Compliance Calendar

In alignment with Freddie Mac and at the direction of the Federal Housing Finance Agency (FHFA), we are simplifying our short sale and Mortgage Release policies to provide servicers with clear parameters to assist borrowers with exiting the property while avoiding a foreclosure sale. In particular, we are updating our short sale and Mortgage Release policies to 

 streamline and align the documentation requirements for evaluating a borrower to determine eligibility; 

 implement new criteria for evaluating a borrower facing imminent default, which closely aligns with the criteria for mortgage loan modification evaluations; 

 streamline the borrower contribution evaluation, including eliminating the requirement to evaluate the borrower for a promissory note; 

 revise the requirements for evaluating the credit report for new mortgage loans obtained; 

 more closely align the incentive payments to assist a borrower with relocation expenses by removing the different incentive amounts for certain jurisdictions for a Mortgage Release; 

 permit short sale negotiation fees as an allowable short sale transaction cost, provided they are deducted from the allowable real estate sales commission; and 

 change the timing with which the servicer must conduct the final interior property inspection for a Mortgage Release from no more than two business days following the receipt of the executed deed and all related documents to no more than five business days following the receipt of the executed deed and all related documents. 

We are also updating the servicer’s responsibilities for anti-fraud measures for a short sale to instruct the servicer to insert the date of the short sale closing, rather than the date of the deed, when amending the deed conveying the property to the purchaser with the resale restriction provision.

Updated Servicing Guide Topics 

 D2-1-01, Determining if the Borrower’s Mortgage Payment is in Imminent Default 

 D2-3.3-01, Fannie Mae Short Sale 

 D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure) 

 F-1-12, Preparing to Implement a Workout Option

 F-1-15, Processing a Fannie Mae Mortgage Release (Deed-In-Lieu of Foreclosure) 

 F-1-16, Processing a Fannie Mae Short Sale

Effective Date

Servicers are encouraged to implement these policy changes immediately, but must implement them no later than September 1, 2019. Once implemented, servicers must evaluate borrowers for a short sale or Mortgage Release in accordance with this policy. 

Additionally, without regard to a servicer’s time frame for implementing the policy changes related to short sales and Mortgage Releases described above, we are updating D2-3.3-02, Fannie Mae Mortgage Release (Deed-inLieu of Foreclosure) to eliminate Mortgage Release case delegation and instead require servicers to submit all cases to us.  

Effective Date 

Servicers are encouraged to implement this change immediately, but must submit all Mortgage Release cases evaluated on or after March 1, 2019 to Fannie Mae for review. 

Effective September 1, 2019; however, Servicers may implement earlier if they are operationally ready to do so.

We are revising our short sale and deed-in-lieu requirements in alignment with Fannie Mae and at the direction of the FHFA. These revisions simplify our short sale and deed-in-lieu requirements to improve the loss mitigation experience for Servicers and Borrowers. 

We are revising our short sale and deed-in-lieu requirements related to: 

• Borrowers who have been previously discharged from a Chapter 7 bankruptcy 

• Borrower documentation 

• Special requirements for Borrowers who are current or less than 60 days delinquent • Borrower contributions 

• Short sale negotiation fee requirements

Eligibility requirements for Borrowers previously discharged from Chapter 7 bankruptcy

If the Borrower was previously discharged from the debt obligation in a Chapter 7 bankruptcy, then the Borrower is eligible for a short sale or deed-in-lieu evaluation regardless of Delinquency, occupancy and property condition and without requiring a Borrower Response Package (BRP).

Borrower documentation 

We are revising our requirements for Borrower documentation for short sales and deeds-in-lieu. The table below outlines the documentation required to evaluate a Borrower for a short sale or deed-in-lieu. 

Special requirements for Borrowers who are current or less than 60 days delinquent

If a Borrower is current or less than 60 days delinquent at the time of initial evaluation, the Borrower must be in non-retention imminent default according to the Business Rules in the chart below to be eligible for a short sale or deed-in-lieu, unless the Borrower was previously discharged from a Chapter 7 bankruptcy. The criteria for nonretention imminent default follows very similar logic to what we have implemented to evaluate for imminent default as part of a Flex Modification evaluation, but has been adjusted slightly to be more applicable to short sales and deeds-in-lieu. These requirements are identical to the imminent default requirements for a mortgage modification, except for Business Rule 3, where we have replaced one of the acceptable Imminent Default Hardships.

Non-retention imminent default evaluation Business Rules

To be considered in imminent default, the Borrower must meet all requirements under Business Rule 1, and must meet the requirements for either: 

• Business Rule 2, or 

• Business Rule 3

Borrower contributions and promissory notes

Promissory notes are no longer accepted as a form of payment for Borrower contributions. All requirements pertaining to promissory notes will be removed from the Guide. Servicers will be required to evaluate Borrowers for a cash contribution, in accordance with the revised requirements described directly below. 

The Servicer must request a cash contribution toward the deficiency if a Borrower has: (i) more than $10,000 in Cash Reserves, or (ii) a housing-to-income ratio (calculated following the requirements of Section 9208.3(e)), less than or equal to 40%, unless: 

• It is prohibited by applicable law 

• The Servicer determines that the Borrower is eligible for Streamlined documentation • The Borrower is a Servicemember with PCS orders and the property securing the Mortgage is or was the Borrower’s primary residence, where the transfer or new employment location is greater than 50 miles oneway from the property securing the Mortgage being evaluated.

Borrowers who are required to make a contribution toward the deficiency must contribute the greater of: 

• 20% of their Cash Reserves or 

• Four times principal, interest, taxes and insurance (PITI)

The contribution amount must be rounded to the nearest $100, and must not exceed the deficiency. If the contribution amount is not at least $500, the requirement is waived. 

Based on the Servicer’s assessment of the Borrower’s written or stated ability to make a financial contribution, along with its evaluation of the Borrower’s financial and hardship information, the Servicer may negotiate a lower contribution amount. Additionally, the Servicer may determine that the Borrower’s individual circumstances warrant a lower starting point to cash contribution negotiations or no contribution. The specific reason(s) for the Servicer's decision to adjust the contribution amount must be documented in the Mortgage file. If the Borrower refuses to make a contribution that the Servicer deems reasonable for the Borrower, the Servicer must submit the case to Freddie Mac for review.

If the Borrower is current or less than 60 days delinquent and meets the criteria described in the Cash Reserves test, the Borrower must contribute a minimum of 20% of their Cash Reserves. If the Borrower is unwilling to contribute 20% of their Cash Reserves, the Servicer must submit the case to Freddie Mac for review. 

While the Servicer is not required to collect supporting documentation pertaining to the Borrower’s assets, Freddie Mac expects the Servicer to perform due diligence to ensure the stated assets are consistent with the Borrower’s overall financial circumstances. As part of its evaluation, the Servicer must verbally confirm the Borrower’s assets as stated on Guide Form 710, Mortgage Assistance Application, and reconcile any discrepancies and/or inconsistencies with the financial information in the documentation collected as part of the complete BRP (i.e., income and hardship documentation and the Borrower’s credit report).

Short sale negotiation fees

At the discretion of the real estate broker, fees paid to a party to evaluate, negotiate or process a short sale with the Servicer, which are commonly referred to as "short sale negotiation fees," "short sale processing fees," "marketing fees," or "administrative fees," may now be deducted from the real estate broker’s 6% commission. 

Negotiation fees still must not be deducted from the proceeds of sale or charged to the Borrower. Additionally, neither the Servicer nor its agents may charge Freddie Mac or the Borrower, either directly or indirectly, any fee whatsoever in connection with processing a short sale on any Mortgage. Standard and customary real estate commissions and settlement service fees agreed to by the Borrower and paid to the real estate brokerage and settlement agent are not prohibited.

Supplemental Borrower incentive fees for deeds-in-lieu 

We are eliminating the supplemental Borrower incentive of up to $7,000 in Connecticut, the District of Columbia, Illinois, Maryland, Massachusetts, New Jersey, New York and Pennsylvania. Borrowers in these and other areas will remain eligible to receive up to $3,000 provided they meet the requirements of Section 9209.4.

Final inspection timing for deeds-in-lieu

The Servicer must conduct an interior inspection of the Mortgaged Premises to ensure that it is vacant, undamaged and in broom-swept condition. The inspection must occur no more than five Business Days following receipt of the executed deed and all related documents. The Servicer must take all necessary actions to protect the property from waste, damage and vandalism, and is responsible for the condition of the property at the time of conveyance to Freddie Mac.

Guide updates

We are updating Sections 9202.1, 9208.2 through 9208.5, 9208.7, 9208.8, 9209.2 through 9209.5 and 9209.8 to reflect these changes to our short sale and deed-in-lieu requirements.

To encourage timely submission of post-settlement data corrections, we are implementing a grace period for the contract noncompliance and contract change compensatory fee. We will not assess this fee on post-settlement data correction requests submitted within 60 days of the date the initial adjustment is posted to the Detail Adjustment Report, or in the case of mortgage modifications, within 60 days of the close of the Freddie Mac Accounting Cycle. 

Guide impact: Section 8303.43

• For most Closing Costs, we require the Servicer to ensure they are reasonable and customary for the jurisdiction where the Mortgaged Premises is located 
• For certain specific transaction costs, we have more prescriptive limits (e.g., Borrower incentives)
• We are re-organizing Section 9208.7(b) to segregate the Closing Costs/transaction costs with more stringent thresholds

• House Bill 3815 and Senate Bill 339 amend the Seller’s Disclosure Notice the seller of a residential real property comprising not more than one dwelling unit must give to a purchaser in order to include notice of whether the seller is aware of conditions relating to the property’s present flood insurance coverage, previous flooding due to a failure or breach of a reservoir or a controlled or emergency release of water from a reservoir, or previous water penetration into a structure on the property due to a natural flood event; whether the seller is aware the property is located wholly or partly in a floodplain, floodway, flood pool, or reservoir; whether the seller has ever filed a flood claim for flood damage to the property with any insurance provider; whether the seller has ever received assistance from FEMA or the U.S. Small Business Administration for flood damage to the property; and requires the seller to provide the definitions for the 100-year and 500-year floodplains, flood pool, flood insurance rate map, and reservoir, as defined by the bills, on the Seller’s Disclosure Notice. 

House Bill 3815 and Senate Bill 339 take effective September 1, 2019, and apply only to a contract for the sale of real property subject to Section 5.08 entered into on or after September 1, 2019.

The state of New Jersey enacted provisions relating to the disclosure of a security breach of an online account. These provisions are effective on September 1, 2019.

• Senate Bill 2128 amends subsection (b) of Section 12.0011 of the Property Code
  authorizing a paper document concerning real or personal property that is a copy of an electronic record to be recorded or serve as notice if the paper copy has been declared to be a true and correct copy of the electronic record as provided by new Section 12.0013 by a notary public or other officer authorized to take an acknowledgment or proof of a written instrument (see Section 12.001(b)(3)). 
• Senate Bill 2128 adds Section 12.0013 to establish a process for requiring county clerks to record a paper copy of an electronic record that is otherwise eligible under state law to be recorded in the real property records, provided the paper copy contains an image of an electronic signature or signatures that are acknowledged, sworn to with a jurat, or proved according to law and the copy has been declared by a notary public or other officer authorized to take an acknowledgment or proof of a written instrument to be a true and correct copy of the electronic record (see Section 12.0013(b)). 
• Senate Bill 2128 authorizes a notary public or other such officer to declare that a paper copy of an electronic record is a true and correct copy of that record by executing and attaching an official seal to a paper declaration under penalty of perjury and affixing or attaching the declaration to the paper copy of the electronic record (see Section 12.0013(d)). 
• Senate Bill 2128 requires the form of the declaration to be substantially as the form in subsection (e) of Section 12.0013 (see attached Exhibit 1 to this Legislative Update for this form).  
• Senate Bill 2128 establishes that a document that is a paper copy of an electronic record and that is printed and declared to be a true and correct copy as provided by subsection (d) of Section 12.0013 satisfies any requirement of law that, as a condition for recording, the document (1) be an original or be in writing; (2) be signed or contain an original signature, if the document contains an image of an electronic signature of the person required to sign the document; and (3) be notarized, acknowledged,
  verified, witnessed, made under oath, sworn to with a jurat, or proved according to law, if the document contains an image of an electronic signature of the person authorized to perform that act and all other information required to be included (see Section 12.0013(c)). 
• Senate Bill 2128 adds definitions for “document,” “electronic,” “electronic record,” and “electronic signature” in subsection (a) of Section 13.0013. 
•  Senate Bill 2128 amends subsection (b) of Section 193.003 of the Local Government Code to require the property record index entry for a paper document so recorded to contain the names of the grantors and grantees. 

We are updating our requirements for acceptable title insurers to remove prescriptive ratings. Lenders must now ensure title insurers are: 

▪ duly authorized and licensed, as required, to issue title insurance in the state where the property is located; and 

▪ further evaluated in accordance with the lender’s procedures for title insurer approval. 

Effective for case numbers assigned on or after September 1, 2019.

• The Maximum Mortgage Amount section of Handbook 4000.1 is amended to reduce the current Maximum LTV and CLTV percentages from 85 to 80 percent of the Adjusted Value on cash-out refinance mortgages. 

SVC-2018-09 Update: We are extending the mandatory effective date from March 1, 2019 to September 1, 2019 to allow servicers additional time to make the operational changes necessary for a better customer experience. Also, we’re changing the available date for borrower-initiated requests for termination of conventional MI based on current value of the property from January 1, 2019 to March 1, 2019.

******

To simplify the process of evaluating borrower-initiated requests for the termination of conventional mortgage insurance (MI), we are updating our requirements. These new requirements will result in a better customer experience for both servicers and borrowers.

Our requirements related to borrower-initiated conventional MI termination requests have been changed to reflect the following:

•  For borrower-initiated MI termination requests based on original value, allowing the use of Fannie Mae’s Automated Property Service^TM (APS) to verify the current value of the property, resulting in servicers no longer being required to warrant the property value;
• For borrower-initiated MI termination requests based on current value, allowing the use of broker price opinions (BPOs) through our Valuation Management System (VMS) to verify the current value of the property;
• For borrower-initiated MI terminations based on current value with property improvements, changing the loan-to-value (LTV) threshold from 75% or less to 80% or less and providing examples of what are considered substantial improvements;
• Allowing borrower-initiated terminations to be evaluated based on a borrower’s written or verbal request;
• Incorporating into the Servicing Guide changes announced in LL-2017-09, Fannie Mae Extend Modification for Disaster Relief and Other Clarifications for Mortgage Loans Impacted by Disaster Events, related to evaluating a borrower’s request for termination of MI for any mortgage loan that is impacted by disaster; and
• Removing outdated original value termination requirements.

Unless stated otherwise, these requirements will replace the following sections in the Servicing Guide:

•  “Borrower-Initiated Termination of Conventional Mortgage Insurance Based on Original Value of the Property” and “Borrower-Initiated Termination of Conventional Mortgage Insurance Based on Current Value of the Property” in B-8.1-04, Termination of Conventional Mortgage Insurance; and
• “Verifying Property Value for Mortgage Insurance Termination” in F-1-02, Escrow, Taxes, Assessments, and Insurance.

Effective Date

Servicers are encouraged to implement these policy changes as early as APS and VMS become available on January 1, 2019; however, servicers are required to implement these changes by March 1, 2019, unless otherwise noted in this Lender Letter.

Borrower-Initiated Termination of Conventional Mortgage Insurance Based on Original Value of the Property

The servicer must take the following steps to evaluate the borrower’s request for MI termination because of a curtailment:

1. Verify the LTV ratio, or combined loan-to-value (CLTV) ratio if applicable, of the mortgage loan meets our eligibility criteria.

The following table describes the LTV ratio, or CLTV ratio if applicable, eligibility criteria. 

N O T E : The servicer must determine the original value of the property in accordance with applicable law.

 2. Verify the borrower has an acceptable payment record.

An acceptable payment record is achieved when the mortgage loan

•  is current when the termination is requested, which means the mortgage loan payment for the month preceding the date of the termination request was paid;
• has no payment 30 or more days past due in the last 12 months; and
• has no payment 60 or more days past due in the last 24 months.

N O T E : When assessing the payment history for a mortgage loan that has been outstanding for fewer than 24 months (or for a current borrower who assumed a mortgage loan within the last 23 months), the servicer must apply the acceptable payment record criterion to the length of time the mortgage loan has been outstanding (or that has elapsed since the current borrower assumed the mortgage loan).   

The 12- and 24-month payment histories must be measured backward from the later of the date

•  the balance is first scheduled to reach, or actually reaches, 80% of the original value of the property; or
• the borrower actually requests termination.

3. Verify the current value of the property is not less than its original value.

The servicer must obtain a property valuation from Fannie Mae’s APS or follow the Ordering Property Values for Mortgage Insurance Termination section below to verify that the current value of the property is at least equal to the original value of the property and take the required actions based on the following table. 

N O T E : The APS value will only be updated after 120 days.

The servicer must notify the borrower if the request for termination is denied and provide the grounds for denial, including the results of the APS value, BPO, or appraisal used to make the determination. This notice must be sent within 30 days of the date the servicer received the APS value, BPO, or appraisal, if applicable.

Borrower-Initiated Termination of Conventional Mortgage Insurance Based on Current Value of the Property

If the borrower’s request for termination includes the information necessary to reach a decision, the servicer must evaluate the request based on the following:

 1. Verify the LTV ratio, or CLTV ratio if applicable, of the mortgage loan meets Fannie Mae’s eligibility criteria.

Satisfaction that the mortgage loan meets the applicable LTV ratio or CLTV ratio eligibility criterion must be evidenced by obtaining a property valuation from Fannie Mae’s VMS application as described in Ordering Property Values for Mortgage Insurance Termination below.

The following table describes the LTV ratio (or CLTV ratio, if applicable) eligibility criteria.

2. Verify the borrower has an acceptable payment record.

An acceptable payment record is achieved when the mortgage loan

•  is current when the termination is requested, which means the mortgage loan payment for the month preceding the date of the termination request was paid;
• has no payment 30 or more days past due in the last 12 months; and
• has no payment 60 or more days past due in the last 24 months.

N O T E : When assessing the payment history for a mortgage loan that has been outstanding for fewer than 24 months (or for a current borrower who assumed a mortgage loan within the last 23 months), the servicer must apply the acceptable payment record criterion to the length of time the mortgage loan has been outstanding (or that has elapsed since the current borrower assumed the mortgage loan).

If a mortgage loan has been assumed, the servicer must not agree to the termination unless the current borrower has a 24- month payment history for the mortgage loan.

The servicer must notify the borrower if the request for termination is denied and provide the reasons for denial, including the results of the BPO or appraisal. This notice must be sent within 30 days after the latter of the date the servicer received

• the borrower’s request for termination, or
• the BPO or appraisal.

Ordering Property Values for Mortgage Insurance Termination

The BPO or appraisal to determine the current value of the property is at the expense of the borrower. As soon as the servicer receives the applicable fee for the valuation from the borrower, on one unit properties it must order a BPO, or appraisal if the servicer determines it is required by law, using Fannie Mae’s VMS application and the updated VMS Valuation Order Template. On two- to four- unit properties, the servicer must order an appraisal using Fannie Mae’s VMS application and the updated VMS Valuation Order Template. The borrower must be charged for the cost of the BPO or appraisal based on the following table.

If the borrower is requesting MI termination based on current value of the property because of property improvements made by the borrower, the servicer must include details of the property improvements provided by the borrower in the VMS Valuation Order Template.

Verification of Acceptable Payment Record for Borrowers Impacted by a Disaster

Effective immediately, when verifying the borrower’s acceptable payment record for MI termination the servicer must not consider any payment that is 30 or more days past due in the last 12 months, or 60 or more days past due in the last 24 months, that is attributable to a disaster event in which the servicer provided the following:

• disaster relief, or
• a forbearance plan, repayment plan, or Trial Period Plan, and the borrower complied with the terms of any such plan.

The state of Nebraska amended its provisions relating to its Uniform Power of Attorney Act. These provisions are effective on September 6, 2019 (or 3 months following adjournment of the current legislative session).

A bill for an act relating to the Nebraska Uniform Power of Attorney Act; to amend sections 30-4020 and 30-4031, Reissue Revised Statutes of 3 Nebraska; to change provisions relating to banks and other financial 4 institutions; to harmonize provisions; and to repeal the original sections.

• Updates include an automated analysis of the eligible income sources to support that the business has sufficient liquidity and is financially capable of producing stable monthly income for the Borrower (e.g. “business and income analysis")
• Eliminates the requirement for the Seller to perform a business and income analysis for all eligible sources of income that appear on the Income Calculation Report
• If Loan Product Advisor returns an income representation and warranty result of “Eligible” on the Last Feedback Certificate, the Seller will be eligible for relief from enforcement of representations and warranties related to the accuracy of the income calculation and the business and income analysis
• We have also incorporated the requirements related to verification of business assets used for closing and current existence of the business into Guide Chapter 5903 for ease of reference

FHA has provided guide updates, clarifications and removals in Handbook 4000.1 including but not limited to:

• Updated definition of Minimum Decision Credit Score to address application of a median score;

• Clarification of the definition for Net Tangible Benefit, and the addition of a definition for Reduction in Term in the Streamline Refinances section; and

• Clarification of the incident end date policy for when inspections may be performed for

properties located in Presidentially-Declared Major Disaster Areas (PDMDAs).

See attached letter for all changes.

North Carolina Senate Bill 162 is an act to modernize the loan origination fee for North Carolina banks and to adjust the late payment charge for certain loans.

§ 24-1.1. Contract rates and fees 

• (a) Technical changes
• (b) Technical changes
• (c) Technical changes
• (d) Technical changes
• (e) Amended to add: "(1) For a loan or extension of credit with a principal amount of one hundred thousand dollars ($100,000) or greater, the maximum origination fee is one  quarter of one percent (1/4 of 1%) of the principal amount. 
• (e) Amended to add: (2) For a loan or extension of credit with a principal amount less than one hundred thousand dollars ($100,000), the origination fee shall not exceed the amounts in the following table:

• (e) Amended to add: (3) If (i) the loan or extension of credit has a principal amount less than five thousand dollars ($5,000), (ii) the borrower is a natural person, and (iii) the debt is incurred primarily for personal, family, or household purposes, the loan or extension of credit shall not have an annual percentage rate that exceeds thirty-six percent (36%), inclusive of the origination fees permitted by this subsection and the interest permitted by subsection (c) of this section. For purposes of this subsection, "annual percentage rate" shall be calculated in accordance with the federal Consumer Credit Protection Act, Chapter 41 of Title 15 of the United States Code, (Truth in Lending Act) and the regulations adopted under it.
• (f) Technical changes

§ 24-10.1. Late fees

• (a) Technical changes
• (b) Amended to add: 
  • (1) A late payment charge shall not exceed any of the following: 
    • a. The amount disclosed with particularity to the borrower pursuant to the federal Consumer Credit Protection Act, Chapter 41 of Title 15 of the United States Code, (Truth in Lending Act) and the regulations adopted under it, if that act applies to the transaction. 
    • b. For a loan or extension of credit that meets all of the following conditions, the greater of thirty-five dollars ($35.00) or four percent (4%) of the amount of the payment past due:  
      • 1. The loan or extension of credit is made by a bank or savings institution organized under the law of North Carolina or of the United States. 
      • 2. The loan or extension of credit is not secured by real property. 
      • 3. The loan or extension of credit is governed by G.S. 24-1.1.
      • 4. The loan or extension of credit has an original principal balance greater than or equal to one thousand five hundred dollars ($1,500).
    • For any other type of loan or extension of credit governed by G.S. 24-1.1 or G.S. 24-1.1A, four percent (4%) of the amount of the payment past due
  • (2) Deleted
  • (3) Amended to add: A late payment charge shall not be charged unless one of the following is true: a. The payment is 30 days past due or more for a loan on which interest on each installment is paid in advance. b. The payment is 15 days past due or more for any other loan
  • (4) Technical changes
  • (5) Technical changes
  • (6) Technical changes
• (c) Technical changes

This act is effective when it becomes law (September 10, 2019) and applies to contracts entered into, renewed, or modified on or after that date.

To support the Uniform Mortgage-Backed Securities (UMBS), we previously announced new maximum servicing fees for fixed-rate mortgage loans delivered on or after June 1, 2019 in Lender Letter LL-2019-03. We are now incorporating these changes into the following topics of the Servicing Guide: 

▪ F-2-09, Servicing Fees for MBS Mortgage Loans

▪ F-2-10, Servicing Fees for Portfolio Mortgage Loans

• The Washington State Department of Financial Institutions (“DFI”) reported that it had interpreted the Servicemembers Civil Relief Act (“SCRA”) broadly to apply the SCRA’s 6% interest rate cap to a loan agreement entered into only by a servicemember’s spouse
• Lenders should generally apply the interest rate cap to loans contracted for by servicemember spouses in Washington and should consider taking the same approach in all community property states.  
• The exception would be for loans taken out by spouses that do not in any way benefit the marital community. 

SECOND HOME MORTGAGES

In response to Seller feedback, we are updating our requirements for second home Mortgages to:

• Permit second homes with seasonal limitations on year-round occupancy (e.g., lack of winter accessibility) to be eligible for sale to Freddie Mac provided the appraiser includes at least one comparable sale with similar seasonal limitations to demonstrate the marketability of the subject property
• Specify that the property may be rented out on a short-term basis provided that:
  • The Borrower keeps the property securing the second home Mortgage available primarily (i.e., more than half of the calendar year) as a residence for the Borrower's personal use and enjoyment; and
  • The property is not subject to any rental pools or agreements that require the Borrower to rent the property, give a management company or entity control over the occupancy of the property or involve revenue sharing between any owners and developer or another party

Guide impacts: Sections 4201.15 and 5601.2

Multistate Second Home Rider Uniform Instrument

Freddie Mac and Fannie Mae have revised the Multistate Second Home Rider-Single-Family – Fannie Mae/Freddie Mac Form 3890 (rev. 4/19). For more information, visit Freddie Mac's Uniform Instrument News & Updates web page.

As a result, we are updating Guide Exhibit 4, Single Family Uniform Instruments, to reflect the revised Second Home Rider.

Guide impact: Exhibit 4

INCOME DOCUMENTATION REQUIREMENTS

In response to Seller feedback, we are updating the documentation requirements language for retirement income, survivor and dependent benefit income, long-term disability income and Social Security Supplemental Security Income to specify that one or more of the required documents (i.e., benefit verification letter, award letter, pay statement, 1099 and bank statement(s)) can be used to verify income type, source, payment frequency, payment amount and current receipt of the income. As a result, separate verification of current receipt of income is not required if the documentation obtained to support income type, source, payment frequency and predetermined payment amount also verifies current receipt of income.

The applicable Loan Product Advisor feedback messages will be updated to reflect these changes.

Guide impact: Section 5305.2

Lender-paid mortgage insurance

We are revising the Guide sections related to the sale of fixed-rate Mortgages with annual- and monthly-premium lender-paid mortgage insurance to reflect a 50 basis points maximum Minimum Contract Servicing Spread for Mortgages sold under the fixed-rate Guarantor and MultiLender Swap programs.

Guide impact: Section 4701.2

Sec. 1. 14 MRSA §6111, sub-§2-A Enacts policy of notice by a mortgagee to a mortgagor. 

Sec. 2. 14 MRSA §6111, sub-§3, as amended by PL 1997, c. 579, §2, is repealed.

Sec. 1. 14 MRSA §6323, sub-§ amends procedures for civil actions relating to public sale timing and Sec. 2. 14 MRSA §6324 adds a new paragraph regarding the reporting of the sale.

Defect Categories

• Overall, Defect Categories have increased from 12 to 13
• 2 defect categories were consolidated into 1
• 2 new defect categories

Defect Subcategories

• Overall, Defect Subcategories have increased from 37 to 40
• There are multiple additions, deletions, and renamed subcategories (as well as defects)

Revises Chapter 147: Notaries Public and Commissioners, in its entirety, and includes new provisions for online notarial acts.

Effective today the below updated guidance, regarding the required student loan payment requirement, is implemented. This change pertains to the required payment to be utilized for Non-Fixed student loan repayment plans.

• Student loans. Lenders must include the payment as follows:
• Fixed payment loans: A permanent amortized, fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed.
• Non-Fixed payment loans: Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation. The higher of one half percent (.50%) of the loan balance or the actual payment reflected on the credit report must be used as the monthly payment in the underwriter decision. No additional documentation is required.

This modification will be permanently incorporated into Chapter 11 of HB-1-3555 in the near future.

Pursuant to the authority granted in the Reverse Mortgage Stabilization Act of 2013, 12 U.S.C. § 1715z-20(h)(3), this Mortgagee Letter amends regulations for HECMs with FHA Case Numbers assigned prior to August 4, 2014, regarding HECM MOE Assignments. 

This Mortgagee Letter applies to all HECM loans with FHA case numbers assigned prior to August 4, 2014, which comprise a valid first lien security interest in real property under applicable state law at the time of the MOE Assignment.

The terms of this Mortgagee Letter modify or supersede Mortgagee Letter 2015- 15, Mortgagee Letter 2016-05, and Mortgagee Letter 2017-05, where there is conflict.

See Mortgagee Letter for specific updates.

FHA has evaluated the HECM program requirements implemented under ML 2018-06 and has determined that the collateral risk assessment requirement is having the desired effect of mitigating significant collateral valuation risks posed to the Mutual Mortgage Insurance Fund (MMIF) and borrowers. The findings from the 6-month and 9-month evaluations provide evidence of policy effectiveness and support the continuation of the collateral risk assessment requirement.

See Mortgagee Letter for specific information.

Circular 26-19-24 is changed as follows: 

Page 1, paragraph 2: Add “The requirement in CFR 36.4317(c)(13) is currently waived.” after ‘Unless otherwise specified, servicers are required to report these events monthly.”

Rescission: This Circular is rescinded October 1, 2020.

Chapter 4, Topic 2, Subsection k, page 4-18 has been updated for clarification changing from “and” to “or” in reference of documentation required.

The Servicing Guide has been updated to include changes related to the following:

• Document Custodian Updates

We have updated our Selling and Servicing Guides to remove all references to Fannie Mae’s designated document custodian (DDC); now, all Fannie Mae-approved custodians are equipped to certify all mortgage loan types. Each custodian arrangement must be evidenced by the execution of a Master Custodial Agreement (Form 2017) in accordance with Selling Guide A3-3-04, Document Custodians. Various topics have been updated in the Servicing Guide to reflect one, consolidated procedure where there were previously different instructions for our DDC versus a third-party document custodian.

Effective Date

Servicers must document each custodian arrangement through the execution of a Master Custodial Agreement (Form 2017) by September 30, 2019.