February 2016 - The Industry's Best Kept Secret

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TH E M R EP O RT | 49 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 SERVICING THE LATEST Freddie Updates Seller/Servicer Guide Alterations abound in the updated bulletin, including a new delivery fee and mortgage insurance rules. F reddie Mac sellers/servicers can expect some changes regarding the way they do business in 2016. The government-sponsored en - terprise recently updated its Single- Family Seller-Servicer Guide bulletin with many changes to push the company's focus of "making homeownership accessible to more first-time home - buyers and low-to- moderate-income borrowers." The announce- ment, sent out to all Freddie Mac sellers, stated that a new post-settlement delivery fee will be introduced in the coming year for Home Possible and Home Possible Advantage Mortgages, which took effect January 4. The GSE noted that the intro - duction of the delivery fee is to assist with pipeline coverage for pricing purposes. The delivery fee cap will be 0.00 percent for those with a credit score above 680 and 1.5 percent for those with a credit score below 680. "We are implementing a new delivery fee cap structure for Home Possible Mortgages to help preserve affordability for low-to- moderate-income borrowers or borrowers in an underserved area across a broad spectrum of loan- to-value (LTV) ratios and credit scores. This fee cap structure is de - signed to manage both affordability and risk, and do so in a balanced and responsible manner," Freddie Mac said in the letter. In addition, Freddie also an- nounced changes to the mortgage insurance requirements for Home Possible Mortgages and Home Possible Mortgages secured by manufactured homes, which also became ef- fective January 4. The new rules require standard cover- age for mortgages with LTV ratios greater than 80 percent and less than or equal to 90 percent, and the minimum coverage level is 25 percent for mortgages with LTV ratios greater than 90 percent. The company's announcement also included a reduction to the delivery fee rates for mortgages secured by manufactured homes from 100 basis points to 50 basis points. Existing mortgage insurance coverage level requirements for mortgages secured by manu - factured homes will now be standard mortgage insurance. Lastly, in an effort to provide more mortgage insurance op- tions, Freddie Mac is allowing its sellers/servicers to offer custom mortgage insurance to include mortgage products with certain LTV ratio ranges not previously covered, including Home Possible Mortgages. These changes will begin March 1. Servicers Made the Grade All of the institutions that were party to the National Mortgage Settlement in 2012 passed the 33-metric compliance test. I n his summary of six reports filed with the U.S. District Court for the District of Co- lumbia, Independent Settle- ment Monitor Joseph A. Smith Jr. and his team revealed no failed metrics among the servicers that were party to the National Mort - gage Settlement in 2012. Smith's summary, titled Update on Compliance, includes results for Bank of America, Chase, Citi, Ditech, SunTrust, and Wells Fargo. The compliance test includes a total of 33 metrics—29 originally set forth by the NMS and four more set forth by the Monitor in 2013. The report covers the first half of 2015. "My tests show that servicers are adhering to the NMS's ser - vicing rules, which aim to give borrowers better experiences," Smith said. "Among six servicers and over six months, my profes - sionals and I uncovered no fails." The report does not include the results of compliance tests for Ocwen Financial for the first half of 2015. Smith said he was still testing Ocwen and would release the results to the public when he is confident they are complete. Smith released his last update on Ocwen's compli - ance with the terms of the NMS in October, at which time he revealed that the Atlanta-based servicer failed four metrics during the second half of 2014. The report was the sixth for Bank of America, Chase, Citi, and Wells Fargo. It was the fourth for Ditech and the first for SunTrust. The NMS was originally finalized in April 2012 between 49 states and the District of Columbia, the federal government, and five banks and/or mortgage servicers (Bank of America, Citi, JPMorgan Chase, Ally/GMAC, and Wells Fargo). As part of the agreement, the five servicers were required to provide $20 billion in consumer relief and $5 billion in other payments. Ocwen falls un - der Smith's supervision due to the servicer's acquisition of mortgage servicing rights from a unit of Ally Financial, one of the original banks included in the settlement. SunTrust became party to the NMS in June 2014 when it settled with the DOJ for $968 million to resolve claims that the Atlanta-based bank engaged in improper mortgage origination practices, as well as servicing and foreclosure abuses. Ocwen entered into a new consent judgment with the Consumer Financial Protection Bureau in February 2014 that requires it to provide $2.1 billion in consumer relief and to comply with the servicing standards set forth by the NMS. "We are implementing a new delivery fee cap structure for Home Possible Mortgages..." —Freddie Mac

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