On August 25, FHFA announced that the GSEs will implement a new refinancing offering for borrowers having high LTVs who meet certain criteria. The new offering contains a number of similarities to the Home Affordable Refinance Program (HARP), including not subjecting eligible borrowers to a minimum credit score, not establishing a maximum debt-to-income ratio or maximum LTV, and often not requiring an appraisal. Dissimilarities from HARP include not imposing eligibility cut-off dates and allowing borrowers to use the offering more than once to refinance their mortgage. Borrowers will not have access to the new offering until October 2017. As such, the FHFA directed the GSEs to extend HARP through September 30, 2017, ensuring that “high LTV borrowers who are eligible for HARP will not be without a refinance option while the new refinance offering is being implemented.”
On August 23, Fannie Mae and Freddie Mac (GSEs) published a redesigned Uniform Residential Loan Application (URLA), the first substantial update to the standardized form used by borrowers applying for a residential loan in more than 20 years. The GSEs also released a redesigned Uniform Loan Application Dataset (ULAD) Mapping Document, used to “ensure consistency of data delivery.” The GSEs revised the URLA and ULAD by (i) redesigning the format to support better efficiency and more accurate data collection; (ii) including new and updated fields intended to “[c]apture loan application details that reflect today’s mortgage lending business and support both the GSEs’ and government requirements”; (iii) simplifying instructions; and (iv) incorporating revised HMDA demographic questions. The GSEs released FAQs about the redesigned URLA and ULAD, which will be available for lender use beginning January 1, 2018. Among other things, the FAQs note that (i) the GSEs will continue to support the URLA in paper form; and (ii) updates to the published documents may be required as a result of the CFPB’s review of the redesigned URLA in connection with the Regulation B safe harbor.
On July 7, the FHFA released an update entitled An Update: An Implementation of the Single Security and the Common Securitization Platform (the Update) regarding Fannie Mae’s and Freddie Mac’s (collectively, the GSEs) joint venture – Common Securitization Solutions (CSS) – to develop and implement a Common Securitization Platform (CSP). As part of a multi-year initiative beginning as early as February 2012, the FHFA has been developing and reporting on the principles and functions for a new securitization platform that supports single-family residential mortgage-backed securitization activities guaranteed by the GSEs. FHFA’s recently issued Update outlines the CSS’s progress made to date, describes expected upcoming milestones, and summarizes the various phases of required testing for Release 1 and Release 2 of the CSP. Importantly, Release 1 will allow Freddie Mac to use the CSP and its Data Acceptance, Issuance Support, and Bond Administration modules to “perform activities related to its current single-class, fixed-rate securities—Participation Certifications (PCs) and Giant PCs—and certain activities related to the underlying mortgage loans (such as tracking unpaid principal balances).” Release 2 will allow both GSEs to use the CSP’s Data Acceptance, Issuance Support, Disclosure, and Bond Administration modules to “perform activities related to their current fixed-rate securities, both single- and multi-class; to issue Single Securities, including commingled resecuritizations; and to perform activities related to the underlying loans,” as well as to allow the GSEs to use the CSP “to issue and administer certain non-TBA mortgage securities, including Fannie Mae securities backed by adjustable rate mortgages.” According to the Update, the Single Security features of the CSP described in the FHFA’s May 2015 update have not been altered and are final. The Single Security features are fundamentally the same as those of the current Fannie Mae MBS and include: (i) payment delay of 55 days; (ii) certain pooling prefixes; (iii) mortgage coupon pooling requirements; (iv) minimum pool submission amounts; (v) general loan requirements such as first lien position, good title, and non-delinquent status; and (vi) seasoning requirements. As outlined in FHFA’s December 2015 publication of the 2016 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions, the GSEs are expected to implement Release 1 in 2016 and Release 2 in 2018.
On April 11, the Government Accountability Office (GAO) released a report titled, “Nonbank Mortgage Servicers: Existing Regulatory Oversight Could Be Strengthened.” The report analyzes data on the mortgage servicing market from June 2006 through June 2015 from Fannie Mae and Freddie Mac (collectively, the Enterprises), the Federal Reserve, and Ginnie Mae, as well as academic studies and research conducted by industry organizations, federal agencies, and others since the financial crisis. The report focuses in particular on the role of nonbank servicers in servicing privately securitized nonprime loans. According to the report, the percentage of mortgage loans serviced by nonbank servicers – which, according to market participants, tend to service more delinquent loans than banks – increased significantly from the first quarter of 2012 through the second quarter of 2015, but still account for less than a quarter of the overall mortgage servicing market. Concerns regarding the regulatory oversight of nonbank servicers are highlighted in the report, which comments on (i) the CFPB’s direct role in overseeing nonbank servicers’ compliance with federal consumer financial laws; (ii) state regulators’ various prudential and operational requirements for nonbank servicers; and (iii) Ginnie Mae and the Enterprises’ monitoring of nonbank servicer activities to manage risk exposure. According to the report, issues related to nonbank servicers’ “aggressive growth and insufficient infrastructure have resulted in harm to consumers, have exposed counterparties to operational and reputational risks and … complicated servicing transfers between institutions.” Based on the findings summarized in the report, the GAO recommends that (i) Congress consider giving FHFA the authority to examine third parties doing business with the Enterprises; and (ii) the CFPB collect additional data regarding the identity and number of nonbank servicers.
Recently, the U.S. Court of Appeals for the Ninth Circuit affirmed the District Court of Nevada’s ruling that, for the purposes of the False Claims Act (FCA), 31 U.S.C § 3729(b)(2)(A)(i), Fannie Mae and Freddie Mac are not instrumentalities or officers, employees, or agents of the federal government. U.S. ex rel. Adams v. Aurora Loan Servs., Inc., No. 14-15031 (9th Cir. Feb. 22, 2016). In this case, the plaintiffs alleged that several lenders and loan servicers (collectively, defendants) made certain false certifications to Fannie and Freddie in connection with the purchase and sale of loans. Plaintiffs argued that the False Claims Act applies to claims made to Fannie and Freddie because they are agencies or instrumentalities of the federal government under one of the two definitions of a “claim” in the Act. The Ninth Circuit held that Fannie and Freddie are not federal instrumentalities for FCA purposes of the first definition of a “claim,” notwithstanding the government’s conservatorship. Likewise, the court confirmed that because Fannie Mae and Freddie Mac are private companies, albeit subject to the government’s conservatorship, claims made to the companies were not made to an officer, employee or agent of the federal government. The court observed that plaintiffs did not make an argument under the second definition of claim under the FCA, which defines a claim as a request or demand made upon non-government third parties under certain conditions, and therefore expressed no opinion on whether such a claim could have been brought.