Fannie Mae Publishes Fair Servicing Best Practices Guide

Fannie Mae recently released a Fair Servicing Best Practices guide (the "Guide") to “promote servicer awareness of fair servicing best practices.” The Guide identifies compliance with fair lending and housing laws and other applicable consumer protection laws as only one component of fair servicing, stressing that fair servicing practices must be integrated into all aspects of a servicing organization in order to identify disparities and effectively mitigate risks.

The Guide includes insights gathered from servicers and consumer advocacy groups on the best available methods to provide servicing that is consistent and fair to all borrowers. These methods are grouped into categories such as training, risk/compliance, policies and procedures, monitoring/testing, governance, remediation, and consumer support, and limited English proficiency.

For a more in-depth look at the Guide and its key takeaways, please read "Focusing on Fairness: A Look at Fannie Mae's Fair Servicing Best Practices" written by Lynn Woosley, Managing Director with Asurity Advisors and our resident expert on fair lending and servicing. To read the guide in its entirety, please visit Fair Servicing Best Practices.

Illinois Legislation Prohibits Misleading Marketing Aimed at Borrowers

As of January 1, 2024, mortgage companies soliciting consumers in Illinois will need to ensure their marketing materials do not run afoul of the state’s new law designed to protect consumers from being misled.

The new law provides that any marketing materials from a mortgage company with no connection to the consumer’s existing mortgage company must comply with certain requirements intended to avoid misleading recipients of any such materials. As a result, any solicitation must clearly identify the name of the soliciting mortgage company and may not include language implying a response is required. The name of the consumer’s current mortgage company may not be used in any way to suggest the solicitation is from that company. Further, any such solicitations must be accompanied by language communicating that the solicitation is not from, or affiliated with, the consumer’s actual mortgage company.

The legislation, which went into effect on January 1, 2024, may be viewed in its entirety by visiting Illinois House Bill 2094.

Texas Authorizes Remote Ink Signed Notarizations

Since 2018, the state of Texas has permitted remote online notarizations. With the passage of Senate Bill 1780, effective January 1, 2024, remote “ink-signed” notarization will now be recognized under Texas law. A remote ink-signed notarization occurs when the notary observes an individual executing a physical document through audio-visual technology. The notarial certificate must indicate that the signature was a tangible symbol (rather than an electronic signature as in the case of remote online notarization). Once the document is signed, the individual must send the document to the notary to attach his or her seal.

As in all cases, the notary is required to confirm the identity of the person signing the document.

To review the bill in its entirety, please visit Texas Senate Bill 1780.

Illinois Allows Loan Originators to Work Remotely

Beginning January 1st, loan originators in Illinois will be permitted to work from a remote location provided certain customer interaction and information security requirements are met. Previously, loan originators were only able to conduct business in locations licensed as a branch office. While many states issued temporary executive orders permitting remote work during the pandemic out of health and safety concerns, several states have since updated their laws in keeping with the move towards the increased use of remote work environments.

The Illinois bill may be viewed in its entirety by visiting Illinois House Bill 2325.

California Becomes Latest State to Permit RON

California has joined 44 other states and the District of Columbia in passing laws to permit remote online notarization (“RON”). Notaries in California will not be able to perform such notarizations until January 1, 2030, however, in order to give the Secretary of State time to adopt regulations and establish the technology necessary to implement the RON laws.

With the passing of the California law, only four remaining states still prohibit RON: Alabama, Georgia, Mississippi and South Carolina. While Connecticut has enacted RON legislation, the Connecticut law specifically excludes real estate finance transactions from the types of transactions which may be executed by remote online notarization.

Maine Adds Annual PMI Cancellation Notice Requirement

Effective September 20, 2023, supervised lenders and servicers of residential mortgages will be required to provide borrowers with an annual disclosure document informing them of their right to cancel or to terminate private mortgage insurance, in accordance with the provisions of the federal Homeowners Protection Act of 1998. The notice also must include the address and telephone number the borrower should use to contact the lender or servicer to determine whether cancellation of private mortgage insurance is available.

To read Maine Senate Bill 449 in its entirety, please visit http://www.mainelegislature.org/legis/bills/getPDF.asp?paper=SP0449&item=3&snum=131.

North Dakota Revises Licensing for Lenders; Adds Licensing Requirement for Servicers

North Dakota has revised its licensing laws to change the license type required for residential mortgage lenders and has added a licensing requirement for residential mortgage servicers.

Residential mortgage lenders will no longer be licensed under the North Dakota Money Brokers Act but will instead be required to hold a Residential Mortgage Lender License. The new law also added a limitation on late charges for loans of $50,000 or less.

In addition, North Dakota created a licensing requirement for mortgage loan servicers. Until recently, North Dakota was one of only a handful of states that did not require residential mortgage loan servicers to obtain a license. The law will require not only servicers and subservicers to be licensed, but also holders of mortgage servicing rights as well as mortgage servicing rights investors.

The Department of Financial Institutions will issue and regulate both Residential Mortgage Lender Licenses and Residential Mortgage Servicer Licenses. Residential mortgage lenders with an active North Dakota Money Broker license will have until December 31, 2023 to transition to the new Residential Mortgage Lender license in NMLS while servicers were required to be licensed beginning August 1, 2023.

To read the residential mortgage lender licensing bill in its entirety, please visit ND Senate Bill 2090.

To read the residential mortgage lender servicing bill in its entirety, please visit ND House Bill 1068.

North Carolina Delays Effective Date for Remote Electronic Notarization Act

The effective date of the North Carolina Remote Electronic Notarization Act (“RENA”) has been delayed one year until July 1, 2024 to allow the Secretary of State additional time to promulgate

rules implementing the act. RENA also authorized the immediate use of emergency video notarization until the effective date of the permanent legislation. With the effective date of RENA postponed, the provisions allowing emergency video notarization have been extended and a statement indicating that the notarial certificate was executed according to the emergency video notarization requirements contained in G.S. 10B-25 will continue to be required.

For information regarding the process for emergency video notarization and updates on rulemaking, please visit the North Carolina Secretary of State’s website at NC Secretary of State Notary Information.

Maine Requires Mortgage Holders to Notify Homeowner’s Insurance Company of Sale or Transfer of Mortgage

Maine will soon require a creditor, assignee or servicer that holds or controls consumer funds in an escrow account for the payment of insurance premiums to notify the insurer providing homeowner’s insurance coverage if the mortgage is sold or transferred. A creditor, assignee or servicer may satisfy this requirement by providing the insurer with a copy of the notice of the sale or transfer of the mortgage that was sent to the consumer. This requirement goes into effect on June 29, 2023.

To read the bill in its entirety, please visit ME H.P. 358/L.D. 553.

FHA Seeks Industry Input on New Partial Claim Program

The Federal Housing Administration (“FHA”) has announced a proposal to create a new loss mitigation option to assist struggling borrowers that are delinquent on their mortgage payments. The Payment Supplemental Partial Claim would allow mortgagees to use available partial claim funds to bring borrowers current and temporarily reduce the principal amount of the borrower’s monthly mortgage payments for 3-5 years. Mortgagees would be required to evaluate eligible borrowers for the Payment Supplement PC loss mitigation option when the COVID-19 Recovery Modification option will not be sufficient to reach a target payment reduction.

FHA is looking for feedback by June 30, 2023 and will consider industry input before publishing a final mortgagee letter.

To read the proposed mortgagee letter, please visit FHA Payment Supplement Partial Claim Proposal.

FHFA Announces Rescission of DTI-Based Fees

The Federal Housing Finance Agency (“FHFA”) announced yesterday that it was rescinding its controversial plan to implement loan level pricing adjustments (“LLPA”) for borrowers with debt-toincome ratios of 40% or higher.

While the FHFA initially indicated the changes were designed to make home buying more affordable for first time and low-income borrowers, the proposal was met with strong opposition from consumer groups as well as the mortgage industry.

Bob Broeksmit, Mortgage Bankers Association President and CEO, issued the following statement:

We have strongly opposed FHFA's planned debt-to-income loan level pricing adjustment since it was announced in January and have led advocacy efforts calling for its removal. The proposed fee was unworkable for lenders and would have confused borrowers and undermined the customer experience. We are pleased that FHFA engaged with industry stakeholders, recognized the negative impacts of the fee, and decided to rescind its implementation.

The changes were originally set to become effective May 1, 2023, but were delayed until August 1, 2023, before yesterday’s decision to rescind the new pricing scheme in its entirety.

To read the FHFA Announcement, please visit FHFA Announces Rescission of Upfront Fees Based on DTI.

FHA Extends COVID-19 Forbearance Through May

The Federal Housing Administration (“FHA”) announced recently that they will extend the deadline for COVID-19 related forbearance requests through May 31, 2023. The COVID-19 forbearance option had been set to expire at the end of the COVID-19 National Emergency. FHA announced in Mortgagee Letter 2023-08 that with the COVID-19 National Emergency set to expire early, extending the forbearance option through May would allow borrowers who need assistance additional time to request such relief and allow servicers time to offer and process any such requests.

To review the Mortgagee Letter in its entirety, please visit Mortgagee Letter (ML) 2023-08.

Massachusetts and Delaware Become Latest States to Permit Remote Online Notarization

With the passage of new laws in Massachusetts and Delaware, all but five states, as well as the District of Columbia, now have permanent laws in place permitting remote online notarization (“RON”).

To facilitate the continued execution of documents requiring notarization during the COVID-19 pandemic, most states issued temporary orders allowing RON. Many of these states subsequently adopted permanent RON laws.

Five states, California, Connecticut, Georgia, Mississippi, and South Carolina, have no permanent laws in place. Temporary orders authorizing the use of RON during the COVID-19 pandemic expired in Connecticut, Georgia, and Mississippi. California explicitly prohibits RON. South Carolina has been completely silent on the subject.

The Massachusetts law, which goes into effect on January 1, 2024, can be found at MA House Bill 58.

The Delaware law, which goes into effect on August 1, 2023, can be found at DE Senate Bill 262.

CFPB Seeks Comment on Loan Originator Rules

The Consumer Financial Protection Bureau (“CFPB”) is conducting a review of Regulation Z’s Loan Originator Rules (the “Rules”) pursuant to section 610 of the Regulatory Flexibility Act.  Regulation Z, which implements the Truth in Lending Act (TILA), includes certain requirements regarding loan originator compensation. The CFPB is seeking comment on the Rules, in particular the economic impact of the Rules on small entities.  

Specifically, the CFPB is asking for input on the following topics:

• The continued need for the Rules;

• The complexity of the Rules;

• The extent to which the Rules overlap, duplicate or conflict with other Federal rules and/or state and local rules; and

• The degree to which technology, market conditions, or other factors have changed since the Rules were last evaluated, including the economic impact of the Rules on small entities and how the impact of the Rules differ by origination channel, product type or other market segment. 

The Notice and Request for comment was published in the Federal Register today, and any comments must be received on or before May 1, 2023, 45 days after publication.  To read the notice, please visit CFPB Notice of Review and Request for Comment - Loan Originator Rules.

LIBOR Transition News:

Fannie Mae and Freddie Mac Provide Details on LIBOR Replacement for Legacy Loans; Federal Reserve Board Publishes Final Rule

In late-December 2022, Fannie Mae and Freddie Mac officially announced that SOFR (Secured Overnight Financing Rate) will serve as the replacement index for their legacy LIBOR-based adjustable rate loans.  A follow-up announcement was issued by each of the GSE’s on January 25, 2023, providing more clarity on the SOFR transition for legacy single-family ARM loans by including a table identifying the specific SOFR plus transition tenor spread adjustment that replaces each of the three LIBOR indices.

The final rule issued by the Federal Reserve Board in December implementing the LIBOR Act and establishing default rules for benchmark replacement in certain existing contracts that use LIBOR as a reference rate was published in the Federal Register on January 26, 2023 and will become effective 30 days later on February 27, 2023.

The transition to the replacement indices will occur on July 1, 2023, the day after the last date on which the Intercontinental Exchange, Inc. (ICE) Benchmark Administration Limited will publish a representative rate for LIBOR.

To review Fannie Mae’s announcement, please visit Fannie Mae LIBOR Transition Announcement

To review Freddie Mac’s announcement, please visit Freddie Mac LIBOR Transition Announcement

To read the Federal Reserve Board’s final rule implementing the LIBOR Act, please visit Federal Reserve Board's Final Rule Implementing the LIBOR Act