Compliance News
In First American's Compliance News Archive you will find easy access to our library of GSE announcements, court findings, legislative changes, specific changes to state requirements, governmental guidance on issues that directly affect the mortgage document industry and more.March 2009
STATE ANNOUNCEMENTS |
Arkansas: House Bill 1035 (effective retroactive January 1, 2008)
The homestead used as a principal place of residence by a person who is disabled or at least sixty-five years of age shall
be assessed property tax on the lower of the assessed value as of the date of purchase or construction or a later assessed value.
If a homestead is jointly owned and one of the owners qualifies, then all owners receive the benefits of the lower assessed tax.
California: Assembly Bill 7 (effective 14 days after issuance of regulations)
The California Foreclosure Prevention Act ("Act") modifies the foreclosure process until January 1,
2011 to allow additional time for borrowers to obtain loan modifications and also provide an exemption for mortgage loan servicers
implementing a comprehensive loan modification program. A mortgagee/trustee may not give notice of sale for at least six months
(previously three months) if the following conditions are met:
- the loan was recorded between January 1, 2003 to January 1, 2008;
- the loan was issued as a first mortgage;
- the property was an owner-occupied principal residence when the loan became delinquent;
- the notice of default has been recorded on the property.
Loans serviced by a mortgage loan servicer that has implemented a comprehensive loan modification program shall receive an exemption from the notice of sale timeframe. A comprehensive loan modification program must meet all of the following guidelines:
- the object is to achieve long term stability;
- the anticipated recovery under the loan modification exceeds the anticipated recovery through foreclosure on a net present value basis;
- the borrower's targeted debt to income ratio is 38% or less; and
- includes a combination of interest rate reduction, extension of amortization period to no more than 40 years, defers some of the principal amount, reduces the principal, complies with a federal loan modification program, and any other factors the commissioner deems appropriate.
Colorado: Regulation 7-1-1 (effective March 2, 2009)
The Mortgage Brokers Licensing Act ("Act") requires a mortgage broker to provide a disclosure if they are also licensed and acting as a real estate broker in the same transaction. The Dual Status Disclosure Form must be provided within three business days after receipt of a loan application or any moneys from the borrower. The Division of Real Estate provides access to the form on their website. An alternative form may be used if it includes all information required by the Director.
LPS has the disclosure available for client use.
Maryland Regulations 09.03.06 and 09.03.09 (effective March 16, 2009)
The Commissioner of Financial Regulation issued amended provisions regarding high-priced mortgage loans on November 3, 2008.
At that time, the Average Prime Offer Rate (“Rate”) was not being published.
The Rate has now been published on the Federal Financial Institutions Examination Counsel ("FFIEC")
website http://www.ffiec.gov/ratespread/newcalc.aspx. Both the Average Prime Offer Rates – Fixed and Average Prime Offer Rate – Adjustable tables are available.
South Dakota: House Bill 1124 (effective July 1, 2009)
The Mortgage Lender Business Act ("Act") was amended to prohibit a mortgage lender, mortgage broker, or mortgage loan originator from improperly influencing a real estate appraisal by:
A person does not violate this section by asking a real estate appraiser to consider additional information, to provide an explanation for the appraiser’s value conclusion, or to correct errors in the appraisal report. Payment may be withheld based on a bona fide dispute regarding the appraiser's compliance with the Department of Revenue and Regulation’s appraisal standards.
- coercion, extortion, or bribery;
- withholding payment for an appraisal fee;
- conditioning payment of an appraisal fee upon the opinion, conclusion, or valuation to be reached;
- requesting that the appraiser report a predetermined opinion, conclusion, or valuation or the desired valuation of any person; or
- acting in any way that impairs an appraiser's independence, objectivity, and impartiality.
A person does not violate this section by asking a real estate appraiser to consider additional information, to provide an explanation for the appraiser’s value conclusion, or to correct errors in the appraisal report. Payment may be withheld based on a bona fide dispute regarding the appraiser's compliance with the Department of Revenue and Regulation’s appraisal standards.
Virginia: House Bill 2568 (effective July 1, 2009)
Under the Mortgage Lender and Broker Act, a lender must require that the person closing the loan provide the borrower with a settlement statement. House bill 2568 amends the Choice of Settlement Agent disclosure required by the Virginia Consumer Real Estate Settlement Protection Act (“Act”). The amendments also state that the provisions of the Act may not be varied by agreement, and the rights may not be waived
AGENCY ANNOUNCEMENT |
Comptroller of the Currency Bulletin 2009-7 (February 19, 2009)
The Bulletin reminds officers, department and division heads, and all examining personnel of national banks and national bank operating subsidiaries of the amendments to Regulation Z under the Home Ownership and Equity Protection Act ("HOEPA") published in the July 30, 2008 Federal Register. Four key protections were adopted under the category of "higher-priced mortgage loans" which:
- prohibit a lender from making a loan without considering the borrower's ability to repay;
- require creditors to verify income and assets used to determine repayment ability;
- ban any prepayment penalties if the payment can change in the first four years and restrict prepayment penalty periods to no more than two years for other higher-priced mortgages; and
- require creditors to establish escrow accounts for property taxes and homeowner’s insurance.
Fannie Mae Announcement 09-04 (March 4, 2009)
The Home Affordable Refinance program provides opportunities to borrowers who are current on their payments, but are unable to refinance out of risky loan structures such as interest-only or short term ARM loans. This program applies to mortgages held or guaranteed by Fannie Mae.
Two new refinance options are available on or after April 1, 2009 for whole loans or MBS deliveries. Refi Plus™ requires that the current servicer refinance the existing Fannie Mae mortgage loan and requires manual underwriting. The mortgage payment history must reflect financial stability for the borrower to be eligible for the loan. DU Refi Plus™ is refinanced using Desktop Underwriter® and the lender does not have to be the current servicer of the loan.
Both the Refi Plus™ and the DU Refi Plus™ option are offered to insure long-term homeownership sustainability. The following benefits to the borrower must be guaranteed by the lender:
- a reduced monthly mortgage principal and interest payment; or
- a more stable mortgage product by providing fixed-rate mortgages to borrowers, if possible.
The maximum LTV ratio is 105% with no maximum CLTV or HCLTV. New refinance transactions with an LTV ratio greater than 80% may not require mortgage insurance depending on the current coverage.
Fannie Mae Announcement 09-05 (March 4, 2009)
The Home Affordable Modification Program ("HMP") was created to assist both homeowners who are in default and homeowners who are at imminent risk of default with a principal balance of up to $729,750. The program provides guidance for uniform loan modifications that will reduce monthly payments to sustainable levels equal to 31% of the homeowner's gross monthly income. The HMP applies to all eligible one- to four-unit owner-occupied properties secured by Fannie Mae portfolio mortgages and MBS pool mortgages guaranteed by Fannie Mae. Effective March 4, 2009, the Streamlined Modification Program and the Early Workout™ program will be replaced by the HMP which will expire on December 31, 2012.
Servicers must service loans eligible for Fannie Mae portfolio mortgages and MBS pool mortgages in order to participate in the program. Servicers may participate in the HMP for Non-GSE mortgages if a servicer participation agreement and Treasury designated documents are executed.
Borrowers who are not eligible for the HMP may be considered for the new HomeSaver Forbearance foreclosure prevention option and a new Fannie Mae loan workout hierarchy.
Fannie Mae Lender Letter 02-2009 (February 13, 2009)
The Federal Housing Finance Agency directed Fannie Mae to require new loan-level data elements for all mortgage loan applications dated on or after January 1, 2010. Lenders must provide the following originator data elements for mortgage applications: (i) the mortgage loan originator's unique identifier, and (ii) the mortgage loan originator company's unique identifier.
Freddie Mac Bulletin 2009-5 (March 4, 2009)
The federal Making Home Affordable Program is supported by the Freddie Mac Relief Refinance MortgageSM ("Mortgage"). Freddie Mac is committed to assisting Borrowers who are current on their mortgage payments, but have encountered difficulties in refinancing because home values have declined or credit availability has been limited.
The Mortgage provides simplified refinance requirements for first lien conventional mortgages owned or securitized by Freddie Mac.
- The significant features of the program include:
- no postsettlement delivery fee assessed except for the Market Condition delivery fee;
- LTV ratios are permitted up to 105%. There are no maximum total TLTV and HTLTV ratios;
- mortgage insurance must be transferred to the refinance mortgage only if it existed on the current mortgage; and
- the use of the Home Value Explorer® is permitted to estimate property values for 1-unit properties. Eligible mortgages will receive Freddie Mac's representation and warranty for the value, condition and marketability of the Mortgage.
- The Mortgage must meet the following requirements:
- the servicer of the existing mortgage must be the originator of the Relief Refinance Mortgage and must deliver the 9-digit Freddie Mac loan number for the refinanced Mortgage;
- must meet all eligibility requirements stated in the Seller’s Purchase Documents on the Note Date of the refinanced Mortgage;
- must be seasoned for at least three months; and
- the payment history does not show any delinquency that has been 30 or more days overdue during the past 12 months. If seasoned less than 12 months, no delinquency has occurred since the Mortgage Note Date.
- The Mortgage must benefit the borrower by making one of the following improvements:
- reduces the interest rate of the first mortgage;
- replaces an ARM, an Initial InterestSM Mortgage, or a balloon/reset Mortgage with a fixed-rate, fully amortizing mortgage; or
- reduces the amortization term.
Freddie Mac Bulletin 2009-6 (March 11, 2009)
The Home Affordable Modification Program ("HMP") which replaces the Streamlines Modification Program effective March 4, 2009 was announced. The key features of the HMP include:
- allowing one opportunity to qualify for a modification if the borrower is less than 31 days delinquent or whose default is imminent;
- targeting a monthly mortgage payment that is not less than 31% of the borrower’s gross monthly income;
- calculation of a total monthly debt to income ratio and required counseling from a HUD-approved counseling agency when the ratio is equal to or greater than 55%;
- a Trial Period requiring the Borrower to make three monthly payments at the estimated modified payment amount as a prerequisite of the modification;
- providing servicers with incentives for completed and successful modifications as well as "pay for success" incentives for up to three years if the borrowers maintains a current payment history under the modification.