Compliance Calendar

Eliminating unrecorded assignments of mortgage for loans not registered in MERS

Currently, lenders must deliver to the document custodian an unrecorded assignment of mortgage from the servicer to Fannie Mae for each loan purchased by Fannie Mae that is not registered with MERS® (“unrecorded assignments”). Unrecorded assignments are also required in concurrent servicing and post-delivery servicing transfers. To reduce operational complexities related to unrecorded assignments in the loan certification, mortgage servicing, and servicing transfers processes, next year we will eliminate the requirement for unrecorded assignments. We will announce the effective date for this policy change in the near future. In the meantime, unrecorded assignments must continue to be provided in accordance with the requirements in the Selling and Servicing Guides.

Effective: The Selling and Servicing Guides will be updated early in 2022 to remove the requirement for unrecorded assignments, at which time we will communicate the effective date of the policy. (Note that we will continue to require unrecorded assignments for non-MERS loans until that date.)

Irrevocable powers of attorney

As part of this policy change, we are requiring each seller/servicer, whether or not they use MERS today, to complete and deliver five (5) original Irrevocable Limited Power of Attorney (Form 520) to Fannie Mae. Form 520 is a new form and is available for download by sellers/servicers on our website. Refer to the job aid, Form 520 Step-by-Step Guide for Sellers/Servicers that describes instructions for completion of the form. Sellers/servicers are encouraged to begin sending the completed forms to the address listed within the job aid. The completed powers of attorney must be submitted on or before the effective date specified below. Failure by a seller/servicer to properly complete and submit the forms by the effective date may result in suspension or termination of the rights to sell or service mortgage loans (as applicable) in accordance with the Selling and Servicing Guides.

A governmental seller/servicer that is a housing finance agency, as defined in 24 C.F.R. §266.5, may claim an exemption from the Form 520 requirement. The housing finance agency has the option to submit a letter to its Fannie Mae Account Team confirming that it meets such regulatory definition. We will review and confirm or decline the exemption and notify the housing finance agency accordingly.

The Form 520 power of attorney does not modify the duties and obligations of the parties under the lender contract. The power of attorney is a free-standing remedial instrument intended to preserve and protect our interest in loans serviced by the seller/servicer. In the event of exigent circumstances, we will use a power of attorney at our sole discretion. For example, we may use a Form 520 power of attorney to execute assignments if a seller/servicer discontinues its operations and fails to provide
mortgage assignments to us as requested.

Effective: All Form 520 powers of attorney must be properly completed and submitted to us on or before March 1, 2022.

At the direction of FHFA, and in coordination with Fannie Mae, effective March 1, 2022, when evaluating a Borrower for either a COVID-19 or Disaster Payment Deferral, Servicers must perform an Escrow analysis in accordance with the Real Estate Settlement Procedures Act (RESPA) and any applicable federal, State, or local law.

If the Servicer determines that there is an Escrow shortage, the Servicer must disclose the amount of the shortage to the Borrower before the Borrower accepts the Payment Deferral. If the Borrower is unable to pay the Escrow shortage as a lump sum, then the Borrower must pay the shortage as part of the monthly principal, interest, taxes and insurance (PITI) payment. If the Borrower must make monthly Escrow shortage payments, then the Servicer must:

• Spread the repayment of the Escrow shortage amount in equal monthly payments over a period of 60 months, unless the Borrower chooses to pay off the shortage over a shorter timeframe, not to be less than 12 months
• Take into account any remaining unpaid amount of the Escrow shortage in any subsequent Escrow analysis to ensure that the Borrower is able to continue to pay all Escrow shortage amounts over the remaining portion of either the current remaining Escrow shortage repayment period or a period up to 60 months. The Servicer may not accelerate or compress the remaining Escrow shortage amount into a new Escrow payment or shorter repayment period as a result of a future Escrow analysis.

If the Borrower is unable to afford a COVID-19 Payment Deferral or Disaster Payment deferral based on the increased monthly payment resulting from an Escrow shortage repayment, the Servicer must evaluate the Borrower for a Flex Modification.

Any Escrow account shortage that is identified at the time of the Payment Deferral must not be capitalized and the Servicer is not required to fund any existing Escrow account shortage.

Additionally, the COVID 19 Payment Deferral and Disaster Payment Deferral Agreements (see Attachment A and Attachment B to this Bulletin in the dropdown above) have been updated to reflect this change.

Flex Modification

Escrow shortages resulting from Escrow analyses performed as part of evaluation for a Flex Modification must also be spread over 60 equal monthly payments. A Borrower may pay the shortage off in a lump sum or may choose a shorter repayment period, not to be less than 12 months.

Guide impacts: Sections 9203.26 and 9206.15

Lender Letter LL-2021-07, COVID-19 Payment Deferral and Fannie Mae Flex Modification for COVID-19 has been updated in regard to requirements related to performing an escrow analysis.

The purpose of this mortgagee letter is to announce the revision of the effective date of the FHA Catalyst Transition for Single Family Default Monitoring System (SFDMS) Reporting Module to March 1, 2022.

This Mortgagee Letter announces an extension to the Exclusive Listing Period during which owner-occupants, governmental entities, and HUD-approved nonprofits are eligible to bid on HUD REO properties from 15 days to 30 days effective on or after March 1, 2022.

This Guide Bulletin announces:

• An additional alternative to signatures on tax returns.
• Updates related to AM Best requirements and ratings.
• Additional description and examples related to the coverage limit requirements for 1- to 4-unit properties.
• A clarification related to condominium unit mortgages that are Freddie Mac Home Possible^® mortgages.

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

▪ Single-close construction-to-permanent transactions: requirements to address the credit and valuation risks
▪ Condo Project Manager™: added CPM™ status designations to align with the enhancements that will be in the CPM release on March 4, 2022
▪ Community Seconds® interest rate: simplifies policy for the allowable interest rate permitted on a Community Seconds transaction
▪ Miscellaneous updates:
o Comparable sales

Property eligibility and appraisals

This announcement provides an option to use a desktop appraisal in lieu of an interior and exterior inspection appraisal for certain purchase transactions and a clarification for determining automated collateral evaluation (ACE) eligibility for Mortgages with appraisal waivers.

Desktop appraisals

Effective for new Loan Product Advisor® submissions or resubmissions on or after March 6, 2022

Based on the success of the temporary COVID-19 appraisal flexibilities and a market appetite for appraisal options that do not require physical inspections, Freddie Mac is introducing the desktop appraisal option for purchase transaction Mortgages that meet certain requirements. The desktop appraisal can help address appraiser capacity concerns and reduce appraisal turn-times. Its use also has the potential to help reduce Borrower costs.

The desktop appraisal, completed on new Guide Form 70D, Uniform Residential Appraisal Report, will be available beginning March 6, 2022 for new loan applications and resubmissions to Loan Product Advisor. This report is similar in format to Form 70 and will require many of the same exhibits. However, a specific requirement of Form 70D is that the appraiser must provide a floor plan in addition to a building sketch.

Eligibility requirements for desktop appraisals

A desktop appraisal may be obtained in lieu of an interior and exterior inspection appraisal, provided the Mortgage and the Mortgaged Premises meet the requirements in Guide Section 5601.7, which include but are not limited to, the following:

Each Mortgage must be an Accept Mortgage and must receive a feedback message in Loan Product Advisor indicating that the Mortgage is eligible for delivery with a desktop appraisal

Each Mortgage must be a purchase transaction Mortgage secured by a 1-unit Primary Residence, including a unit in a Planned Unit Development (see information on eligibility below)

Each Mortgage must have a loan-to-value (LTV) ratio less than or equal to 90%. For purposes of qualifying for a desktop appraisal, this LTV ratio is calculated using the sales price. Freddie Mac will accept Mortgages originated with a desktop appraisal with an LTV ratio higher than 90% as calculated using the value obtained from the desktop appraisal if the loan amount does not increase and all other eligibility requirements are met, including the requirement that the LTV ratio calculated using the sales price is less than or equal to 90%. LTV ratios greater than 90% that occur as a result of loan amount changes require an upgrade to an interior and exterior inspection appraisal (Form 70).

Eligibility details can be found in Section 5601.7, which identifies Mortgages that may not use the desktop appraisal. Ineligible Mortgages include, but are not limited to, those secured by Condominium Units and Manufactured Homes.

Guide impacts: Sections 5601.5, 5601.7, 5601.8, 5601.10, 5601.14 and Form 70D (new)

Delivery requirements

The Seller must deliver the following ULDD Data Points for Mortgages using desktop appraisals:

Property Valuation Form Type (Sort ID 85) and enter a valid value of “Uniform Residential Appraisal Report”

Property Valuation Method Type (Sort ID 89) and enter a valid value of “Desktop Appraisal”

Guide impact: Section 6302.8

Loan Product Advisor updates and additional resources

Loan Product Advisor feedback messages will be updated by March 6, 2022 to reflect this change.

We encourage Sellers to review our desktop appraisal FAQs(opens in new window) and visit Freddie Mac Learning(opens in new window) for additional resources.

Determining automated collateral evaluation (ACE) appraisal waiver eligibility

For clarification, we have updated the Guide to acknowledge that Freddie Mac accepts the following for determining ACE appraisal waiver eligibility submitted by the Seller for purposes of underwriting the Mortgage:

The purchase price for purchase transactions, or

The estimated value for refinance transactions

Guide impact: Section 5601.9

USDA announced an unnumbered Letter (UL) dated February 4, 2022, which was issued, increasing the appraisal fee to $750 and the conditional commitment fee to $825 under the direct programs effective March 6, 2022.

FHA announced the effective March 14, 2022, the mandatory use of the FHA Catalyst: EAD Module for all Single Family origination appraisal deliveries, as well as the expanded availability for the delivery of Home Equity Conversion Mortgage (HECM) appraisals.

During the weekend of March 19, 2022, Fannie Mae announced the implementation of Desktop Underwriter® (DU®) Version 11.0.

The state of Tennessee enacted provisions relating to its LIBOR Discontinuance and Replacement Act.

VA Circular 26-20-10, Change 3, announces the extension of the rescission date to July 1, 2023.

The Department of Veterans Affairs (VA) released VA Circular 26-22-04 to advise the lending industry that VA Form 26-1805 has been updated to include information about recent changes in ordering an appraisal

The U.S. Department of Housing and Urban Development published ML-2022-06 to advise the lending industry of updates to Property Preservation and Protection (P&P) policy effective March 31, 2022.

Freddie Mac and Fannie Mae (the GSEs) are implementing a two-year transition to convert certain edits in their Uniform Closing Dataset (UCD) collection solutions from “warning” to “critical/fatal.” The transition will begin in May 2021 and is designed to enhance data quality and consistency for single-family loans purchased by the GSEs.

Phase 3 Closing Disclosure Sections:

• Loan Costs
• Other Costs
• Total Closing Costs (Borrower – Paid)
• Lender Credits

FHA announced the publication of the Servicing and Loss Mitigation section (Section III) of the Single-Family Housing Policy Handbook 4000.1 effective August 17, 2021; however, Servicers may begin to implement these updates immediately.

These updates strengthen FHA’s loss mitigation approaches for struggling borrowers while streamlining key requirements for servicers.

In addition, the policy revisions align with industry standards and reduce and update outdated requirements and processes. These changes will improve outcomes for borrowers facing financial hardship and reduce the burden on both borrowers and servicers.

The Servicing and Loss Mitigation section also incorporates policy and process improvements identified by FHA, and through industry feedback received from its July 14, 2020, posting on the Single-Family Housing Drafting Table.

Key updates to and benefits of this section will include:

• A revised loss mitigation waterfall that allows servicers to review struggling borrowers for a permanent FHA Home Affordable Modification Program (FHA HAMP) home retention option without a lengthy forbearance. This approach has been proven to be highly effective at helping borrowers avoid redefault and foreclosure;
• Streamlined documentation requirements to avoid unnecessary delays and to align more closely with standard industry servicing practices, including removing signature requirements on Trial Payment Plans; and
• A revised structure for certain allowable costs and fees that corresponds with fee structures
  used by other industry participants.

Note: FHA Mortgagee Letter 2021-14 extends implementation to March 31, 2022, for

• Section III – Servicing and Loss Mitigation
• Appendix 4.0 – FHA-Home Affordable Modification Program (FHA-HAMP) Calculations
• Appendix 5.0 – HUD Schedule of Standard Possessory Action and Deed-In-Liew of Foreclosure Attorney Fees
• The effective date for all other changes published on April 19, 2021, continue to have an August 17, 2021, effective date