Compliance Calendar

• Texas adopted amendments to the conditional pre-qualification and conditional loan approval forms attached to §§80.201 and 81.201 as Forms A and B
• An important amendment to §§80.201(a) and (b) and 81.201(a) and (b) is the language
  that there is no requirement to issue the appropriate loan status form ("voluntary usage")
• Does not require written notification of conditional prequalification or conditional approval of a loan, but when such written notification is given, it must be by using the appropriate loan status form or an alternate form that includes all of the information found on the appropriate loan status form
• Rule §80.201 and its Forms A and B are for use by Texas licensed residential mortgage
  loan companies and their licensed residential mortgage loan originators
• Rule §81.201 and its Forms A and B are for use by Texas registered residential mortgage bankers and their licensed residential mortgage loan originators

This bulletin is updating the document delivery and retention instructions for Mortgages documented using New York Consolidation, Extension and Modification Agreements (NY CEMAs) and certain other Guide sections relating to Mortgage file contents.

• Provides that a person holding a commission as a notary public from the
  Department of Financial Institutions (DFI) and meets certain eligibility requirements may obtain an additional commission as an online notary public
• Provides that an online notary public who is physically located in this state may perform an online notarial act for a person who is physically located in the United States or for a person who is physically located outside the United States if certain conditions are satisfied
• Creates a process for an online notarial act which is a notarial act that is performed by means of communication technology that meets standards established by DFI 
• Requires any person that offers the services of an electronic notarization system (online notarization system provider) to register with DFI
• Requires DFI to promulgate rules to implement the provisions of the bill relating to online notaries public and online notarial acts, and to facilitate online notarizations. The rules must include standards for online notarization, credential analysis, identity proofing, and communication technology

• For Mortgages documented using New York Consolidation, Extension and Modification Agreements (NY CEMAs), copies of Consolidated Notes, Original Old Money and Original New Money (Gap) Notes must be copies of the entire Note, not just the face and back page as previously required
• The Guide is also updated to explain why we require certain NY CEMA exhibits to be delivered as specified and to clarify, simplify and conform to certain language in the Guide relating to Mortgage file contents and delivery to Freddie Mac for post funding quality control

Fannie Mae will temporarily allow delivery of loans in Forbearance.   Delivery may begin May 1, 2020 for loans with notes dated Feb. 1, 2020 through May 31, 2020.

Eligibility requirements for sale of loans in forbearance

• Eligible Transactions: Purchase; Limited Cash-Out
• Ineligible Transactions: Cash-out refinance
• Payment history: Loans in forbearance cannot be more than one month delinquent at the time the lender submits the loan data in Loan Delivery for whole loan purchase or MBS execution (see Lender Letter for complete details)
• MBS pools (including TBAeligible UMBS pools): All standard pooling policies apply (with exception allowed for inclusion of loans in forbearance and one month delinquency)
• Fannie Majors®: Loans are eligible for delivery in Fannie Majors based on the above MBS effective dates
• Special Feature Code: All loans must be delivered with SFC 919, COVID Forbearance
• Loan Delivery data: (see Lender Letter for complete details)
• Loan-level price adjustment (LLPA): (see Lender Letter for complete details)

Representations and Warranties

• Notwithstanding the temporary flexibility allowing the sale of loans in forbearance, the lender remains responsible for compliance with all other requirements in the Selling Guide, as modified by the COVID-19 Lender Letters.The lender’s representation and warranty obligations remain unchanged.

Reporting forbearance after delivery

• Servicers are required to report any forbearance to Fannie Mae the next reporting month following loan delivery.

Freddie Mac will temporarily allow delivery of loans in Forbearance.   Delivery may begin May 1, 2020 for loans with notes dated Feb. 1, 2020 through May 31, 2020. (See Bulletin for Cash Contract provisions)

Eligibility requirements

Freddie Mac will allow the delivery of Mortgages for which a Borrower:

• Requested forbearance and attested to or otherwise informed the Seller or Servicer that, after the Note Date, he or she suffered financial hardship caused directly or indirectly by COVID-19, or 
• Was approved for a forbearance plan based on a COVID-19 related financial hardship that occurred after the Note Date

These Mortgages are eligible provided that each Mortgage:

• Is either a purchase transaction Mortgage or a “no cash-out” refinance Mortgage
• Is no more than 30 days delinquent as defined in the Bulletin

Credit Fees in Price:  (See Bulletin for complete details)

Delivery requirements:

Loan Selling Advisor® will be updated in support of the temporary requirements above for Mortgages with Settlement Dates on and after May 1, 2020. In connection with each Mortgage delivered in accordance with the temporary requirements above, the Seller must enter the applicable valid value for ULDD Data Point, Investor Feature Identifier (Sort ID 368):

• “J76” for Mortgages with COVID-19 related forbearance for non-First-Time Homebuyer, or
• “J77” for Mortgages with COVID-19 related forbearance for First-Time Homebuyer

Reporting forbearance after delivery

As a reminder Seller/Servicers must report any COVID-19 related forbearance to us in accordance with the requirements of Bulletin 2020-7.

Loan characteristics

We expect Mortgages sold to us under these temporary requirements to be representative in both profile and volume of a Seller’s agency-eligible Mortgage originations typically sold to Freddie Mac.

Seller Representations and Warranties Reminders

• Notwithstanding the temporary updates announced in this Bulletin, the Seller remains responsible for complying with all other requirements and for all representations and warranties in the Guide, including all requirements related to underwriting the Borrower to ensure the Borrower is qualified for the Mortgage as of the Note Date.

We are adding the selling requirements for Cooperative Share Loans and Cooperative Projects to the Guide in new Guide Chapter 5705

All Cooperative Share Loans must meet the eligibility requirements of Section 5705.5, including that the Shareholder must:

• Occupy the Cooperative Unit as a Primary Residence or second home
• Have a right to occupy the Cooperative Unit pursuant to a Proprietary Lease with a term that extends at least to the maturity date of the Cooperative Share Loan

Mortgage insurance for Cooperative Share Loans – Cooperative Units located in the State of New York (Sections 4203.1 and 4701.5)

• For New York properties, to determine whether mortgage insurance is required, the sales price is permitted to be used solely for purchase transaction Cooperative Share Loans

Cooperative Project review requirements (Section 5705.2) 

• If a Cooperative Project does not comply with the project eligibility requirements on the Note Date of the Cooperative Share Loan, the Seller may deliver the Cooperative Share Loan at the time the Cooperative Project meets the project eligibility requirements provided all other applicable requirements are met

Cooperative Share Loan eligibility – Pro Rata Share calculation (Section 5705.5) 

• If the Cooperative Corporation has a line of credit, the Seller must include the full amount of the line of credit as part of the Cooperative Project’s debt (i.e., Blanket Mortgage and any second mortgage) when calculating the Cooperative Unit’s maximum Pro Rata Share

Freddie Mac owned “no cash-out” refinance Cooperative Share Loans (Sections 5705.7, 8202.5 and 8202.6) 

• For Cooperative Share Loans that are being refinanced and are currently owned by Freddie Mac in whole or in part or securitized by Freddie Mac, Sellers do not need to determine compliance with the Cooperative Project review requirements provided that certain requirements are met including, but not limited to: 
  • Maximum 80% loan-to-value/total loan-to-value/Home Equity Line of Credit total loan-to-value ratios, and 
  • The general project eligibility requirements in Section 5705.2(b) are met

• Additionally, Sellers are not required to determine the existence or adequacy of the project liability insurance and/or the fidelity or employee dishonesty insurance as required in Sections 8202.5 and 8202.6

Special delivery requirements

• We are adding new Section 6302.45 for special delivery requirements for Cooperative Share Loans 
• We are now requiring the delivery of ULDD Data Point Project Classification Identifier (Sort ID 42) “Full review” or “Exempt from Review” for all Cooperative Share Loans 
• We will no longer require the delivery of project related data for those Cooperative Share Loans delivered as “Exempt From Review”

Servicing requirements

• Servicing requirements for Cooperative Share Loans will be announced in an upcoming Bulletin

• Servicers of Cooperative Share Loans must implement the Servicing requirements described in new Chapter 8801
• Topics include:
  • Cooperative Share Loans recognized as personal property (Section 8801.1)
  • Transfers of Servicing with respect to Cooperative Share Loans (Section 8801.2)
  • Loss mitigation for Cooperative Share Loans (Section 8801.5)
  • Pre-foreclosure referral account review (Section 8801.6)
  • Reimbursement of Cooperative Share Loan expenses (Section 8801.7)

Effective March 4, 2020

• Payment of interest on balances.
  (b)(5) The rates for IORR and IOER are: 
  • Table 1 to Paragraph (b)(5): Rate (percent) IORR 1.10 / IOER 1.10

• Temporary suspension of employment validation within the Desktop Underwriter® (DU®) validation service, in response to COVID-19’s unprecedented impact on employment, for all new casefiles created in DU on or after May 4, 2020
• Lenders must perform a verbal verification of employment in accordance with the Selling Guide B3-3.1-07 (Verbal Verification of Employment) and follow the temporary policies outlined in LL-2020-03
• The DU Underwriting Findings report will issue the standard DU Verbal Verification of Employment (VVOE) message whenever
  employment information for a borrower is submitted to DU, instead of the DU validation service employment validation message
• Fannie Mae will communicate the reinstatement of employment validation service

• Extension of effective date: extending the application dates eligible for previously announced temporary appraisal flexibilities to Jun. 30, 2020

1. Extension of effective date: extending the application dates for these temporary policies to Jun. 30, 2020 
2. Unemployment benefits as qualifying income: reminding lenders that unemployment benefits can only be used as qualifying income if it is associated with seasonal employment 
3. Furloughed borrowers: clarifying that the income of a furloughed borrower is not eligible under our temporary leave income policy 
4. Employment validation through DU validation service: temporarily suspending representation and warranty relief for employment validation through the DU validation service 
5. Sale of loans aged six months or less: all loans must be purchased or securitized no more than six months from the first payment date
6. Age of documentation: modifying our age of document requirements from four months to two months for most income and asset documentation UPDATED May 5, 2020 with new effective date 
7. Verification of self-employment: requiring lenders to confirm the borrower’s business is open and operating within 10 business days of the note date UPDATED May 5, 2020 with new effective date 
8. Market-based assets: updating policies for use of stocks, stock options, and mutual funds for down payment, closing cost costs, and reserves UPDATED May 5, 2020 with new effective date 
9. Powers of attorney: providing flexibilities for use of a power of attorney UPDATED May 5, 2020 with new effective date 
10. Remote online notarization: providing expansion of the use of remote online notarization UPDATED May 5, 2020 with new effective date and added three additional states. 
11. Lender quality control requirements: allowing post-closing reverifications to occur verbally or electronically, and other flexibility related to the field review of appraisals 
12. Verbal verification of employment: offering flexibilities related to the lender’s process for obtaining the verbal verification of employment. UPDATED May 5, 2020 with new effective date and removed the reference to the DU validation service. 
13. Continuity of income: reminding lenders of the importance of ensuring sustainable homeownership for borrowers in light of recent events 
14. Submission of financial statements and reports: extending the deadline for submission of financial statements and Form 582 to Apr. 30, 2020 
15. Notes, electronic records, and signatures: reminding lenders of our existing policies regarding possession of the original promissory note before loan purchase, and electronic signature requirements 
16. Title insurance: reminding lenders we accept lender’s policies of title insurance written on the 2006 ALTA loan title insurance form or a local equivalent, which includes “gap coverage” 
17. Business continuity plans: reminding sellers and servicers to have and to follow their own business continuity and resiliency plans Effective: See each section 

Furloughs and layoffs

Freddie Mac provides requirements for income while on temporary leave in Section 5303.5. These requirements do not extend to employer-initiated actions such as furloughs and layoffs, regardless of whether there is a projected “return to work” date.

Unemployment compensation

While we recognize that many individuals have become eligible for assistance and compensation available through the Unemployment Insurance Provisions provided in the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), the assistance and compensation are temporary in nature and therefore do not represent a stable or continuous source of income.

As such, unemployment compensation continues to be eligible for use in qualifying only when it is associated with seasonal employment and all other requirements in Section 5303.3 are met.

Automated income assessment with Loan Product Advisor® using tax return data

To align with the IRS federal tax filing extension, we are revising our requirements applicable to automated income assessment with Loan Product Advisor® using tax return data (i.e., AIM for self-employed). For Mortgages with Loan Product Advisor initial submission dates on or after August 1, 2020, the Borrower’s most recent tax returns filed with the IRS must be the 2019 tax return. This is an extension of the May 1, 2020 deadline.

Loan Product Advisor update to identify Freddie Mac-owned Mortgages

As announced in Bulletin 2020-11, Loan Product Advisor has been enhanced to assist Sellers with identifying if a Mortgage being refinanced is owned by Freddie Mac, effective for submissions to Loan Product Advisor on and after April 27, 2020. This enhancement supports our COVID-19 related appraisal flexibilities for Freddie Mac owned “no cash-out” refinance Mortgages announced in Bulletin 2020-5. If a match is found based on property address and the Social Security number of one or more Borrowers on an existing loan, then informational feedback messages will be returned on both submissions and resubmissions indicating the Mortgage is Freddie Mac owned.

Mortgages in forbearance Credit Fees in Price

As announced in the April 29, 2020 Single-Family News and Insights article, the applicable Mortgage in forbearance Credit Fee in Price will be assessed at settlement unless the contract acceptance date was prior to the publication of Bulletin 2020-12, in which case it will be assessed after funding.

EXTENSION OF TEMPORARY CHANGES FROM PREVIOUS BULLETINS

We are extending the temporary requirements and flexibilities that were effective for Mortgages with Application Received Dates through May 17, 2020 to Mortgages with Application Received Dates through June 30, 2020 for the following:

• Credit underwriting requirements announced in Bulletins 2020-5 and 2020-8
• Appraisal and GreenCHOICE Mortgage® flexibilities announced in Bulletins 2020-5, 2020-8 and 2020-11
• Condominium Project flexibilities announced in Bulletin 2020-11
• Power of attorney flexibilities announced in Bulletin 2020-8

The temporary requirements below are effective immediately and will remain in place until further notice.

• We are temporarily revising our Mortgage eligibility requirements to limit our purchase of Mortgages to those with Settlement Dates no more than six months after the Note Date or, for Construction Conversion and Renovation Mortgages, the Effective Date of Permanent Financing. 
• Additionally, we are temporarily suspending Mortgage purchases through our bulk sales unit.

In Bulletin 2020-12, Freddie Mac announced certain requirements for the purchase of Mortgages in COVID-19 related forbearance. 

If a Seller discovers that it has sold to Freddie Mac a “Mortgage in forbearance” as defined in Bulletin 2020-12 prior to its eligibility for purchase or has delivered such Mortgage without the required ULDD Data Point, Investor Feature Identifier (Sort ID 368) of “J76” or “J77,” the Seller must report such finding to Freddie Mac within 30 days of discovery through either the Post-Fund Data Correction process or the quality control processes set forth in Section 3402.10 or Quality Control Advisor®.

Effective for Mortgages with Settlement Dates on and after May 5, 2020

Currently, if the Mortgage file does not show evidence that gift funds have been deposited in a Borrower’s account then the Borrower must provide evidence of the transfer of funds from the donor to the Borrower.

We are updating the Guide to require that in all instances when gift funds are used the Seller must provide either:

• Evidence of transfer of funds from the donor’s account in a financial institution to the Borrower’s account, or
• Evidence of transfer of the funds from the donor’s account in a financial institution to the settlement or closing agent

Funds transferred via a third-party money transfer application or service are acceptable only when the documentation included in the Mortgage file evidences that the funds were transferred, using the application or service (e.g., Zelle), directly from the donor’s bank account to the Borrower’s bank account or to the settlement or closing agent. This helps to ensure that the donor identified on the gift letter is the individual providing the gift funds.

Loan Product Advisor feedback messages will be updated by May 5, 2020 to reflect these changes.

Guide impact: Section 5501.3

Updates Circular 26-20-13 as follows:

1. Page 1, Section 3. Remove the paragraph and replace with “The policies outlined in the Circular are effective for all loans closed on, or after March 13, 2020, and until further notice or the rescission of this Circular.” 
2. Page 2, Section 6. Remove the following sentence “The lender should not request an Exterior-Only appraisal if the loan amount will be more than one and a half times the maximum 2020 CCL limit” and replace with, “The lender should not request an Exterior-Only appraisal if the financed loan amount (i.e. unpaid principal loan amount) will be more than one and a half times the maximum 2020 CCL limit.” 
3. Page 3, Section 7.a. Remove the following sentence, “The lender should not request a Desktop Appraisal if the loan amount will be more than the maximum 2020 CCL limit” and replace with “The lender should not request a Desktop Appraisal if the financed loan amount (i.e. unpaid principal loan amount) will be more than the maximum 2020 CCL limit.” 
4. Page 5, Section 11. Add: “d. Water System Acceptability. Well water testing for refinance transactions where the home is already encumbered by a VA loan will be waived. In areas where testing is suspended due to COVID-19, the Veteran will need to sign an acknowledgement stating they are aware that testing cannot be done for purchase and refinance transactions where the home is not already encumbered by a VA-guaranteed loan. The lender is responsible to have a test completed within 180 days. Prior to loan closing, the Veteran must acknowledge they accept responsibility to install a filtration system at their own cost to correct the issue should the water test fail. VA staff and/or the Staff Appraisal Reviewer (SAR) must annotate the Veteran acknowledgement and 180-day requirement in NOV Condition #16, Other Conditions, on the NOV.”

Moratorium Extension:

The 60-day foreclosure and eviction moratorium announced by USDA, Single Family Housing Guaranteed Loan Program (SFHGLP) on March 19th, is extended until June 30, 2020.

The moratorium extension does not apply in cases where the servicer has documented the property is vacant or abandoned.

Forbearance Requirements:

Lenders should continue to provide impacted borrowers relief in accordance with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) by offering forbearance of the borrowers 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 October 30, 2020.

Post Forbearance Options for Borrowers Impacted by COVID-19:

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.

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 in 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.

• In response to the CARES Act, we are updating our reclassification process for mortgage loans in these MBS pools when a borrower impacted by COVID-19 is provided a forbearance plan. 
  • Such mortgage loans will not be removed from the MBS pool for the duration of the forbearance plan under the CARES Act, in accordance with the 2007 Trust Agreement, which permits mortgage loans to remain in trust longer than six consecutive months when the forbearance plan is required by applicable law. 
• These changes will be effective beginning with the June 2020 monthly delinquency status reporting cycle and will apply when the servicer reports delinquency status code 09 (Forbearance) and reason for delinquency code 022 (Energy-Environment Costs), as reassigned pursuant to this Lender Letter for reporting a hardship associated with COVID-19.

Extension to the COVID-19 foreclosure moratorium

• Foreclosure actions, including foreclosure sales, are now extended through June 30, 2020

Property inspections for delinquent Mortgages

• Effective immediately, Servicers must not complete property inspections on a Mortgaged Premises where the Borrower is experiencing a hardship related to COVID-19 unless as of the effective date of the National Emergency declaration effective date (March 1, 2020): 
  • the Mortgage was delinquent, and 
  • the property was confirmed to be vacant or abandoned 
• For a Mortgaged Premises where the Mortgage was delinquent and the property was confirmed to be vacant or abandoned, the Servicer must complete delinquent property inspections in accordance with Bulletin 2020-7

EDR reminder – reporting Mortgages impacted by COVID-19

• As a reminder, Servicers must notify Freddie Mac when a Borrower has a COVID-19 related hardship, in accordance with our requirements as described in Bulletin 2020-4, by reporting default reason code 032. 
• Additionally, if a Mortgage is subject to a COVID-19 related hardship and is on an active forbearance plan, required reporting (in compliance with our Electronic Default Reporting requirements) must include both default reason code 032 and default action code 09, forbearance.

Property valuations for short sales and deeds-in-lieu of foreclosure

• When obtaining a property valuation as part of a short sale or deed-in-lieu of foreclosure, Freddie Mac requires the Servicer to use an interior property valuation that Freddie Mac provides, as described in Sections 9208.5(a) and 9209.5(a). 
• Due to the COVID-19 pandemic, we are temporarily using external valuations in some cases. In these instances, Servicers must use the valuation we provide, even if it is not an internal valuation.

HAMP good standing for Mortgages on a COVID-19 forbearance plan, repayment plan, or COVID-19 Payment Deferral

• If the Borrower’s Mortgage was previously modified under the Home Affordable Modification Program℠ (HAMP®) and the Borrower is in “good standing” when they entered into a COVID-19 forbearance plan, then the Borrower will not lose good standing while on the active forbearance plan, even if the Borrower becomes more than 90 days delinquent. Additionally, the Borrower will not lose “good standing” if they transition directly from a COVID-19 forbearance plan to:
  • A reinstatement, or 
  • An active repayment plan, or 
  • A settled COVID-19 Payment Deferral 
• If the Borrower successfully transitions directly from a COVID-19 forbearance plan to a reinstatement, repayment plan or COVID-19 Payment Deferral, the Borrower will not lose good standing while the relief option is active or upon completing the relief option to become current. If the COVID-19 forbearance plan expires without transitioning directly to one of these solutions, or if the Borrower does not successfully reinstate the Mortgage as a result of one of these options, then the Borrower will lose “good standing.”

National Emergency Declaration effective date

• The Borrower must have been current or less than 31 days delinquent (i.e., must not have missed more than one monthly payment) as of the date of the COVID-19 National Emergency Declaration effective date, March 1, 2020, for Extend Modification, the Capitalization and Extension Modification (Cap and Extend), and streamlined Flex Modification evaluations
• This change also applies to Extend Modification and Cap and Extend Modification evaluations described in the “Borrower Contact Requirements and Loss Mitigation Hierarchy” section in Bulletin 2020-4, and to any other previous reference to the March 13 date

Loan Collateral Advisor/UCDP

• New message will note when an appraisal submitted to UCDP is identified as a desktop appraisal in the Map Reference field of the appraisal report on a refinance transaction. 
• Because desktop appraisals are not permitted on refinance transactions, this message will have a fatal severity and will require a correction of the appraisal type and resubmission to UCDP.

Loan Product Advisor

• Effective May 18, a new message is being added to remind users that COVID-19-specific requirements supercede any Loan Product Advisor feedback messages that may be returned.

Housing Goals Messages

The housing goals messages in DU are currently only issued when the address can be standardized and a 16-digit Federal Information Processing Standard (FIPS) code is obtained, or when the lender provides the 16-digit FIPS code on the loan application. The 16-digit FIPS code includes the state number as the first two digits, with the next three being the county number, the next six being census tract number, and the last five being the MSA number. DU will no longer require a 16-digit FIPS code to issue these messages.

The messages used to indicate the property is in a high-needs rural region, a low-income area census tract, a minority census tract, or a designated disaster area census tract will be updated to use an 11-digit FIPS code. That 11-digit FIPS code can be provided by the lender on the loan application, or DU will use what is received when the address can be standardized.

The messages used to indicate if the loan casefile may be eligible towards Fannie Mae’s low-income purchase goal, very low- income purchase goal, and low-income refinance goal will be updated to include the following waterfall approach:

• If an 11-digit FIPS code is received by DU when the address is standardized, or is provided on the loan application, that FIPS code will be used to issue the applicable message.
• If an 11-digit FIPS code is not received, but a 5-digit FIPS code representing the state and county is received when the address is standardized, or is provided on the loan application, that FIPS will be used to issue the applicable message.
• If a 5-digit FIPS code is not received (on the loan application or through address standardization), DU will not issue any housing goals messages.
  • Casefile Create Date: When a policy change is made without a new version of DU, that policy change is implemented using the date the loan casefile was created. For lenders to be certain if the policy should apply to a specific loan casefile, the “Casefile Create Date” will be added to the Summary section of the DU Underwriting Findings report.
  • Sales Price: The Sale Price field name displayed in the Summary section of the report will be updated to include the phrase “purchase transactions.” This will remind lenders that even if a value is included in the Purchase Price field on the loan application for refinance transactions, it will only be displayed in the Summary Section of the report on purchase transactions.
  • Expense Ratio with Undisclosed Debt (classic only): The “With Undisclosed DTI” will be removed from the Expense Ratios section in the Underwriting Analysis Report.

Note: The FIPS code is a unique code assigned to all geographic areas by the U.S. Census Bureau. The census tract is provided on the appraisal, and can also be obtained using other geocoding technology (e.g., the Census Geocoder on the U.S. Census Bureau website).

DU Underwriting Findings Report

The changes below will be made to the enhanced and classic versions of the DU Underwriting Findings report.

Real Estate Owned Data in Debt-to-Income Ratio

Insurance, Maintenance, and Taxes

Lenders are currently required to create a separate “Taxes” or “Other” liability that reflects the monthly amount of the taxes, insurance, and association dues for the borrower’s current residence on second home and investment property transactions. DU will now use the Insurance, Maintenance, Taxes & Misc. entered for the borrower’s current residence in the Schedule of Real Estate Owned (REO) section of the loan application in the debt-to-income (DTI) ratio calculation.

This update will apply to loan casefiles created on or after June 1, 2020.

Note: The Job Aid providing instructions for entering housing expenses for the borrower’s current residence on second home and investment property transactions will continue to apply to DU V. 10.3 loan casefiles created before June 1, 2020.

Rental Income

On second home and investment property transactions lenders currently enter net rental income associated with a borrower’s 2- to 4-unit current residence in the income section of the loan application. DU will now use either the Gross Rental Income or Net Rental Income entered for a borrower’s 2- to 4-unit current residence in the REO section of the loan application in the DTI ratio calculation. When Net Rental Income is entered, that amount will be used in the DTI ratio calculation. If only Gross Rental Income is entered, DU will use 75% of the Gross Rental Income in the DTI ratio calculation.

Note: DU will continue to use the net rental income entered in the income section of the loan application, when provided, even if net rental income is entered in the REO section.

Updates to Align with the Selling Guide

Rental Housing Expense

Selling Guide Announcement SEL-2020-01 clarified the documentation required to verify the borrower’s rental housing payment when the subject transaction is a second home, investment property, or includes a non-occupant co-borrower.

A new DU message will be issued when a borrower discloses rent as their current housing payment on a second home or investment property transaction, or a non-occupant co-borrower discloses rent as their current housing payment. This message will remind lenders that the rental housing payment must be verified and documented.

Note: This new message will only be issued on loan casefiles created on or after June 1, 2020.

Special Feature Code Description Update

The Special Feature Codes (SFC) descriptions issued on Homestyle® Renovation Mortgages will be updated to clarify which SFC should be used if renovation is complete or if renovation is not complete.

Miscellaneous Message Text Changes

To continue to provide clarity and consistency with the Selling Guide, various DU messages will be updated.

Retirement Income Validation in the DU Validation Service (added to release notes May 7, 2020)

Currently, the DU validation service can validate retirement income in the form of pension, annuities and IRA distributions because these income types are grouped together in one line on the 2018 tax return and tax transcript data used by the DU validation service. If retirement income entered into DU includes IRA distributions, then the DU validation service issues a message requiring lenders to document evidence of enough assets to support a three-year continuance.

The IRS changed the 2019 tax returns to separate IRA distributions from pension and annuity income; therefore, these fields are now separated on the tax transcript data used by the DU validation service. As a result, retirement income from IRA distributions will no longer be eligible for income validation. The DU validation service will no longer include a requirement to document evidence of enough assets to support a three-year continuance since only retirement income from pension and annuity will continue to be eligible for validation.

Note: The change will be effective for loan casefiles submitted or resubmitted on or after May 16, 2020.

• The commissioner may make and enter an order denying an application for a license certificate and refuse the license certificate sought
  • A denial and refusal are final and conclusive unless an appeal is made in accordance with the provisions of rules proposed for legislative approval
• The commissioner shall make and enter an order denying or refusing a license, if the commissioner finds that the applicant (individually, if an individual, or the partners, if a co-partnership, or the officers and directors, if a corporation):
  
  
  • (1) Has failed to furnish the required bond unless otherwise exempt under the provisions of §17A-2-2a of this code; 
  • (2) Has failed to furnish the required certificate of insurance; 
  • (3) Has knowingly made false statement of a material fact in his or her application; 
  • (4) Has habitually defaulted on financial obligations in this state or any other state or jurisdiction; 
  • (5) Has been convicted of a felony: Provided, That the commissioner shall apply §17A-6-6(c) and §17A-6-6(d) of this code in determining whether an applicant’s prior criminal convictions bear a rational nexus to the license being sought; 
  • (6) So far as can be ascertained, has not complied with and will not comply with the registration and title laws of this state or any other state or jurisdiction; 
  • (7) Does not or will not have or maintain at each place of business, subject to the qualification contained in 17A-6-1(a)(17) of this code with respect to a new motor vehicle dealer (an established place of business as defined for the business in question) in that section; 
  • (8) Has been convicted of any fraudulent act in connection with the business of new motor vehicle dealer, used motor vehicle dealer, house trailer dealer, trailer dealer, recreational vehicle dealer, motorcycle dealer, used parts dealer, or wrecker or dismantler in this state or any other state or jurisdiction: Provided, That the commissioner shall apply §17A-6-6(c) and §17A-6-6(d) of this code in determining whether an applicant’s prior criminal convictions bear a rational nexus to the license being sought; 
  • (9) Has done any act or has failed or refused to perform any duty for which the license certificate sought could be suspended or revoked were it then issued and outstanding; 
  • (10) Is not age 18 years or older; 
  • (11) Is delinquent in the payment of any taxes owed to the United States, the State of West Virginia, or any political subdivision of the state; 
  • (12) Has been denied a license in another state or has been the subject of license revocation or suspension in another state; 
  • (13) Has committed any action in another state which, if it had been committed in this state, would be grounds for denial and refusal of the application for a license certificate; 
  • (14) Has failed to pay any civil penalty assessed by this state or any other state; 
  • (15) Has failed to reimburse when ordered, any claim against the dealer recovery fund as prescribed in §17A-6-2a of this code; or 
  • (16) Has failed to comply with the provisions of §17A-6E-1 et seq. of this code, pertaining to the employment of licensed salespersons.

Fannie Mae has updated LL-2020-06 to extend eligible Note dates to June 30, 2020 and delivery dates to August 31, 2020 for loans going into forbearance after loan closing and before sale to Fannie Mae.

Temporary eligibility requirements for purchase and refinance transactions 

Effective: Lenders may immediately apply these policies to loans in process and must apply them to loans with application dates on or after June 2, 2020. These policies will be effective until further notice. 

In response to lender feedback, we are addressing eligibility requirements for borrowers impacted by the COVID-19 pandemic. With this update we are providing eligibility guidelines for purchase and refinance transactions. 

Lenders must continue to review the borrower’s credit report to determine the status of all mortgage loans. In addition to reviewing the credit report, the lender must also apply due diligence for each mortgage loan on which the borrower is obligated, including co-signed mortgage loans and mortgage loans not related to the subject transaction, to determine whether the payments are current as of the note date of the new transaction. For the purposes of these requirements, “current” means the borrower has made all mortgage payments due in the month prior to the note date of the new loan transaction by no later than the last business day of that month. Examples of acceptable additional due diligence methods to document the loan file include: 

• a loan payment history from the servicer or third-party verification service, 
• a payoff statement (for mortgages being refinanced), 
• the latest mortgage account statement from the borrower, and 
• a verification of mortgage. 

A borrower who is not current and has missed payments on any mortgage loan is eligible for a new mortgage loan if those missed payments were resolved in accordance with the requirements in the table below.

(See Lender Letter for table)

We are not considering payments missed during the time of a COVID-19-related forbearance that have been resolved to be historical delinquencies for purposes of our excessive mortgage delinquency policy as outlined in B3-5.3-03, Previous Mortgage Payment History. This flexibility does not apply to high LTV refinance loans, which must continue to meet the payment history requirements in B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan.

Temporary purchase and refinance eligibility requirements for Borrowers with existing Mortgages

In an effort to support responsible lending and sustainable homeownership during this unprecedented COVID-19 pandemic, we are implementing the following temporary purchase and refinance requirements for Borrowers with existing Mortgages.

Effective date

These temporary requirements are effective for Mortgages with Application Received Dates on and after June 2, 2020 and until further notice. Sellers are encouraged to implement these requirements to their loans in process.

Eligibility requirements

In addition to meeting all other requirements of the Purchase Documents and regardless of the Loan Product Advisor® Risk Class, as of the Note Date of the new Mortgage, each existing Mortgage on which the Borrower is obligated that is secured by either the subject property or any other 1- to 4-unit residential property, must meet the requirements described in the following table...(See Bulletin for table).

Documentation requirements and guidance 

In addition to reviewing the Borrower’s credit report, Sellers must exercise additional due diligence to verify whether or not each Mortgage is current (as defined above), has been reinstated after the Application Received Dates, or is in a repayment plan, loan modification Trial Period Plan, Payment Deferral or is subject to another loss mitigation program, as well as whether the additional requirements in the table above are met, if applicable. The Seller must include any related documentation in the Mortgage file...(See Bulletin for examples).

Evaluation of Mortgage payment history for Manually Underwritten Mortgages 

For Manually Underwritten Mortgages, Mortgage payments missed during COVID-19-related forbearance are not considered significant derogatory credit information for the purpose of compliance with requirements in Section 5202.5. 

Enhanced Relief Refinance® Mortgages 

These temporary requirements do not apply to Enhanced Relief Refinance® Mortgages. All of the requirements in Guide Chapter 4404, including the payment history requirements applicable to the Mortgage being refinanced and the use of refinance proceeds, continue to apply. 

Loan Product Advisor® and Guide updates

Loan Product Advisor® feedback messages and the Guide will not be updated to reflect these temporary requirements.

Representation and warranty framework relief related to Mortgages subject to forbearance agreements

Effective immediately, we are updating our requirements such that a Mortgage that was subject to a forbearance agreement during the payment history period may be eligible for relief from enforcement of selling representations and warranties regardless of the forbearance agreement, provided the acceptable payment history requirements in Section 1301.11 are met. These Mortgages also continue to be eligible for relief based on a satisfactory conclusion of a Freddie Mac quality control review of the Mortgage file if the Mortgage otherwise meets the requirements in version 2 of the selling representation and warranty framework. 

Section 1301.11 will be updated with a future Bulletin to remove the requirement that in order to qualify for selling representation and warranty relief, a Mortgage must not have been subject to a forbearance agreement during the payment history period.

Extension of temporary requirements for purchase of Mortgages in forbearance

We are extending the temporary requirements for purchase of Mortgages in forbearance announced in Bulletin 2020-12. These requirements are now effective for Mortgages with Note Dates on or after February 1, 2020 and on or before June 30, 2020, and Settlement Dates on or after May 1, 2020 and on or before August 31, 2020...(See Bulletin for chart).

IRS Form 4506-T

VA guidelines for standard and alternative documentation do not include a requirement to obtain IRS Form 4506-T. This applies to both W-2 earners and self-employed borrowers. The VA Lender’s Handbook references IRS Form 4506-T in Chapter 4, Topic 8, Documentation for Automated Underwriting Cases (AUS). The IRS Form 4506-T requirement is sometimes listed as a condition on the AUS feedback certificate or imposed during a manual underwrite by the lender. It is important to note that even if this condition exists, it would be considered an investor or lender overlay exceeding the guidelines established by VA. 

Renewal Applications, Applications for Underwriter Approvals, and Fees to conduct business with VA

Lenders are reminded to submit timely annual renewal applications to VA as required in VA Pamphlet 26-7, Chapter 1 The Lender Approval Guidelines. Lenders should not rely on VA reminder notices of expiration. Per standard practice, all lender maintenance items, including applications, fees, merge and acquisition information are submitted to the Regional Loan Center (RLC) of jurisdiction for the corporate office of the lender. To prevent delays in processing maintenance items VA recommends that a copy of the request be sent by email to the RLC of jurisdiction, including a scanned copy of any checks being sent by mail. Questions or concerns should be directed to the VA RLC with jurisdiction over the lender’s corporate office. 

a. Beginning on March 13, 2020, through June 13, 2020, deadlines for applications, renewals and fees due to VA are automatically extended by 60 days. For example, if a lender’s renewal fees and financial documents are due on May 1, 2020, the due date is extended to June 30, 2020, without penalty. 

b. With the exception of the extension outlined in paragraph 4 (a) of this Circular, failure to submit timely annual renewal applications and fees may result in life of loan indemnification for loans closed due to lapse in VA approval/registration any company or individual. 

c. VA reminds lenders that as discussed in VA Pamphlet 26-7, Chapter 1, Lender Approval Guidelines, non-supervised automatic lenders must have a VA-approved underwriter. VA has recently observed an increase in the number of loans underwritten by underwriters not registered with VA, or where the underwriter was approved under a former employer and incorrectly assumed the approval carries over to a new employer. VA reminds lenders that loans underwritten by underwriters not registered with VA, as their employee, or where the approval has lapsed, as of the day of closing, are subject to the Indemnification for the life of loan.

USDA announces updated loan status reporting requirements for borrowers impacted by the Presidentially declared COVID-19 National Emergency.

• Effective immediately lenders should start reporting the status reason code of 010- Neighborhood Problem and a status code of 06- Formal Forbearance.   
  • If any other forbearance code was previously reported for Borrowers Affected by the COVID-19 National Emergency, please stop reporting that status code and begin reporting with status code 06 – Formal Forbearance. 
  • The same default status date should be used as the date the borrower was approved for the forbearance if changing the status code.  
• If the loan was not previously in default, the status code 42 must be reported first to open the default event and then Status Code 06 – Formal Forbearance can be reported in the following months. 

Page 2, paragraph 3, section d: replace with the following paragraph: The lender must ask the Active Duty Servicemember if he or she has a pre-discharge claim pending. If so, the lender must contact the Regional Loan Center (RLC) by email immediately to request assistance in obtaining a proposed or memorandum rating to determine if the Servicemember may be exempt from paying the funding fee as noted in Item 2 of this Circular. While Form 26-8937, Verification of VA Benefits, may be submitted, an alert to the RLC by email is also required to ensure the RLC is aware of the need for the proposed or memorandum rating. If a proposed or memorandum rating is not obtained and a closing takes place, the Servicemember is not eligible for funding fee exemption. 

Page 2, paragraph 3, section f: Replace Item 3, paragraph f with the following information: “Funding Fee Refunds. Funding fee refunds must be paid to the Veterans by VA through FFPS. The lender/servicer must change the refund destination from ‘Lender/Vendor’ to ‘Primary Veteran’ in the refund setting section of FFPS. If the loan is in default, the Veteran will be advised that he/she may wish to use the refund to help bring their loan current. When a funding fee refund does not involve a Veteran, for example, a lender paid a funding fee to VA in error which was not charged to the Veteran, or a lender paid a funding fee before the Veteran decided not to close on the loan, the refund destination will be ‘Lender/Vendor’ in FFPS and the RLC will refund the funding fee to the lender. Lenders should add notes describing the reason for refund, otherwise, if the notes are unclear, it may appear that the lender failed to change the refund destination and the refund should be paid to the Veteran. If a refund is requested to be paid to the lender on a closed loan, a copy of the final closing disclosure must be uploaded by the lender into WebLGY. 

• Provides short title; Defines terms
• Clarifies validity of electronic documents and electronic signatures
• Provides for recording of electronic documents 
• Creates the Real Property Electronic Recording Standards Advisory Committee to develop the standards necessary to electronically record real property documents; authorizes a legislative rule
• Provides that the article modifies, limits and supersedes certain parts of the federal Electronic Signatures in Global and National Commerce Act.

CHOICERenovation Mortgages

Freddie Mac is offering temporary flexibilities to our requirements for removal of recourse for CHOICERenovation Mortgages previously in COVID-19-related forbearance. 

For the flexibilities below to apply, the forbearance period must have ended, the CHOICERenovation Mortgage must not be delinquent at the time of the request to remove recourse and the Borrower must be making the monthly payments due:

• If the Borrower did not miss any monthly payments during the forbearance period and the CHOICERenovation Mortgage is no longer subject to the forbearance plan, recourse may be removed
• If the Borrower missed one or more monthly payments during the forbearance period, recourse may be removed upon the Borrower having successfully completed a repayment plan
• As of February 1, 2020, the CHOICERenovation Mortgage must not have been 30 days delinquent more than once during the renovation period and prior to being subject to the forbearance plan. If it does not meet this requirement, then the recourse may be removed at a later date as specified in Section 4607.15.

Note: Mortgages subject to recourse that may require a payment deferral or loan modification due to missed payments during the forbearance period continue to be subject to our existing requirements.

Mortgages with Settlement Dates after completion of renovations

In Bulletin 2020-14, Freddie Mac temporarily revised our Mortgage eligibility requirements to limit our purchase of Mortgages to those with Settlement Dates no more than six months after the Note Date or, for Construction Conversion and Renovation Mortgages, the Effective Date of Permanent Financing.

Effective immediately, we are offering flexibility to these temporary requirements for CHOICERenovation Mortgages with Settlement Dates after completion of renovations. After completion of renovations, the Seller may sell the CHOICERenovation Mortgage to Freddie Mac provided the Settlement Date is no more than 12 months after the Note Date. (Note: Pursuant to Section 4607.4(a), all renovations must be completed within 365 days of the Note Date for a CHOICERenovation Mortgage.)

Effective Date

These temporary flexibilities are effective immediately and remain in place until further notice. These temporary flexibilities are for CHOICERenovation Mortgages sold with recourse previously in COVID-19-related forbearance.

Delivery Requirements for "No Cash-Out" Refinance Mortgages

For Freddie Mac-owned “no cash-out” refinance Mortgages utilizing the appraisal flexibilities in Bulletin 2020-5, Sellers should enter the ULDD Data Point, Related Loan Investor Type (Sort ID 222) of “FRE” as well as the nine-digit Freddie Mac loan number assigned to the original Mortgage in ULDD Data Point, Related Investor Loan Identifier (Sort ID 221). Sellers should use their best efforts to provide this information. However, we recognize a Seller’s process and systems may not be updated to accommodate this change and in these cases the Seller is not required to provide this information. This temporary guidance does not waive any current requirements in Section 6302.16(b)(ii).

Purchase of Delinquent Mortgages in Forbearance

Bulletin 2020-12 announced, and Bulletin 2020-17 extended, temporary eligibility requirements allowing Sellers to sell to Freddie Mac certain Mortgages for which the Borrower has requested forbearance. Under the temporary eligibility requirements, the Mortgages must be no more than 30 days delinquent. Sellers were instructed to populate the ULDD Data Point, Investor Feature Identifier (Sort ID 368) with either J76 or J77, as applicable, and reminded to populate the ULDD Data Point, Delinquent Payments Over Past 12 Months Count (Sort ID 452) as appropriate.

With this Bulletin, effective for Mortgages that are 30 days delinquent and with Settlement Dates on or after June 1, 2020, Sellers must submit the following updates using the Post-Fund Data Correction process to ensure the Mortgage servicing data is reflected accurately.

• Loan Acquisition Scheduled UPB Amount (Sort ID 385). The updated value for this ULDD Data Point must reflect the actual balance as of the Settlement Date.
• Last Paid Installment Due Date (Sort ID 440). The updated value for this ULDD Data Point must be the actual date of the last paid installment.

Sellers must deliver these updated values for the ULDD Data Points according to the format instructions provided on the Post-Fund Data Correction Form (DCR Form). These updates must be submitted in the same month as the Settlement Date. The $500 compensatory fee associated with contract non-compliance and contract changes will be waived. Please note that all Credit Fees in Price found in Guide Exhibit 19 will apply to the revised UPB amount.

NOTE: The Seller must provide standard required ULDD information at delivery and subsequently provide these updates. If the Seller provides data in accordance with the instructions above at the time of delivery, the Mortgage will receive a critical edit in Loan Selling Advisor®.

NCUA published an interim final rule modifying its prompt corrective action (PCA) regulations to help ensure that federally insured credit unions (FICUs) remain operational and liquid during the COVID-19 crisis; effective May 28, 2020.

• The first amends its regulations to temporarily enable the Board to issue an order applicable to all FICUs to waive the earnings retention requirement for any FICU that is classified as adequately capitalized. 
• The second modifies its regulations with respect to the specific documentation required for net worth restoration plans (NWRPs) for FICUs that become undercapitalized.

Fannie Mae has made the following updates to Lender Letter 2020-03:

Temporarily requiring additional documentation to support the lender’s decision that self-employment income meets requirements.

Fannie Mae has updated LL-2020-04, Impact of COVID-19 on Appraisals Lender Letter, to include the following:

• Recourse removal for HomeStyle Renovation loans that were subject to forbearance and providing guidance on when the lender may request recourse removal on loans that were subject to COVID-19 related forbearance during the renovation period.

• Delivery timeframe for HomeStyle Renovation loans when the renovation is completed prior to loan delivery:  confirming our standard seasoning requirement of no more than 12 months after the note date applies to loans delivered with SFC 279

• Additional resources: providing links to COVID-19 resources, such as other selling and servicing lender letters and FAQs