Compliance Calendar

Minnesota House Bill 990 and Minnesota House Bill 1960 adds residential mortgage originators licensing requirements exemptions and conformity with federal truth in lending requirements.

• Creates and enacts section 44-06.1-13.1 and a new section to chapter 44-06.1 of the North Dakota Century Code, relating to the adoption of the Revised Uniform Law on Notarial Acts; and
• Amends and reenacts sections 11-18-15, 44-06.1-01, 44-06.1-03, 44-06.1-18, and 47-19-26 of the North Dakota Century Code, relating to the adoption of the Revised Uniform Law on Notarial Acts.

• Section 28-23-11 The Sheriff's certificate must now include the applicable redemption period, where subject to redemption
• Section 32-19-18 now excludes abandoned property from redemption rights
• Section 32-19-19 amends the abandoned property statute to include "at the time of the commencement of the foreclosure action and at any time before the sheriff's sale" as the eligible time period to petition for abandonment
• Section 32-19-23 is amended to add "Actual service of the notice before foreclosure is not required if the property is abandoned...or if service by mail as provided in this chapter has been attempted three times and the attempted service is returned as refused or unclaimed"
• Section 32-19-23.1 is a new section, adding a standard for "Abandoned property - Prima facie evidence" (e.g. Affidavit of Abandonment)
• Section 32-19-27 amends the proof of service notice affidavit requirements to include "service was attempted and refused or unclaimed, or the property is abandoned"

Tthe bill expands the definition of PII to include, 

(i) an individual’s payment card information; 

(ii) an individual’s biometric data; and 

(iii) any other information that can be used to access a person's financial records. 

Under the bill, an individual is guilty of an offense if the individual “obtains or attempts to obtain, transfers, records, or uses or attempts to use” any PII of another individual, living or deceased, to obtain anything of value without consent of the other individual.

Previously, to request a partial release of a lien or grant of an easement, Servicers were required to e-mail Freddie Mac the information listed in Section 8401.1(a). To streamline the partial release of a lien or grant of an easement process, remove any uncertainty about what must be submitted and ensure that Servicers are sending all information necessary to execute a partial release or easement, we have created new Guide Form 715, Borrower Application for Partial Release or Easement.

Completed forms should be sent to Distressed_property@freddiemac.com. Servicers must begin using Form 715 no later than August 1, 2019.

Guide impacts: Section 8401.1 and Form 715

Effective August 1, 2019, appraisal fees have increased in Alabama, Florida, Mississippi, Puerto Rico, and the U.S. Virgin Islands. The changes are reflected on the VALERI Fee Cost Schedule, which is located at https://www.benefits.va.gov/HOMELOANS/servicers_valeri_rules.asp.

New Jersey Senate Bill 3411 amends the foreclosure process, as follows:

• The Notice of Intent to Foreclose shall include a notice of the right to cure the default, at least 30 days, but not more than 180 days, in advance of foreclosure initiation
• The Notice of Intent to Foreclose must include that the debtor is entitled to housing counseling, at no cost to the debtor, through the Foreclosure Mediation Program established by the New Jersey Judiciary, including information on how to contact the program
• If more than 180 days have elapsed since the date the Notice of Intent to Foreclose is sent, and any foreclosure or other legal action to take possession of the residential property which is the subject of the mortgage has not yet been commenced, the lender shall send a new written notice at least 30 days, but not more than 180 days, in advance of that action
• If a plaintiff's action to foreclose a residential mortgage has been dismissed without prejudice, reinstatement of the plaintiff's action may be permitted only on motion for good cause shown.
• Reinstatements shall be limited to three for any action, except that a reinstatement which is granted following a dismissal without prejudice that resulted from the plaintiff's compliance with federal law or regulation shall not count toward the limit established by this subsection. 
• The fee for a plaintiff to reinstate a residential mortgage foreclosure action shall be twice the amount set for filing a foreclosure complaint. The plaintiff shall not charge or otherwise pass a reinstatement fee onto the debtor or any other person.

To ensure that the Loan Product Advisor resubmission requirements align with our current view of credit risk, we are revising the resubmission tolerances.

Increase in debt payment-to-income (“DTI”) ratio – effective for Mortgages with Settlement Dates on and after August 1, 2019

As reflected in the following table, Loan Product Advisor resubmission will be required any time the DTI ratio exceeds 45%. 

Decrease in the loan amount on a refinance transaction

As reflected in the following table, to ensure there is no change in the appraisal waiver eligibility, Loan Product Advisor resubmission is required if the loan amount has decreased on a refinance transaction and the Seller has accepted an appraisal waiver offer.  

Guide impact: Section 5101.6

Effective for Mortgages with Settlement Dates on and after August 1, 2019, but Sellers may implement immediately

We reviewed our requirements for income commencing after the Note Date but prior to the Delivery Date (Option 2), and are revising our requirements as follows:

• To verify that the income commenced before the Mortgage is delivered to Freddie Mac, we are adding a requirement for the Seller to obtain one of the following:
  • A paystub
    
  • A written verification of employment, or
  • A third-party employment verification
• Requiring verification of additional funds only when there are more than 15 calendar days between the Note Date and the start date of the new employment. This change provides flexibility when the potential employment gap is not expected to impact the Borrower’s ability to make their first scheduled Mortgage payment and meet their other debt obligations. Currently, Sellers must verify additional funds regardless of how soon after the Note Date the Borrower is expected to begin receiving the income.

In addition, we are adding a worksheet Sellers may use to calculate the amount of additional funds required under both options.

Guide impact: Section 5303.2

Seller disclosure on Contaminated Sites, Hazardous Substances or other adverse conditions

Effective for Mortgages with Settlement Dates on and after August 1, 2019

We are adding a new requirement to specify that the Seller must disclose to the Borrower any information that the Seller is aware of that may adversely affect the market value, condition or marketability of the subject property.

This includes, but is not limited to, the presence of any Contaminated Site, Hazardous Substance or other adverse conditions affecting the subject property or neighborhood.

Guide impact: Section 5601.3

Update: FHA INFO #19-35 announced the delay of the August 5, 2019 implementation for XML Digital Signatures being required on all appraisals uploaded to the Electronic Appraisal Delivery (EAD) System, as described in FHA INFO #18-46, until further notice.

Beginning August 5, 2019, XML Digital Signatures will be required on all appraisals uploaded to the EAD portal. Appraisal forms software used by appraisers completing FHA appraisals must include XML Digital Signature functionality compatible with EAD validations. XML Digital Signature validation functionality is in the EAD portal and indicates compliance of submitted appraisals. 

Although the current Digital Signature Hard Stops are now eligible for automatic override, they will change from “eligible for override” to “not eligible for override.” Refer to the EAD Hard Stop Checks and Error Messages Fact Sheet for complete information on the revised Hard Stops. The EAD General User Guide, including the Hard Stop information found in its Appendix, will be updated at a later date. 

Quick Links 

• View the Hard Stop Checks and Error Messages Fact Sheet at: https://www.hud.gov/sites/docu... 

• View the EAD General User Guide at: https://www.hud.gov/sites/docu...

• New Guide Chapter 4408 provides requirements for mortgages made pursuant to employee relocation programs for newly hired or transferred employees to purchase a 1- to 4-unit Primary Residence at a new job location
• Updates have also been incorporated into Guide Sections 4201.14, 5305.2, 5401.2, 5501.3 and 5501.4

• When the HUD Data Plate is not present or not legible, Freddie Mac will accept a duplicate Data Plate in the form of a Performance Verification Certificate (PVC) from the Institute for Building Technology and Safety (IBTS) as evidence of compliance. 
• If the original or alternative documentation of compliance cannot be obtained for either the HUD Certification Label (HUD label or tag) or the HUD Data Plate, then the Mortgage secured by a Manufactured Home is not eligible for sale to Freddie Mac.

• Lenders may now use construction-to-permanent single-closing or two-closing financing options when originating a manufactured home loan
• All construction-to-permanent policies described in Chapter B5-3, Construction and Energy Financing are applicable, in addition to existing manufactured home requirements
• Special Feature Code 235 (manufactured home) is required at delivery
• If single-closing option is used, Special Feature Code 151 is also required
• The loan amount of the manufactured home may include the cost of the land
• Site preparation costs that are included in the loan amount may include the cost to remove an existing manufactured home and other outbuildings
• Limited cash-out refinance transactions may involve a new or existing manufactured home

See the New Manufactured Home Financing Matrix for a comparison of our standard manufactured home underwriting requirements and the construction-to-permanent options that are now available. 

Effective Date 

Lenders may take advantage of these changes immediately. Desktop Underwriter® (DU®) will be updated in a future release to support construction-to-permanent transactions. Until that time, lenders may deliver a DU loan with an Approve/Ineligible recommendation if the only reason for the Ineligible is that a manufactured home transaction was submitted with a loan purpose of Construction or Construction-Permanent. Lenders must also ensure that the loan complies with the manufactured home guidelines in the Selling Guide, including the LTV, CLTV, and HCLTV ratios. 

• All references to these loans have been removed from the Selling Guide and Eligibility Matrix.
• All DU Refi Plus and Refi Plus loans must have application dates on or before December 31, 2018. 
• All DU Refi Plus and Refi Plus whole loans must be purchased by Fannie Mae on or before September 30, 2019 or must be delivered into MBS pools with issue dates on or before September 1, 2019.

• Update have been made to B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report and B3-6-02, Debt-to-Income Ratios 
• Clarifies the resubmission trigger based on a prior Guide update made to the debt-to-income ratio for loans underwritten through DU. 
• For further clarification, we also added examples to the Guide.

• To align with an upcoming update to the Servicing Guide, we are clarifying that all applicable renovation funds must be deposited into an escrow account that meets the requirements of the Selling Guide at the time of delivery
• Updates have been incorporated into B5-3.2-04

VA is consolidating and clarifying guidance regarding how section 309 of Public Law 115-174, the Economic Growth, Regulatory Relief, and Consumer Protection Act affects IRRRLs. Specifically:

• Remedial actions for applications initiated on or after May 25, 2018, and before the date of this Circular (August 8, 2019), and where such loans did not meet the recoupment or net tangible benefit standards defined in this Circular
• Fee Recoupment
• Net Tangible Benefit
• Loan Seasoning
• Disclosure
• Veteran Certification

See also:

• https://benefits.va.gov/homeloans/documents/circulars/26_19_22_exhibita.pdf
• https://benefits.va.gov/homeloans/documents/circulars/26_19_22_exhibitb.pdf
• https://benefits.va.gov/homeloans/documents/circulars/26_19_22_exhibitc.pdf
  

Arkansas Senate Bill 188 (Act 200) is an act to modify the fair mortgage lending act; and to amend certain provisions of the fair mortgage lending act to comply with recent developments in federal law; and for other purposes.

• Includes for transitional loan officers in all existing licensing provisions
• Updates multiple definitions
• Updates some licensing provisions

Arkansas House Bill 1943 amends The Personal Information Protection Act to revise the definition of "personal information". 

• Adds a definition for "Biometric data" as part of "personal information"
• Adds new requirements for breach of security systems affecting the personal information of more than one thousand (1,000) individuals, including disclosure requirements to affected individuals, and disclosure to the Attorney General at the same time the security breach is disclosed to an affected individual or within forty-five (45) days after the person or business determines that there is a reasonable likelihood of harm to customers, whichever occurs first
• Adds documentation retention requirements for written determination of a breach of the security of a system and supporting documentation for five (5) years from the date of determination
• Adds requirements to provide the Attorney General, upon request, copies of the written determination of the breach of the security of the system and supporting  documentation to the Attorney General no later than thirty (30) days after the date of receipt of the request. 
• Clarifies that the determination and documentation are not subject to public disclosure

• An AMC that oversees a panel of more than 15 state-certified or state-licensed appraisers in a state, or 25 or more appraisers in two or more states in a calendar year may no longer provide appraisal services for loans held in portfolio with a loan amount larger than $250,000 unless the AMC is registered with the state or is subject to oversight by a federal financial institution’s regulatory agency through its ownership and control by a federally regulated depository institution.
• AMCs that are not owned and controlled by a depository institution are therefore
  considered non-federally regulated and will have to rely on state regulatory programs in order to avoid restrictions on the services they can provide.
• The majority of states will have had to revise their state AMC licensing programs to comport with the new minimum standards, 13 of which had no prior “appraiser certifying and licensing agency”
• If non-federally regulated AMCs are unable to provide important appraisal management services, the many lenders who depend on them to manage the appraisal process will be forced to find other options if they wish to originate portfolio loans above $250,000.

The final rule effective date was August 10, 2018; however, the window was extended by an additional 12 months for those states that were found to be making substantial progress towards implementing a registration and supervision program.

We are updating our mortgage modification requirements to allow Servicers to use eModification Agreements to modify paper Notes and eMortgages. Updates include guidelines for:

• Electronic loss mitigation documents
• General requirements for all Freddie Mac eModification Agreements
• Document custodial requirements
• Storage and safekeeping of eModification Agreements
• Transfers of Servicing
• Disaster Recovery/Business Continuity Plan

Please see the guide bulletin for complete details. 

• We are updating Exhibit 76, Loan Modification for Delinquent Mortgages, to include requirements that better reflect our available modification products. 
• These changes include an expansion of the Borrower representations and covenants as well as a section for the capitalization amount. 
• We are also creating Exhibit 76A to provide authorized changes to Exhibit 76, such as language to address forbearance. 
• We recommend that Servicers begin implementing Exhibit 76 and use the authorized changes in future modification agreements when modifying Freddie Mac Mortgages.

• Servicers that they are required to periodically screen all Borrowers against OFAC’s list of Specially Designated Nationals and Blocked Persons SDN List (“OFAC SDN List”) in accordance with the Servicer’s own OFAC compliance program 
• Servicers are required to notify Freddie Mac within 24 hours of any Borrower match to the OFAC SDN List
• After a Servicer notifies Freddie Mac of a valid SDN match, we will contact the Servicer to discuss next steps related to Servicing the Mortgage, which may consist of discontinuing certain Servicing activities

• Rremoving the requirement that Servicers notify Freddie Mac if a Borrower becomes at least 30 days delinquent in his or her payments under a confirmed reorganization plan that includes a bankruptcy cramdown 
• Rather, upon determining the Borrower became 60 days delinquent in his or her payments but no later than the 75th day of Delinquency, the Servicer must instruct counsel to file for relief from the automatic stay
• For any other default under the terms of a confirmed reorganization plan that includes a bankruptcy cramdown, the Servicer must continue to notify Freddie Mac of such default and indicate the type of default and include the Servicer’s recommendation as to how to proceed

• Wwe encouraged Sellers to establish Escrow accounts when originating certain Mortgage products 
• To support these best practices, we are updating our Escrow related Servicing requirements in Section 8201.1
• Servicers must not discontinue or waive collecting Escrow on a HomeOne Mortgage if an Escrow account was established when the Mortgage was sold to Freddie Mac
• We are reorganizing Section 8201.1 to make it easier for Servicers to identify our requirements for annual Escrow analysis, waivers of Escrow accounts and non-payment of Escrow charges

• Failure to send a copy of the notice of foreclosure or to file an affidavit as required results in a fine of $500 payable to the ward in which the property is located

• Deletes language regarding the requirements when a party refiles the complaint or counterclaim

• Adopted amendments specify the term, renewal process, and expiration date for a residential mortgage loan originator license. 
• The amendments maintain the current one-year term, the current December 31 expiration date, and the current reinstatement period from January 1 through the last day of February. 
• The title of §2.201 is also amended to state "License Term, Renewal, and Expiration," to ensure that the rule's title clearly conveys its contents, and to ensure consistency with other rules being amended in this adoption. 
• Adopted amendments shorten the titles of Chapter 2 and its two subchapters, in order to make these titles more simple and concise, and to clarify that Chapter 2 applies to residential mortgage loan originators regulated by the OCCC, not just those applying for licensure.

Edits changing severity are related to Flood Insurance, Lien Type, and data consistency. 

Note: A federal judge has issued a stay on the August 2019 compliance date tied to the “payday lending rule”.  A new compliance date has not been set.

• For short-term and longer-term loans with balloon payments, and for longer-term loans with an annual percentage rate greater than 36 percent that are repaid directly from the consumer’s account, the rule identifies it as an unfair and abusive practice to attempt to withdraw payment from a consumer’s account after two consecutive payment attempts have failed, unless the lender obtains the consumer’s new and specific authorization to make further withdrawals from the account. 
• The rule also requires lenders to provide certain notices to the consumer before attempting to withdraw payment for a covered loan from the consumer’s account.  

VA has provided guidance for sending VA required loss mitigation letters to the borrower, including:

• Timing
• Content
• Investor Reporting
• VA's Adequacy of Servicing (AOS) process