Affirming the dismissal of a qui tam lawsuit based on certifications made to the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the U.S. Court of Appeals for the Ninth Circuit recently held that neither entity is an officer, employee, or agent of the United States. Therefore, demands or requests for payment made to these entities are not claims under 31 U.S.C. § 3729(b)(2)(A)(i) of the False Claims Act. United States ex rel. Adams v. Aurora Loan Services, Inc., — F.3d —-, 2016 WL 697771 (9th Cir. Feb. 22, 2016).
There has been considerable recent discussion in the mortgage servicing industry regarding the increasing hurdles to transfers of residential mortgage servicing rights. Those hurdles include additional scrutiny from the Consumer Financial Protection Bureau, Federal Housing Finance Agency, and state regulators. In the past week, each of Fannie Mae and Freddie Mac have issued updates to their servicing transfer requirements moving up the due dates for requests for approvals of servicing transfers, making it more difficult to consummate quick transfers. The new requirements don’t create new standards for approval of transfers of Fannie Mae and Freddie Mac servicing rights, but they do add a bit more procedural difficulty for such transfers. Read More
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
At least for the next year, Congress has materially impaired the ability of local governments to seize underwater residential mortgage loans through eminent domain by cutting off federal insurance or guarantees to refinance the seized mortgages and then securitize the refinancings. Without this federal “take out” through mortgage insurance provided by the Federal Housing Administration (“FHA”), and guarantees of mortgage-backed securities by the Government National Mortgage Association (“Ginnie Mae”), local governments will have to find private sources of long-term funding to pay for loans that they attempt to seize.
By: Phillip L. Schulman and Christa Bieker
Earlier this week, Fannie Mae and Freddie Mac announced guidelines for a new mortgage program that will allow down payments as low as three percent for some first-time and low-income home buyers. Melvin Watt, director of the Federal Housing Finance Agency which regulates Fannie and Freddie, explained that the new guidelines will “enable credit worthy borrowers who can afford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgage with 3 percent down.”
Fannie Mae and Freddie Mac do not make loans, but instead buy loans from mortgage lenders and bundle them into securities to sell to investors. Fannie and Freddie’s loan guidelines have broad influence in the mortgage-lending market. The program, first announced in October, is designed to expand access to mortgages with low down payments, which Watt has stated is a “much needed piece to the broader access to credit puzzle.”
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
This summer has brought a wave of housing finance reform efforts in both chambers of Congress. To date, the House and Senate have proposed different approaches to housing finance reform. The leading House proposal, introduced by Republicans, leans heavily toward privatization and would eliminate the affordable housing responsibilities of Fannie Mae and Freddie Mac. In contrast, the Senate proposal, introduced in a bipartisan effort, would combine a government backstop (arguably through more transparent means than those GSEs currently provide) with a continued attempt to fund affordable housing programs. Notwithstanding those differences, there is one common element of both proposals – a reduced government role in the housing finance sector. This core principle has been echoed by the President, who recently laid out general principles for housing finance reform that include winding down the GSEs, amplifying the role of private risk capital, and preserving the function of FHA insurance. In this alert, we summarize key aspects of several recent housing finance proposals, which we will continue to monitor once Congress reconvenes after its August recess.
To read the full alert, click here.
The loan repurchase policies of Fannie Mae and Freddie Mac are one of the factors that have exacerbated the U.S. housing crisis and impeded economic recovery, according to two recent releases by notable federal government actors. These reports call into question whether the aggressive repurchase stance of the Federal Housing Finance Agency, as conservator of the GSEs, to reduce short-term losses to U.S. taxpayers instead might work to the long-term detriment of such taxpayers. Lenders reportedly responded by saying: “like, duh!” Read More
For the past six months, the mortgage lending industry has reported receiving conflicting messages from the Department of Housing and Urban Development (“HUD”) and the Federal Housing Administration (“FHA”) regarding Deferred Action for Childhood Arrivals (“DACA”) recipients’ eligibility for FHA-insured mortgages. In December 2018, Senators Robert Menendez (D-NJ), Cory Booker (D-NJ), and Catherine Cortez Masto (D-NV) asked HUD to clarify whether it has “developed a policy regarding DACA recipients’ eligibility for FHA-insured mortgage loans.” If not, the senators requested HUD to “promptly provide clear and written guidance to FHA-approved lenders clarifying” that DACA recipients are not ineligible for FHA insurance simply because of their DACA status.  In response, HUD issued a letter explaining that is has “not implemented any policy changes” with respect to “FHA’s eligibility requirements” for non-U.S. citizens who are lawful residents. HUD reiterated that “non-U.S. citizens without lawful residency are ineligible for FHA financing.”  In early 2019, Fannie Mae issued a guide regarding “non-citizen borrower eligibility,” explaining that mortgages provided to DACA recipients are eligible to be purchased by Fannie Mae because DACA recipients are lawful nonpermanent residents because they have a valid Employment Authorization Document number.  During congressional testimony in April, HUD Secretary Ben Carson seemingly clarified that DACA recipients are eligible for FHA-insured mortgages. The secretary commented that “plenty of DACA recipients … have FHA mortgages,” and that he would be surprised if lenders received statements to the contrary from HUD staff.Read More
Extensive data about mortgage lending activity collected pursuant to the Home Mortgage Disclosure Act (“HMDA”) was just made available to the public for the first time on March 29, 2019. More detail about borrowers, about underwriting, and about loan features is now available than ever before, and that information also is easier for the public to access than it ever has been. The mortgage lending industry should expect that the expanded HMDA data will receive significant attention and scrutiny from private organizations and individuals, and the data is certain to spark controversy about the racial, ethnic and gender fairness of mortgage lending.Read More