Compliance Calendar

Fannie Mae announces a new adverse market refinance fee (loan-level price adjustment) of 50 basis points (0.500%) that will apply to most limited cash-out and cash-out refinances for whole loans purchased on or after September 1, 2020, and loans delivered into MBS pools with issue dates on or after September 1, 2020.

Note: A refinance exception applies to loans with an original principal amount less than or equal to $125,000.

Freddie Mac announces a new adverse market refinance fee (Market Condition Credit Fee) of 50 basis points (0.500%) that will apply to cash-out and no cash-out refinance mortgages (except for Construction Conversion Mortgages that qualify for single-closing Interim Construction Financing and Permanent Financing) with settlement dates on or after September 1, 2020.

This bulletin is updating requirements for analyzing market conditions when reporting one-unit housing trends in the Neighborhood section of the appraisal report. Appraisers must analyze contract sales and listings, in addition to closed sales, to determine the trend of property values and marketing times in the subject market area. Market conditions must always be analyzed to determine their impact on the market value of the subject property. This is especially important in markets where property values are increasing or declining. The appraiser's analysis will support the use of positive or negative time adjustments in the sales comparison approach and reflect the changing market conditions.

2021 loan limits

As announced in our November 24, 2020 Single-Family News Center article, the FHFA has increased the maximum base conforming and designated high-cost area loan limits effective January 1, 2021. Freddie Mac super conforming Mortgages are subject to the loan limits for designated high-cost areas.

See Bulletin for complete loan limits table

Home Possible^® Mortgages

Sweat equity

We are removing the sweat equity-specific maximum LTV/TLTV ratios chart in Section 4501.10(c)(ii)(4)(C) and instead referring to the general maximum LTV/TLTV ratios for Home Possible Mortgages in Section 4501.10(a)(i). These ratios also apply to Home Possible Mortgages that use sweat equity as an eligible source of funds.

Guide impact: Section 4501.10

Cash on hand

For Home Possible Mortgages, the use of Exhibit 23, Monthly Budget and Residual Analysis Form, is now optional when Borrower personal funds include cash on hand. Rather, the Mortgage file must contain documentation confirming that the total monthly residual income available for savings is a positive number.

While the use of Exhibit 23 is optional, it reflects information that may be necessary to confirm that the total monthly residual income available for savings is a positive number.

Guide impact: Section 4501.10

Increase for allowable Cash Contract extensions

Effective December 7, 2020

As announced in Bulletin 2019-9, Sellers have the ability to extend the expiration date for current Mandatory and Best Efforts Cash Contracts up to four times in Loan Selling Advisor^® as long as the total extension period does not exceed 30 days from the original contract expiration date. Effective December 7, 2020, we are enhancing this capability to allow for unlimited contract extensions as long as the total extension period does not exceed 30 days from the original contract expiration date.

For additional information, refer to the November 13, 2020, Single-Family News Center article.

Guide impacts: Sections 6101.3, 6101.4, and 6102.4

Updates to ACH authorization forms

Effective December 9, 2020

Beginning on December 9, 2020, Seller/Servicers will be able to utilize eBill to authorize debits and credits through the following applicable Automated Clearing House (ACH) authorization forms:

• Form 98, Authorization for Automatic Transfer of Funds Through the Automated Clearing House (ACH) for Vendors
• Form 483, Wire Transfer Authorization
• Form 987E, Wire Transfer Authorization for Warehouse Delivery
• Form 1132, Authorization for Automatic Transfer of Funds Through the Automated Clearing House (ACH) for Seller/Servicers

These forms have been updated to provide clarity in the process, and applicable Guide sections have been updated to:

• Reflect the renamed forms
• Remove references to Form 98 as it relates to Sellers/Servicers because only Vendors can submit Form 98
• Require new submissions of Forms 98, 483, 987E and 1132 to be filed electronically via eBill (Forms 483, 987E and 1132) or emailed to cashcollections@freddiemac.com (Forms 483, 987E and 1132) and counterparty_authorization@freddiemac.com (Form 98)

Guide impacts: Sections 2101.12, 2201.1, 2201.2, 6303.2, 6305.3, Forms 98, 483, 987E and 1132

Authentication Credentials for Systems access

We are updating the access management provisions of the Guide to make it clear that Seller/Servicers are required to reset certain Authentication Credentials every 90 days (for individual user credentials), and every 365 days (for system-to-system credentials). In the event such resets do not occur, or if there is no System activity associated with such credentials within their respective time periods, Freddie Mac may deactivate System access for such credentials.

These updates are intended to bolster already-robust access management practices for Freddie Mac's Loan Advisor and Servicing Gateway tools.

Guide impact: Section 2401.1

Property condition and quality of construction

We have streamlined the description of our requirements for when a property must be identified with a Q6 quality rating or the C5 or C6 condition ratings. We are also including a reference to “C5 condition rating” in the overview of Section 5601.12(e)(i) for consistency with the requirements in this section and to highlight that if a portion of the improvements has deficiencies consistent with a C5 condition rating, the entire property must be rated C5.

Guide impact: Section 5601.12

Additional employed income types

Section 5303.3 has been updated to state that Sellers should refer to Section 5303.3(b) for instances when a history of less than two years, but not less than one year, of certain employed income types may be acceptable.

Guide impact: Section 5303.3

Delivery documents for Cooperative Share Loans – corrected Bulletin 2020-43 text

In Bulletin 2020-43, we updated the requirements specifying the types of documents for Cooperative Share Loans that a Seller/Servicer must deliver to the Document Custodian, and that the Document Custodian must verify to the Seller/Servicer. The Bulletin text included an error in the section outlining delivery documents for Cooperative Share Loans. We are now clarifying that the Seller must maintain a copy of the Recognition Agreement and a copy of the Proprietary Lease in the Mortgage file. The originals of such documents must be delivered to the Document Custodian. There are no Guide changes necessary to implement this correction.

This update provides guidance concerning:

▪ condotel ineligibility,
▪ the proper treatment of projects subject to pre-litigation activities, and
▪ projects subject to recreational leases and mandatory memberships.

The addition of some supplemental requirements to the list of Ineligible Properties criteria related to identifying condotels, including projects that are transient in nature, offer hotel-type services, voluntary rental pooling, or sharing of revenue from short-term rentals and related activities. We have also added back language previously removed from the Guide describing common condotel “red flags.”

It is increasingly common that state statutes require conflicting parties to enter mediation or arbitration prior to litigation to avoid the expenses and time associated with formal legal proceedings. We are reminding lenders that we require you to apply our standard Guide policies concerning litigation when the project is engaged in pre-litigation activities. This includes mediation or arbitration when there is a reasonable expectation that the activities will proceed to litigation. Mortgage loans for units in
projects that are involved in litigation are generally not eligible for sale to us.

Finally, projects with amenities provided through a recreational lease agreement are ineligible for sale to us. We have added a list of “red flags” to the Guide to help lenders determine when projects may be subject to these arrangements.

Due to the continuing impact of the COVID-19 Pandemic National Emergency on forbearance levels and delinquency rates, Ginnie Mae, is extending the exemptions that were announced in the APM 20-06: "Treatment of Mortgage Delinquency Ratios for Issuers Affected by COVID-19."

From December 31, 2020, through July 31, 2021 (June 2021 investor reporting).

FHA announces temporary waiver of quality control (QC) requirements for appraisals' filed reviews to provide mortgagees with flexibility.

HUD Does Not Accept Wire Transfers for Secretary-Held Home Equity Conversion Mortgages

and Partial Claims

Today, the Federal Housing Administration (FHA) published new Frequently Asked Questions (FAQs) as a reminder of the method by which payoff funds for Secretary-Held Home Equity Conversion Mortgages (HECMs) and Partial Claims can be submitted to FHA. All payoffs for Secretary-Held HECMs and Partial Claims must be sent to HUD’s Loan Servicing Contractor, Novad Management Consulting, in the form of certified funds, such as a cashier’s check.

FHA does not accept wire transfers to payoff Secretary-Held HECMs or Partial Claims. Any Secretary-Held HECM or
Partial Claim payoff statement containing wiring instructions is fraudulent. The recipient of any Secretary -Held HECM or Partial Claim payoff statement that contains wiring instructions should immediately contact the FHA Resource Center by email or by phone at 1-800-CALLFHA (1-800-225-5342) to report that a possibly fraudulent payoff statement has been received and to obtain a correct payoff statement. (Persons with hearing or speech impairments may reach the FHA Resource Center by phone by calling the Federal Relay Service at 1-800-877-8339.)

COVID-19 Updates

• An extension of the COVID-19 foreclosure moratorium through January 31, 2021
• Updates to requirements for Borrower-requested cancelation of Borrower-paid mortgage insurance

Automated Clearing House (ACH) authorization forms

• Updates to Automated Clearing House (ACH) authorization forms

Freddie Mac Flex Modification^® Trial Period Plan failure

• Updates to Flex Modification Trial Period Plan requirements

Electronic Payment Deferral Agreement

• Updates to Electronic Payment Deferral Agreements

Occupancy waiver request

• Clarification to occupancy waiver requests for Second Homes

Form 1036 Request for Possession or Control of Documents

• Form 1036 updates

Escrow Requirements

• clarifying the escrow waiver exception request-related requirement with further details when submitting an exception request to Freddie Mac

Authentication Credentials for Systems access

• Seller/Servicers are required to reset certain Authentication Credentials every 90 days (for individual user credentials), and every 365 days (for system-to-system credentials)

EDR Reporting for COVID-19 and Disaster Payment Deferrals

• Clarifying that Servicers must submit Status Code EDR Event Code H6, Payment Deferral Offer, through EDR

Fannie Mae has updated LL-2020-02 to announce a temporary policy change related to verifying an acceptable payment record for borrowers that experience a financial hardship related to COVID-19, as well as extend the suspension of foreclosure activities through January 31, 2021.

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

▪ Earthquake insurance requirements*: removes property-level earthquake insurance requirement on mortgage loans for all Puerto Rico properties, and on Guam properties constructed of masonry construction.

▪ Miscellaneous revisions*: incorporates the payment deferral policy communicated in LL-2020-05 as well as the incentive fees for retention workout options as outlined in LL-2020-09 and updates the Servicing Guide to accurately reflect the day of the month in which Fannie Mae will draft guaranty fees and guaranty fee buydown charges from servicer’s designated custodial account.

Fannie Mae has extended the application dates eligible for these temporary flexibilities to Jan. 31, 2021.

Freddie Mac is extending the effective date for Mortgages with Application Received Dates through January 31, 2021 for 10 day pre-closing employment verification, appraisal and GreenCHOICE, Condominium projects and Power of Attorneys.

Fannie Mae has updated LL2020-03 to extend the application dates for verbal verifications of employment and power of attorney flexibilities to Jan. 31, 2021 and flexibilities to the process to obtain a verbal verification of employment.

Effective date

Sellers may apply these revised temporary requirements to existing Mortgages in process; however, they must be applied to Mortgages with Application Received Dates on or after December 14, 2020 and until further notice.

Revised requirements summary

In response to Seller feedback, we are revising the temporary requirements for assessing self-employment income announced in Bulletin 2020-19, to include:

• Extending the number of months’ business account statements required when an unaudited year-to-date (YTD) profit and loss statement is obtained from two months to three months
• When reviewing YTD profit & loss statements and business account statements, the Seller must now determine if the business revenue documented in the unaudited YTD profit and loss statement supports the level of revenue documented on the business account statements

See bulletin for a complete breakdown of all self-employment requirements, including the updates noted above.

Effective December 15, 2020, the FHA Catalyst platform is available for Mortgagees to submit Hawaiian Home Land Mortgages (Section 247 Mortgages) claims (Claim Type 02), Insured Mortgages on Indian Land (Section 248 Mortgages) claims (Claim Type 02), Single Family Loan Sale (SLFS) claims (Claim Type 02), Claims Without Conveyance of Title (CWCOT) (Claim Type 06), and Pre-Foreclosure Sale (PFS) claims (Claim Type 07) electronically.

This update includes changes to allow the sale of loans secured by single-width manufactured homes; updates requirements related to the use of retirement, government annuity, and pension income; modifies our seller/servicer eligibility standards related to minimum liquidity; updates our sale of personal assets documentation requirements; simplifies our eligibility requirements for community land trusts; removes earthquake insurance requirements in Puerto Rico and Guam; clarifies how lenders may use pro-rated tax credits toward closing; and more.

FHA Mortgagee Letter 2020-47 announces an extension of Re-verification of Employment and Exterior only Appraisal scope of work option for Federal Housing Administration (FHA) Single Family programs impacted by the Coronavirus Disease of 2019 (COVID-19).

The continuation of re-verification of employment guidance in ML 2020-05 is effective immediately for cases closed on or before February 28, 2021.

The extension of the Exterior-Only Appraisal inspection option in ML 2020-37 is effective immediately for appraisals with an effective date on or before February 28, 2021.

Policy updates in this ML are temporary and will not be incorporated into the Department of Housing and Urban Development (HUD) Single Family Housing Policy Handbook 4000.1.

USDA is extending the temporary exceptions originally issued on March 27, 2020, pertaining to appraisals, repair inspections, and income verifications for the Single-Family Housing Guaranteed Loan Program (SFHGLP) due to the COVID-19 pandemic through February 28, 2021.

Residential Appraisal Reports – Existing Dwelling

For purchase and non-streamlined refinance transactions, when an appraiser is unable to complete an interior inspection of an existing dwelling due to concerns associated with the COVID-19 pandemic, an “Exterior-Only Inspection Residential Appraisal Report”, (FHLMC 2055/FNMA 2055) will be accepted. In such cases, appraisers are not required to certify that the property meets HUD HB 4000.1 standards. The appraisal must be completed in accordance with the Uniform Standards of Professional Practice (USPAP) and the Uniform Appraisal Dataset (UAD).

This exception is not applicable to existing manufactured housing pilot program, new construction properties, or construction to permanent loans. As a reminder, appraisals are not required for streamlined and streamlined-assist refinance transactions.

Repair Inspections – Existing Dwelling

Loans for which a completion certification is not available due to issues related to the COVID-19 pandemic, a letter signed by the borrower confirming that the work was completed is permitted. Lenders must also provide further evidence of completion, which may include photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation. All completion documentation must be retained in the loan file.

This exception is not applicable to rehabilitation and repair loans noted in section 12.28 of HB-1-3555

Verbal Verification of Employment

Lenders should use due diligence in obtaining the most recent income documentation to verify the borrowers repayment ability prior to closing. When the lender is unable to obtain a Verbal Verification of Employment (VVOE) within 10 business days of loan closing due to a temporary closure of the borrower’s employment, alternatives should be explored. For example, email correspondence with the borrower’s employer is an acceptable alternative to a VVOE. If the lender is unable to obtain a VVOE or acceptable alternative, the requirement will be waived when the borrower has a minimum of 2 months cash reserves.

In the case of a reduction of income, the borrower’s reduced income must be sufficient to support the new loan payment and other non-housing obligations. Borrower’s with no income or those receiving unemployment benefits at the time of closing are not eligible for SFHGLP loans regardless of available cash reserves.

USDA is extending the foreclosure and eviction moratorium announced by USDA, Single Family Housing Guaranteed Loan Program (SFHGLP) on March 19, 2020, until February 28, 2021; excluding cases where the servicer has documented the property is vacant or abandoned.

Forbearance Requirements:

Lender should continue to provide impacted borrowers relief in accordance with the CARES Act by offering forbearance of the borrower guaranteed loan payment for up to 180 days. In addition, the initial forbearance period may be extended up to an additional 180 days at the borrower’s request. Lenders should outline potential solutions that may be available at the end of the forbearance payment and explain to borrowers that a lump sum payment of the arrearage will not be required.

During the forbearance options outlined above, no accrual of fees, penalties or interest may be charged to the borrower beyond the amounts calculated as if the borrower had made all contractual payments in a timely fashion.

Lenders may approve the initial 180-day COVID-19 Forbearance no later than the earlier of the termination date of the national emergency declared by the President on March 13, 2020 or February 28, 2021.

Post Forbearance Options:

Upon completion of the forbearance, the lender shall work with the borrower to determine if they can resume making regular payments and, if so, either offer an affordable repayment plan or term extension to defer any missed payments to the end of the loan. If the borrower is unable to resume making regular payments, the lender should evaluate the borrower for all available loss mitigation options outlined in HB-1-3555. The special relief measured that are outlined in Chapter 18 Section 5 “Assistance in Natural Disasters” will apply. These options include Term Extensions, Capitalization and Term Extensions, and a Mortgage Recovery Advance.

FHA Mortgagee Letter 2020-43 announces an extension to the foreclosure and eviction moratorium originally issued in ML 2020-04, extended in MLs 2020-13 and 2020-19, and further extended in ML 2020-27 for borrowers with FHA-insured Single Family mortgages covered under the Coronavirus Aid, Relief, and Economic Security (CARES) Act for an additional period through February 28, 2021.

FHA Mortgagee Letter 2020-44 extends the deadline to February 28, 2021, for the following:

• the date by which Mortgagees must approve the initial COVID-19 Forbearance provided in ML 2020-06 and extended by ML 2020-34;
• the deadline for HECM loans found in ML 2020-06 related to Mortgagee Letter 2015-10, Home Equity Conversion Mortgage (HECM) Due and Payable Policies;
• the deadline for HECM loans found in ML 2015-11, Loss Mitigation Guidance for Home Equity Conversion Mortgages (HECMs) in Default due to Unpaid Property Charges; and
• the deadline 24 C.F.R. §206.125, Acquisition and Sale of Properties and §206.205, Property Charges.

FHA Mortgagee Letter 2020-45 extend the temporary guidance published in ML 2020-16, dated June 4, 2020, and extended in ML 2020-39, dated November 25, 2020, concerning endorsement processes for mortgages where a borrower has been granted a forbearance related to the Presidentially-Declared COVID-19 National Emergency prior to the loan being endorsed for FHA Insurance; through March 31, 2021.

FHA Mortgagee Letter 2020-46 extends the temporary guidance published in ML 2020-24, dated July 27, 2020, and extended in ML 2020-40, dated November 25, 2020, as follows:

Effective immediately, the verification of business operations for self-employed borrowers and the Rental Income guidance in ML 2020-24 is extended for case numbers assigned on or before February 28, 2021.

Effective immediately, the administration of the 203(k) Rehabilitation Escrow guidance for borrowers in forbearance in ML 2020-24 is extended for open escrow accounts through February 28, 2021.

This Mortgagee Letter (ML) updates the Federal Housing Administration (FHA) Manufactured Housing criteria for Appraisal comparable selection with a standard specific to manufactured homes that have been certified under the Fannie Mae MH Advantage® or the Freddie Mac CHOICEHome® program.

This guidance is effective immediately for appraisals with effective dates on and after the ML publication date through December 31, 2022 All policy updates will be incorporated into a forthcoming revision of the Department of Housing and Urban Development (HUD) Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1).

This guidance applies to Mortgages secured by Manufactured Homes that are insured under FHA Title II Single Family Forward and Reverse Mortgage Programs.

Under this final rule, banking organizations may continue to neutralize the regulatory capital effects of participating in the Money Market Mutual Fund Liquidity Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF), and are required to continue to neutralize the LCR effects of participating in the MMLF and the PPPLF. In addition, Paycheck Protection Program loans will receive a zero percent risk weight under the agencies' regulatory capital rules.

This circular replaces the following circulars 26-20-18, 26-20-22, 26-20-23, 26-20-29 and 26-20-30 and is extending foreclosure and eviction relief on properties secured by VA-guaranteed loans, including those previously secured by VA-guaranteed loans.

OCC issued a final rule to determine when a national bank or Federal savings association (bank) makes a loan and is the “true lender,” including in the context of a partnership between a bank and a third party, such as a marketplace lender.

This final rule establishes a clear test for determining when a bank makes a loan, by interpreting the statutes that grant banks their authority to lend. Specifically, the final rule provides that a bank makes a loan when it, as of the date of origination, (1) is named as the lender in the loan agreement or (2) funds the loan.

The state of New York has established the Coronavirus Emergency Eviction and Foreclosure Prevention Act, effective immediately and will expire on May 1, 2021.

The Colorado Secretary of State issued extended regulations enacting requirements for remote notarizations that become temporarily effective on December 31, 2020, but permanently effective 20 days after publication in the Colorado register.

The CFPB issued a final rule amending the official commentary that interprets the requirements of the Bureau's Regulation Z (Truth in Lending) to reflect a change in the asset-size threshold; creditors with assets of less than $2.230 billion (including assets of certain affiliates) as of December 31, 2020, are exempt, if other requirements of Regulation Z also are met, from establishing escrow accounts for higher-priced mortgage loans in 2021.

The CFPB is amending the official commentary that interprets the requirements of the Bureau's Regulation C (Home Mortgage Disclosure) to reflect the asset-size exemption threshold for banks, savings associations, and credit unions; banks, savings associations, and credit unions with assets of $48 million or less as of December 31, 2020, are exempt from collecting data in 2021.

• Amends Colorado Revised Statutes, 24-21-502 to authorize notaries public to perform notarial acts using audio-video communication, and, in connection therewith, making an appropriation