Several policy updates have recently been made to the Federal National Mortgage Association’s refinance programs. Similar changes occurred at the Federal Home Loan Mortgage Corp. Other ripe items include a market report, new information availability, and Federal Housing Finance Agency policy response. One headliner proposed a state-level, non-profit mortgage company.
In announcement SEL-2012-10, Fannie Mae listed selling guide changes made to DU Refi Plus and Refi Plus loan enhancements to underwriting and documentation policies. Also covered were lender communication practices regarding pricing changes and home equity combined loan-to-value ratio requirements for permanently modified home equity lines of credit. Fannie’s also removed the fixed-rate mortgage, weighted-average coupon limit. The announcement further included inactive and deactivated lender status clarification distinctions, established new document acquisition requirements for document custodians and notified users about Fannie’s updated and redesigned eligibility matrix.
Properties affected by a disaster were covered in a new chapter to Fannie’s selling guide, according to announcement SEL-2012-14. This topic covered occupancy and eligible properties. As well, current disaster policy updates for DU Refi Plus and Refi Plus mortgage loans covered appraisal requirement changes. Fannie’s announcement noted that the mortgage loan application date serves as the new basis for the Dec. 13 expiration date on DU Refi Plus and Refi Plus programs, and delivery deadlines were extended. Though Fannie said escrow account establishment requirements for refinances were updated, these provisions were not applicable to DU Refi Plus and Refi Plus loans.
In announcement SEL-2013-01, Fannie established a negotiated-only basis for government loan delivery eligibility. Fannie also clarified its policies on borrower refunds from fees and charges overpayment. Other new policies affected principle balance curtailments allowed before loan delivery to Fannie and updates and clarifications to loans involving inter vivos revocable trust borrowers.
New policies surrounding lender incentives for borrowers and private flood insurance were revealed in Fannie announcement SEL-2013-02. Specifically, Fannie said lenders could offer up to $2,000 in refinancing incentives for encouraging borrowers to conduct DU Refi Plus and Refi Plus transactions. On all transactions, lenders were allowed to give up to a $500 cash or cash-like borrower incentives not requiring repayment and not reflected in HUD-1 settlement statements. For private flood insurance, Fannie stated terms and coverage amounts, at a minimum, had to equal what a National Flood Insurance Program policy covered. Private insurers also had to meet Fannie Mae’s insurance underwriter rating requirements.
Final Fannie policy updates occurred with announcement SEL-2013-03. Fannie’s selling guide was revised to include material from past announcements and lender letters describing selling representation and warranty framework, how Fannie’s quality control review procedures were impacted and repurchase requests alternatives. The document also revealed expanded eMortgages adoption to include more small- and medium-sized lenders, revised Moody’s Investors Service Baa financial rating to Baa2 and incorporated policies changes from announcement SEL-2012-02 into the selling guide.
On Oct. 16, 2012, Freddie Mac’s 2012-21 bulletin revised some adjustable rate mortgage requirements and offered Home Possible Mortgages advice and updates. Of note, adjustable-rate mortgages with July 1, 2013, settlement dates or later were revised to have initial and periodic caps of two percent or less if those ARMs had initial periods of five years or less.
Freddie’s bulletin No. 2012-28 from December made several selling requirement changes such as Relief Refinance Mortgages eligibility requirements revisions, verbal employment verification permissions and necessary documentation for secondary financing updates. As well, Freddie’s single-Family seller and servicer guide received updates to mirror 2013 conforming loan limits, property valuation criteria and new instructions for first-time homebuyer indication completion. The condominium project review eligibility rules also were clarified.
Likewise, bulletin 2013-2, released Jan. 31, established several selling requirement changes. The 120-day-after-note-date delivery deadline was removed on Relief Refinance Mortgages-Same Servicer and Relief Refinance Mortgages-Open Access. All relief refinance loans need, however, a Sept. 20, 2014, or earlier settlement date. Finally, relief refinance and lender contribution guidance was provided while Freddie’s guide removed references to one-year ARMs purchased with ARM-weighted, average coupon cash.
Freddie news for this article ends with a March 21 press release highlighting public data sharing for single-family loans. Specifically, loan-level credit performance information is available on some “fully amortizing 30-year fixed rate single-family mortgages the company purchased over the past 13 years.” This information sharing was part of an FHFA directive and was placed on Freddie’s website on the page for economics and housing research.
A Nov. 7 Mobius Market View report, from Opera Solutions, revealed Texas had the most outstanding subprime collateral loans. As a result, the report said, expectations exist for Texas loans to price higher than loans in other markets. A Texas subprime collateral underwriting factor comparison to the overall market revealed Texas loans have lower credit scores that resulted in higher coupon rate averages. However, the report noted the 10-point difference in credit score could not account for the entire 100 basis point system difference in coupon rates.
The Financial Industry Regulatory Authority, an independent regulator for securities firms, used its Trade Reporting and Compliance Engine to start providing to-be-announced market transaction information to its users. The Nov. 13 statement also said FINRA received Securities and Exchange Commission approval for its proposal to provide transaction details for agency pass-through mortgage-backed securities labeled specified.
That same day, U.S. Congress members for Connecticut asked for a fee increase withdrawal in a letter to FHFA Acting Director Edward DeMarco,. The congressmen said Fannie’s and Freddie’s proposed Sept. 25 guaranty fee increase punished states like Connecticut that had fair foreclosure procedures with processes designed to help lenders and buyers find a solution that kept buyers in their homes.
On March 4, DeMarco’s prepared remarks on the FHFA’s 2013 conservatorship priorities referenced developing a common securitization platform to update and maintain the infrastructures of Fannie and Freddie for mortgage market enhancement.
The next day, David Stevens, Mortgage Bankers Association president and chief executive officer, issued a response that stated DeMarco’s reference highlighted the need for discussion between stakeholders and policy makers on the GSEs’ future and the role of government in the housing market. Stevens said several vested stakeholders had contributed ideas for restructuring the secondary mortgage market and action was the next step for full housing market recovery.
On March 7, Austin, Texas-based mortgage banker Rick Baron used his WordPress blog to propose the Texas government create the Texas Mortgage Guaranty Corporation, a nonprofit company that purchases, securitizes and sells pools of Texas-originated loans in the secondary market. Baron argued this corporation could better support and improve Texas property values and decrease the state-wide dependence on federal-level institutions, which are detriments to Texas’ economy and real estate sector.
The FHFA Office of the Inspector General discovered the FHFA did not manage a thorough counterparty contractual compliance examination and relied on other federal regulatory agencies for this task, according to a March 26 report. While approving of other agency involvement in respect to consumer protection laws, the OIG said FHFA had a responsibility for public interest protection under the Housing and Economic Recovery Act of 2008. As a result, the OIG said the FHFA needs to create and institute a risk-based plan for assessing Fannie’s and Freddie’s oversight of this counterparty compliance.
In ending news, Wall Street and the Housing Bubble, a March 2013 academic research paper by Ing-Haw Cheng, Sahil Raina and Wei Xiong, examined if mid-level securitized finance managers, using their personal data on home transactions, were aware of the housing bubble and crash. The authors concluded agents were not aware of this upsurge or impending downfall.
