July 13, 2020

Volume X, Number 195

July 13, 2020

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July 10, 2020

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FHFA Aligns Freddie/Fannie Monthly Payment Advance Obligations

Responding to pressure from industry groups and members of Congress, the Federal Housing Finance Agency (FHFA) announced on April 21, 2020 that servicers of Freddie and Fannie mortgage loans will only be required to advance four months of missed payments for single family mortgage loans.  The action by the FHFA aligns the servicer advance requirements for mortgage loans in both Freddie Mac and Fannie Mae issued mortgaged-backed securities (MBS).  Prior to the change, Freddie Mac servicers were limited to a four months advance obligation while Fannie Mae servicers with scheduled payment remittance obligations were responsible for advancing missed payment regardless of borrower payments.

The FHFA announcement also reverses April 10, 2020 servicer guidance and specifies that mortgage loans with COVID-19 payment forbearance shall be treated like a natural disaster event and will remain in the MBS pool for at least the duration of the forbearance plan.

The mortgage industry is still expecting an FHFA announcement  later this week specifying when Freddie Mac and Fannie Mae will buy mortgage loans in forbearance.  Further, industry participants remain hopeful that a mortgage servicer liquidity facility will be included in the Federal Reserve and Treasury’s fourth economic relief package expected to be released in the coming weeks.

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Addresses-Servicer-Liquidity-Concerns-Announces-Four-Month-Advance-Obligation-Limit-for-Loans-in-Forbearance.aspx

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume X, Number 113

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About this Author

Colleen H. McDonald Sheppard Mullin Bankruptcy Litigation Attorney
Partner

Ms. McDonald advises financial institutions regarding the acquisition and sale of a variety of assets primarily involving newly originated, seasoned and distressed residential mortgage loan pools, including conventional, government insured and jumbo mortgage loans, on both servicing retained and servicing released bases, and pools of mortgage servicing rights relating to residential mortgage loans. She also has experience in sales of loans to agencies and agency securitizations (agency swaps) and with warehouse arrangements for conventional, government insured and jumbo...

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