FHFA – Consumer Financial Services Watch

GSEs Release Revised Framework for Origination Defects and Remedies — The Proof Will Be in the Execution

Oct 21 2015

By: Laurence E. Platt, Jennifer A. Overall

By recently releasing yet another revised representation and warranty framework, Fannie Mae and Freddie Mac continued their efforts to assuage the concerns of the lending industry that a default by a borrower poses an unfair risk of a loan repurchase demand. On October 7, 2015, Fannie Mae and Freddie Mac (the “GSEs”), at the direction of the Federal Housing Finance Agency (“FHFA”), announced a framework for origination defects and remedies (the “Framework”) that expands on existing frameworks governing the rights and responsibilities of lenders that sell or securitize loans to or with the GSEs. For example, permitting repricing or cure in lieu of the remedy of repurchase represents a concession by the GSEs. Nevertheless, the language of the new Framework is ambiguous enough that one may have to rely on the GSEs’ apparent spirit of good intentions rather than the precision of their language to take total comfort in the changes.

To read the full alert, click here.

Inspector General Urges FHFA to Consider Suing Servicers, Force-Placed Insurers

Jun 30 2014

By: Nanci L. Weissgold, Kerri M. Smith, * Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

On June 25, 2014, the inspector general of the Federal Housing Finance Agency (FHFA) issued a report on force-placed insurance with only one recommendation: FHFA should consider suing servicers and force-placed insurers for hundreds of millions of dollars in allegedly “excessive” force-placed insurance premiums.

As we discussed in a recent blog post, “force-placed” or “lender-placed” insurance is an area of increasing controversy, with Fannie Mae and Freddie Mac rolling out new restrictions on perceived conflicts of interest between insurers and the servicers that bring them business. The inspector general noted these reforms going forward, but believes that FHFA should also assess how to pursue perceived past abuses. Read More

Recent Force-Placed Insurance Initiatives by FHFA & CFPB Suggest Divergent Priorities

Jun 12 2014

By: Nanci L. Weissgold, *Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

Force-placed insurance is under continuing scrutiny by the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB). However, each agency’s focus is slightly different. FHFA, perhaps galvanized by a New York enforcement action, has focused on conflicts of interest between servicers and insurers. The CFPB has focused on erroneous placing of insurance and excessive charges. Read More

Commonwealth of Massachusetts v. FHFA: Fremont Meets The Federal Government

Jun 05 2014

By: Irene C. Freidel

On June 2, 2014, the Commonwealth of Massachusetts sued the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac in state court, under Massachusetts’ consumer protection statute (“Chapter 93A”) to force them to sell foreclosed properties to non-profit organizations at fair market value, so that the properties can then be re-sold or leased back to the former homeowner. See Commonwealth of Massachusetts v. Federal Housing Finance Agency, et al., C.A. No. 14-1763 (June 2, 2014). Among other things, the lawsuit seeks a declaration that the GSEs’ current anti-fraud guidelines violate Massachusetts foreclosure law (M.G.L. c. 244, § 35C(h)), an order requiring property sales to non-profits in specific transactions, an injunction to prevent the GSEs from refusing to adhere to Massachusetts law, and an award of penalties of up to $5,000 for each transaction that the court determines constituted an unfair and deceptive practice under state law. The lawsuit follows a series of communications between the Massachusetts Attorney General and FHFA beginning in 2012 in which the state has demanded that FHFA direct the GSEs to change their anti-fraud “arms-length” requirements that apply to short sales and REO transactions. Read More

Fannie Mae and Freddie Mac to Restrict Purchases to Qualified Mortgages – The Future for Non-QM Loans Remains Unclear

Jun 11 2013

By: Kristie D. Kully , Andrew L. Caplan

On May 6, 2013, the FHFA, the regulator (and conservator) of Fannie Mae and Freddie Mac (the “GSEs”), directed the GSEs to limit their mortgage acquisitions to Qualified Mortgages (or loans that are otherwise exempt from the CFPB’s Ability to Repay Rule), effective January 10, 2014. This FHFA Directive (the “Directive”) will ensure that the GSEs only purchase loans that are fully amortizing, have a term of 30 years or less, and have points and fees limited to 3% of the total loan amount (and meet all the other QM criteria). Read More

Freddie Mac’s Refinancing Policy

Feb 01 2012

By: Kerri M. Smith

NPR and ProPublica charged Freddie Mac with investing in securities that would lose value if homeowners refinanced their mortgages. The primary allegation is that such investments undercut Freddie Mac’s public mission and resulted in a more stringent refinancing policy. Read More

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