Nov. 2015-Opportunity Knocks

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Th e M Rep o RT | 59 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET gses issue new mortgage repurchase Policies The GSes hope to give more clarity to lenders so they will not shy away from lending based on repurchase fears. F annie Mae and Freddie Mac recently issued new updates to rules related to mortgage repurchases that will provide clarity and transparency to lenders and more credit access to borrowers. The new policies, sent in a letter to sellers and servicers, are expected it go into effect January 1, 2016, at the direction of the Federal Housing Finance Agency (FHFA). The origination defects and remedies framework will provide clarity on the process followed in categorizing origination defects, lender corrections of such defects, and available remedies. In addi- tion, it will also provide more transparency regarding Fannie Mae's discretion on loan-level decisions when reviewing a loan during a quality control review. Donna Corley, SVP of the division chief risk office of the single family division at Freddie Mac noted the new framework is a reflection of the company's and its consumer's commitment to partner with lenders to improve loan manufacturing. "The framework announced today will not affect our customers' operations or our full file quality control reviews for performing and non-performing loans," Corley said. "The en- hanced framework is intended to provide more clarity and transparency to lenders who do business with Freddie Mac on identifying and correcting origi- nation defects, and the remedies that are available to them." She added, "Today's announce- ment also underscores Freddie Mac's commitment to work with the Federal Housing Finance Agency and other stakeholders to continually improve America's mortgage finance system." "Lenders consistently tell us that concerns about repurchases limit their willingness to lend, so we're trying to put those concerns to rest," said Andrew Bon Salle, EVP of single-family business at Fannie Mae. "By pursuing repurchase alternatives and providing clarity on significant defects we aim to help lenders serve the market confidently, efficiently and profit- ably. Today's guidance is another milestone in our efforts to provide more clarity and certainty to our customers." Fannie mae & Freddie mac Offer informal grace Period to industry The GSes will suspend post-purchase loan reviews for TRID compliance while the industry adjusts to the new rules. F annie Mae and Fred- die Mac are offering lenders and servicers an informal hold harmless grace period for the Consumer Financial Protec- tion Bureau's (CFPB) TILA- RESPA Integrated Disclosure (TRID) Rule. In two similar letters to the industry, the enterprises outlined that they recognize many lenders and their part- ners in the mortgage industry have "undertaken considerable technological and operational changes" to meet TRID re- quirements, which went into effect October 3, 2015. In addition, each GSE stated that it "recognizes and appreciates the enormous efforts that its lenders have made to date." Fannie Mae and Freddie Mac will no longer conduct routine post-purchase loan file reviews for technical compli- ance with TRID. However, they will con- tinue to review mortgage loans to ensure the correct forms were used during the origination process. The letter also stated that both companies retain the right to require a repurchase in the event that a lender violates applicable law if the lender's failed compliance could impair the enterprise's ability to enforce the note or mortgage, or impose assignee liability. Neither enterprise intends to exercise contractual remedies, including repurchase, for non- compliance with TRID except: • If the required form is not used, • If a particular practice would impair enforcement of the note or mortgage or would result in assignee liability, and a court of law, regulator, or other authoritative body has determined that such practice violates TRID. The enterprises "expect lenders to make good faith efforts to comply with TRID; failure to use a TRID-required form will be deemed a viola- tion of the good faith efforts standard and will render the mortgage loan subject to all contractual remedies, includ- ing repurchase." The enterprises indicated that this grace period will be held until "further notice" with no official end date. the latest

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