers of Servicing for Mortgages registered with MERS also apply to Subsequent Transfers of Servicing.

ESCROW

We are updating the Guide to clarify that if a Servicer advances funds for an unpaid Escrow charge and is unable to reach a mutually satisfactory agreement for the Borrower's repayment of the advance, or if the Borrower fails to comply with the terms of any such arrangement, the Servicer must comply with the collection, loss mitigation, and if necessary, foreclosure referral requirements in accordance with Guide Chapters 9101 or 9102, as applicable.

EXHIBIT 33

We are updating the definition of "Release" in Exhibit 33, to address situations where a Secured Party's interests arising out of or related to the Collateral and the Acknowledgment Agreement (as those terms are defined in Exhibit 33) have been terminated due to a Transfer of Servicing or a voluntary partial cancellation of the Servicer's Servicing Contract Rights.

PARTICIPATION MORTGAGES

With the implementation of the Uniform Loan Data Delivery requirements in March 2012, Freddie Mac ceased the purchase of participation Mortgages. With the implementation of the Investor Reporting Change Initiative, Freddie Mac no longer has participation Mortgages in its portfolio. Therefore, any requirements for purchase and Servicing of participation Mortgages are being removed from the Guide.

ADDITIONAL GUIDE UPDATES AND REMINDERS

Servicer Success Scorecard – Loan Level Reporting Compliance metric, Borrower income documentation, Form 59, Community Land Trust Mortgages, Reminder on Servicing Mortgages impacted by Eligible Disasters.

New Hampshire Amends Provisions Regarding Mortgage Exemptions

Effective: June 13, 2019
Industry: Mortgage Lending
Source: New Hampshire   House Bill 740 →
Tag: Licensing
Details

New Hampshire is exempting certain mortgages from the law regarding licensing of nondepository mortgage bankers, brokers, and servicers.

Florida Enacts Provisions Regarding Online Notarizations

Effective: June 13, 2019
Industry: Consumer Lending, Mortgage Lending, Mortgage Servicing
Source: Florida   Florida House Bill 409 →
Tag: Notary
Details

The state of Florida enacted provisions relating to notaries that include online notarizations specifying registration and qualification requirements for online notaries public authorizing the performance of certain notarial acts. 

Provisions in this bill range from effective immediately to effective on January 1, 2020.

HomeReady® Mortgage Loans - Manual Underwriting

Effective: June 15, 2019
Industry: Mortgage Lending
Source: Fannie Mae   SEL-2019-03 →
Tags: Underwriting, Income, MIP-PMI
Details

HomeReady mortgage is our premier affordable lending product designed for creditworthy low- to moderate-income borrowers, offering expanded eligibility for financing homes in low-income communities. We have updated our HomeReady policies to include the following: 

  • Multiple financed properties: We are imposing a maximum limit of two financed properties, including the subject property, for all HomeReady mortgage loans. Financed properties owned by a non-occupant borrower do not have to be included. The additional reserves required for multiple financed properties are not applicable to HomeReady loans.
  • Boarder income: Our current policy states that a boarder may not be obligated on the mortgage loan. We are clarifying that the boarder may also not have an ownership interest in the property.
  • Mortgage insurance coverage: We are clarifying that HomeReady loans combined with HomeStyle® Renovation may be delivered with the lower level of mortgage insurance coverage permitted for HomeReady.

Effective Date

Lenders may implement these policies immediately. Desktop Underwriter® (DU®) will be updated to include the multiple financed property policy and boarder ownership policy in a future release, at which time these will be required for DU loan casefiles. For manually underwritten loans, lenders must apply these policies for loans with application dates or after June 15, 2019.

Construction to Permanent and Building on Own Land Programs

Effective: June 17, 2019
Industry: Mortgage Lending
Source: FHA   Mortgagee Letter 2019-08 →
Tags: Underwriting, Property - Appraisal
Details

This guidance may be implemented immediately but must be implemented for mortgages with case numbers assigned on or after June 17, 2019.

Summary of Changes

The Construction to Permanent and Building on Own Land policy is being revised to separate the programs according to the “one time close” versus “two-step close” structure instead of the length of time the Borrower has owned the land. This revision preserves the existing mortgage calculations that vary based on the length of time of land ownership and are now available in either program. 

Construction-to-Permanent updates include:

  • New definitions of Construction to Permanent (CP) and Construction Loan
  • Property Eligibility has been expanded to include land already owned by the borrower
  • Calculating Maximum Mortgage Amount has been revised
  • Minimum Required Investment has been revised
  • Required Documentation has been added

The remainder of the Construction-to-Permanent guidance is unchanged. 

Building on Own Land updates include:

  • New definition for Building on Own Land
  • Eligibility has been revised to specify "dwelling"
  • Calculating Maximum Mortgage Amount has been revised
  • Minimum Required Investment has been revised
  • Required Documentation has been added

[Please refer to the Mortgagee Letter for complete details]

Freddie Mac CHOICERenovation℠ Mortgage

Effective: June 19, 2019
Industry: Mortgage Lending, Mortgage Servicing
Source: Freddie Mac   Freddie Mac Bulletin 2019-14 →
Tags: Servicing, Servicing Transfers, Underwriting, Closing
Details

Eligible Mortgages and property

  • 1- to 4-Unit Primary Residence
  • Second home
  • 1-unit Investment Property
  • Manufactured Home
  • Condominium Unit, a unit in a Planned Unit Development (PUD), or a Cooperative Unit if permitted under the Seller’s Purchase Documents

General eligibility requirements

  • All renovations must be completed within 365 days of the Note Date
  • CHOICERenovation Mortgages may be purchase transaction or “no cash-out” refinance Mortgages
  • All CHOICERenovation Mortgages must be submitted to Loan Product Advisor® and must receive a Risk Class of Accept. If the Mortgage receives a Loan Product Advisor evaluation status of invalid, ineligible or incomplete, it is ineligible for sale to Freddie Mac.
  • Sellers must obtain an appraisal report based on an interior and exterior inspection, and the appraisal report must include an “as completed” value subject to completion of the proposed renovations
  • For CHOICERenovation Mortgages with Settlement Dates prior to completion of the renovations, Sellers must establish and manage a Custodial Account for Renovation Funds (as described in Guide Section 4607.13). Sellers must deposit proceeds sufficient to cover the cost of the renovations, plus a minimum 10% contingency reserve to cover unforeseen costs related to the renovation, into the account. Any funds remaining in the account after the cost of all renovations have been paid must be used to reduce the UPB of the Mortgage or used for additional renovations as described in Section 4607.12. If the Mortgage is a “no cash-out” refinance, the Seller may disburse proceeds to the Borrower, provided the total amount disbursed to the Borrower at closing and from the unused funds does not exceed the maximum amount allowed under Section 4301.4.

Provides maximum financed renovation costs by transaction type, recourse, special delivery requirements.

Transfer of Servicing

A Transfer of Servicing involving CHOICERenovation Mortgages with renovations not completed by the Settlement Date (as described in Section 4607.1(b)), is prohibited until:

  • All renovations have been completed
  • A completion report has been obtained pursuant to Section 4607.9, and
  • Freddie Mac has approved removal of recourse pursuant to Section 4607.15

Servicing Requirements

Updating Section 8104.6 to provide that Seller/Servicers that service any CHOICERenovation Mortgage that was permitted to be delivered to Freddie Mac prior to completion renovations must, in addition to other Servicing requirements, comply with the Servicing requirements related to completion of such renovations. This includes but is not limited to:

  • Maintaining the Renovation Funds in their respective Custodial Account for Renovation Funds
  • Complying with the contingency reserve requirements described in Section 4607.12(b), and
  • Requesting removal of recourse pursuant to Section 4607.15


Appraisal Waiver Eligibility

Effective: June 22, 2019
Industry: Mortgage Lending
Source: Fannie Mae   SEL-2019-07 →
Tags: Property - Appraisal, Underwriting
Details
  • Previously, for an appraisal waiver to be considered for a refinance, the borrower name on the loan casefile and prior appraisal had to match. 
  • To streamline appraisal waiver logic and align our policies for purchase and refinance transactions, we have removed this requirement. 

Foreclosure Mediation Program

Effective: June 24, 2019
Industry: Mortgage Servicing
Source: Connecticut   ​Connecticut House Bill 6996 →
Tags: Connecticut, Foreclosure
Details
  • Extends the Ezequiel Santiago Foreclosure Mediation Program until June 30, 2023

Foreclosure Provisions on Properties with Affordable Housing Deed Restrictions

Effective: June 24, 2019
Industry: Mortgage Servicing
Source: New Jersey   New Jersey Senate Bill 362 →
Tags: New Jersey, Foreclosure
Details

Provides that deed restrictions on affordable housing units are not extinguished by foreclosure proceedings.

  1. A deed restriction which was properly recorded in connection with a property for which a credit against the fair share housing obligation was granted pursuant to P.L.1985, c.222 (C.52:27D-301 et al.) shall  not expire, extinguish, or be removed prior to the period of termination for such restriction as a result of the sale of the property through foreclosure proceedings by any creditor.
  2. A Notice of Intent to foreclosure shall be given to the residential mortgage debtor, and, if the mortgage is secured by a residence for which a restriction on affordability was recorded in the county in which the property is located, the clerk of the municipality in which the subject property is located, the municipal housing liaison, if one has been appointed by the municipality pursuant to the regulations of the Council on Affordable Housing, and the Commissioner of Community Affairs, at least 30 days in advance of such action as provided in this section. 
  3. A Notice of Intent must now include: if the property is subject to restrictions on affordability, the address and phone number of the municipal affordable housing liaison and of the New Jersey Housing and Mortgage Finance Agency
  4. The use of the optional foreclosure procedure without sale is not permitted if there is are recorded restrictions on affordability on the property

Loan Selling Advisor updates

Effective: June 24, 2019
Industry: Mortgage Lending
Source: Freddie Mac   Bulletin 2019-16 →
Tag: Underwriting
Details
  • In Bulletin 2019-13, we announced the postponement of enhancements to Loan Selling Advisor that were originally scheduled to go into effect on June 10, 2019
  • These included an automated process that would allow Sellers to extend the expiration date for Mandatory Cash contracts and a relock functionality that would be available for Best Efforts Contracts
  • As of June 24, 2019, these enhancements are available in Loan Selling Advisor

Kentucky Consumer Loan Licensing Requirements

Effective: June 26, 2019
Industry: Consumer Lending, Mortgage Lending
Source: Kentucky   Alert →
Tags: Kentucky, Licensing
Details

On March 26, 2019, Kentucky Governor Matt Bevin signed into law a bill, House Bill 285 (HB 285), which amends the requirements for consumer loan companies in Kentucky.

Some of the key provisions of HB 285 include the following:

  • Increases the fee for investigating an application for a consumer loan company license from $250 to $500 and increases the annual license fee for each location from $400 to $500;
  • Establishes new bonding and net worth requirements for consumer loan company license applicants;
  • Requires a consumer loan company to have at least one managing principal (i.e., a natural person with the requisite experience who is primarily responsible for the operations of a licensee) and it establishes the standards for such person;
  • Provides the requirements for a change of control involving a consumer loan company;
  • Authorizes the Commissioner of Financial Institutions (Commissioner) to take adverse action against a consumer loan company in certain specified circumstances (e.g., if the company has committed fraud or made a misrepresentation of material fact, or if the company has demonstrated incompetence or untrustworthiness to act as a licensee);
  • Requires a consumer loan company to maintain an agent in Kentucky for service of process; and
  • States that the Commissioner must conduct an examination of a consumer loan company licensee once every 2 years, instead of annually.

Licensing and Fees

Effective: June 27, 2019
Industry: Mortgage Lending
Source: Delaware   Delaware House Bill 199 →
Tags: Delaware, Licensing
Details
  • Requires applicants for financial services licenses for mortgage loan brokers (Chapter 21), licensed lenders (Chapter 22), money transmitters (Chapter 23), check cashers (Chapter 27) and motor vehicle sales finance companies (Chapter 29) to provide fingerprints for purposes of criminal background checks

Licensing Provisions

Effective: June 28, 2019
Industry: Mortgage Lending
Source: Nevada   LCB File No. R177-18 →
Tags: New Jersey, Licensing
Details
  • Enacts provisions relating to licensure by endorsement
  • Prescribes the requirements for licensure by endorsement as an escrow agent or escrow agency
  • Addresses other licensing matters

RHS Announces Revisions to Lender Reporting and Oversight Requirements

Effective: June 28, 2019
Industry: Mortgage Lending
Source: USDA   https://www.rd.usda.gov/files/pn525.pdf →
Tag: Certification, Endorsement, and Delivery
Details

HB-1-3555, Chapter 4 is partially revised to update the lender's reporting and oversight requirements.

Chapter 4: Paragraph 4.12, to add a bullet to provide guidance on lender post-closing self reports. 

Remove: Chapter 4 dated 03-19-16: Pages 4-7 & 4-8

Insert Chapter 4 dated 03-19-16:  Pages 4-7 & 4-8 revised 06-28-19.  

VA Funding Fee Guidance to Lenders and Servicers

Effective: June 28, 2019
Industry:
Source: VA   Circular 26-19-17 →
Tag: Underwriting
Details

This Circular supplements the Department of Veterans Affairs (VA) Lenders Handbook, updates to Chapter 8, Topic 8, The VA Funding Fee, eligibility clarification and updates to Chapter 6, Refinancing, concerning Interest Rate Reduction Refinancing Loans, IRRRLs.

Licensing Exemptions

Effective: June 28, 2019
Industry: Mortgage Lending
Source: Alaska   Alaska House Bill 104 →
Tags: Alaska, Licensing
Details

Amends provisions relating to exemptions from mortgage lender, mortgage broker, and mortgage loan originator licensing requirements.

  • New exemption: a bona fide nonprofit organization
  • New exemption: a seller, including a natural person, estate, trust, corporation, or another entity, that offers or negotiates the terms of a residential mortgage loan for the sale of residential property owned by the seller, where certain criteria is met
  • New exemption: an employee of a federal, state, or local government agency that is already exempt
  • New exemption: an employee of a bona fide nonprofit organization, where certain criteria is met