Safeguard Properties

Model Suggests Higher Rate of Flood-Prone Property Buyouts

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Industry Update
October 9, 2019

Source: Science Advances

Additional Resource:

Bloomberg (FEMA Bought 44,000 Flood-Prone Homes. They May Have to Buy Millions More)

Abstract

Retreat from some areas will become unavoidable under intensifying climate change. Existing deployments of managed retreat are at small scale compared to potential future needs, leaving open questions about where, when, and how retreat under climate change will occur. Here, we analyze more than 40,000 voluntary buyouts of flood-prone properties in the United States, in which homeowners sell properties to the government and the land is restored to open space. In contrast to model-based evaluation of potential future retreat, local governments in counties with higher population and income are more likely to administer buyouts. The bought-out properties themselves, however, are concentrated in areas of greater social vulnerability within these counties, pointing to the importance of assessing the equity of buyout implementation and outcomes. These patterns demonstrate the challenges associated with locally driven implementation of managed retreat and the potential benefits of experimentation with different approaches to retreat.

To access full report, please click the source link above.

CFR: Housing Market Points to Recession By Election Day

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Industry Alert
October 10, 2019

Source: CFR

Looking back at the years preceding the 2008 financial crisis, a critical warning sign was the surging gap between the growth in home prices and household income—as can be seen in the main graphic above. When income fails to keep pace with home prices, the latter must fall back. Falling home prices, in turn, drive down household spending by way of the so-called wealth effect—that is, consumers cut spending when their assets fall in value. As one Federal Reserve study shows, consumption falls by $2.50-5.00 for every $100 decrease in housing-market net worth.

Today, a parallel dynamic is playing out—as can readily be seen in the graphic. A similar housing-income gap began opening in 2015. In 2018, as in 2005, housing-price growth began falling rapidly, with significant price drops occurring in several major markets. As the inset figure shows, the trend-line in existing-home sales growth has also been down since 2015, tipping into negative territory at the start of last year. Similar drops have preceded nearly every recession since 1970.

If these trends continue, we should expect broad falls in home prices beginning by mid-2020, which will in turn drag down household spending against a darkening economic backdrop. Growth has been slowing, with Trump’s tariff war hitting exports. Manufacturing is contracting. Retail sales, excluding autos, have stalled. Consumer confidence is falling.

What are the best hopes for avoiding recession, then? Well, we could see a U.S.-China trade deal, which would buoy business confidence. But all signs are that this is unlikely, given Chinese insistence that structural reforms are now off the table. A so-called narrow deal, with punitive tariffs eliminated in return for greater Chinese purchases of soybeans and LNG, would amount to a total victory for Beijing, given the country’s naturally rising demand for both. So our base-case is that the trade war continues.

The Fed? Well, if we are really on the cusp of a recession it will likely take more than 175 basis points of easing to prevent it—and that is all the central bank has to play with before we’re back to the zero lower bound. At that point, applying monetary stimulus becomes considerably more challenging.

In short, then, we think Trump will be entering the election homestretch with some strong economic headwinds against him.  Most notable among them will be a declining housing market.

CFPB: Taskforce on Federal Consumer Financial Law Announced

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Industry Update
October 11, 2019

Source: CFPB

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (Bureau) today announced that it will establish a taskforce to examine ways to harmonize and modernize federal consumer financial laws.

The Taskforce on Federal Consumer Financial Law will examine the existing legal and regulatory environment facing consumers and financial services providers and report to Director Kraninger its recommendations for ways to improve and strengthen consumer financial laws and regulations. The taskforce will produce new research and legal analysis of consumer financial laws in the United States, focusing specifically on harmonizing, modernizing, and updating the enumerated consumer credit laws—and their implementing regulations—and identifying gaps in knowledge that should be addressed through research, ways to improve consumer understanding of markets and products, and potential conflicts or inconsistencies in existing regulations and guidance.

“An objective and independent evaluation of our current regulatory framework to identify where there may be gaps or where regulation should be simplified or modernized is needed to help us more effectively carry out our mission of protecting consumers,” said Consumer Financial Protection Bureau Director Kathleen L. Kraninger. “As we work to set up the taskforce, we encourage interested individuals to apply to be considered to be part of the taskforce.”

The taskforce is in part inspired by an earlier commission established by the Consumer Credit Protection Act in 1968. In addition to various changes to consumer law generally, the Act established a national commission to conduct original research and provide Congress with recommendations relating to the regulation of consumer credit. The commission’s report contains original empirical data, information, and analyses—all of which undergird the report’s final recommendations. The data, findings, and recommendations from the commission were all made public and the report led to significant legislative and regulatory developments in consumer finance.

The Bureau will be seeking to fill the taskforce with several members with a broad range of expertise in the areas of consumer protection and consumer financial products or services; significant expertise in analyzing consumer financial markets, laws, and regulations; and a demonstrated record of senior public or academic service.

The Bureau is accepting applications for members to serve on the taskforce. Click here for additional information on the qualifications for members, as well as the process for applying.

OCC: National Banks and Federal Savings Associations Affected by California Wildfires Allowed to Close

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Investor Update
October 30, 2019

Source: OCC

WASHINGTON — The Office of the Comptroller of the Currency today issued a proclamation allowing national banks, federal savings associations, and federal branches and agencies of foreign banks to close offices affected by wildfires in California at their discretion.

In issuing the proclamation, the OCC expects that only those bank offices directly affected by potentially unsafe conditions will close. Those offices should make every effort to reopen as quickly as possible to address the banking needs of their customers.

OCC Bulletin 2012-28 Supervisory Guidance on Natural Disasters and Other Emergency Conditions provides guidance on actions bankers could consider implementing when their bank or savings association operates or has customers in areas affected by a natural disaster or other emergency.

MHA HAMP Update: October 2019 Reporting System Release Notes Posted

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Investor Update
October 10, 2019

Source: MHA

On October 29, 2019 the HAMP Reporting System will receive the following updates:

• Update to Servicer Response File

Refer to the Release Notes for more information about this update.

Due to the release, HAMP Reporting System response files will be unavailable Monday, October 28, 2019. During this timeframe, the HAMP Reporting Tool will be available for servicers to submit and upload HAMP loan data files, and the corresponding Black Knight response files will be provided as usual.

MHA: Columbus Day Holiday Support and System Availability

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Investor Update
October 10, 2019

Source: MHA

In the observance of Columbus Day, the HAMP Reporting System response files will not be available between 4:00 p.m. ET on Friday, October 11, 2019 and 9:00 a.m. ET on Tuesday, October 15, 2019; they will be sent as soon as the system is available.

During this timeframe, the HAMP Reporting Tool will be available for servicers to submit and upload HAMP loan data files, and the corresponding Black Knight response files will be provided as usual.

The HAMP Solution Center will be open as scheduled from 9:00 a.m. ET to 4:00 p.m. ET on Monday, October 14, 2019.

Fall Wildfires Erupt in Southern California

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Updated 10/14/19: The California Department of Forestry & Fire Protection (CAL FIRE) has created a incident map tracking the latest active wildfires around the state.

Incident Map

Active Incident Summary (abbreviated):

Saddleridge Fire
– Containment: 43%
– Acres Burned: 7,965

Sandalwood Fire
– Containment: 94%
– Acres Burned: 1,011

Updated 10/14/19: KNBC 4 published a report offering the latest updates on active wildfires currently impacting portions of Southern California.

Wildfire Threat Diminishes After Days of Flames and Smoke in Southern California

Updated 10/13/19: The California Department of Forestry & Fire Protection (CAL FIRE) has created a incident map tracking the latest active wildfires around the state.

Incident Map

Active Incident Summary (abbreviated):

Saddleridge Fire
– Containment: 33%
– Acres Burned: 7,965

Sandalwood Fire
– Containment: 68%
– Acres Burned: 1,011

Updated 10/13/19: CNN published a report offering the latest updates on active wildfires currently impacting portions of Southern California.

CNN Full Report

Updated 10/12/19: The California Department of Forestry & Fire Protection (CAL FIRE) has created a incident map tracking the latest active wildfires around the state.

Incident Map

Active Incident Summary (abbreviated):

Saddleridge Fire
– Containment: 13%
– Acres Burned: 7542

Sandalwood Fire
– Containment: 10%
– Acres Burned: 823

Updated 10/12/19: NBC News published a report offering the latest updates on active wildfires currently impacting portions of Southern California.

Race is on to contain wind-fueled Los Angeles wildfire (full report)

Updated 10/11/19: California Governor Gavin Newsom issued an emergency proclamation for two counties impacted by wildfire activity.

Governor Newsom Declares State of Emergency in Los Angeles and Riverside Counties Due to Fires (full proclamation)

Associated County ZIP Code List

Disaster Alert
October 11, 2019

Source: The Weather Channel

Approximate areas containing homes damaged or destroyed:

California
– Calimesa (Riverside County, 92223, 92320, 92373)
– Fontana (San Bernardino County, 92316, 92331, 92334, 92335, 92336, 92337, 92377)
– Granada Hills (Los Angeles County, 91344, 91394)
– Porter Ranch (Los Angeles County, 91326)

NOTE: This has not yet been declared a FEMA Disaster.

At a Glance

  • Residents of more than 12,000 homes in Los Angeles were ordered to evacuate.
  • The 210 and 5 Freeways are closed because of the Saddleridge Fire that began Thursday night.
  • Earlier Thursday, numerous mobile homes were destroyed in Calimesa, California, by a wildfire.
  • About 250,000 customers still had no electricity in Northern California.
  • Costs of the outages could top $1 billion, economists say.

A fast-moving wildfire jumped into neighborhoods in Los Angeles overnight forcing evacuations, destroying homes and closing two freeways and an interstate.

Flames from the Saddleridge Fire, which started about 9 p.m. Thursday in Sylmar, crossed over the 210 Freeway and later the 5 Freeway. Both highways were closed because of smoke. Interstate 405 was closed at State Road 118.

By 4 a.m. local time Friday, the fire had spread to more than 7 square miles in the northern foothills of the San Fernando Valley, according to the Associated Press. The Los Angeles Fire Department deemed the fire a “Major Emergency”, the highest classification there is for a fire emergency.

Officials ordered mandatory evacuations for 12,700 homes in the Porter Ranch, Granada Hills and Oakridge Estates neighborhoods. Some residents had already gone to bed before the order to flee came.

Several homes were seen burning in Granada Hills, and the Los Angeles Fire Department said an “unknown number” of homes were potentially threatened.

There were no reports of injuries.

The Saddleridge Fire was one of several major wildfires that burned as hundreds of thousands of California residents entered a third day without electricity. Utilities had shut off the power in an effort to prevent falling or sparking wires igniting fires.

On Thursday afternoon, a blaze known as the Sandalwood Fire grew rapidly and destroyed numerous mobile homes in the town of Calimesa, about 65 miles east of Los Angeles. The Riverside County Fire Department said 74 structures were destroyed in the fire and another 16 damaged.

Fire crews responded quickly to the fire as it invaded the Villa Calimesa Mobile Home Park not far from Interstate 10. The surrounding area, which includes a middle school, was ordered to evacuate as the fire grew and moved quickly to the west, away from the freeway.

As the fire expanded to an estimated 500 acres, footage from a KTLA-TV helicopter showed dozens of mobile homes on fire.

For full report, please click the source link above.

VA: Circular 26-19-27: Special Relief Following Hurricane Dorian

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Investor Update
October 8, 2019

Source: VA

1. Purpose. This Circular expresses concern about the Department of Veterans Affairs (VA) home loan borrowers affected by Hurricane Dorian, and describes measures mortgagees may employ to provide relief. Mortgage servicers and borrowers alike should review VA’s Guidance on Natural Disasters to ensure Veterans receive the assistance they need. (https://www.benefits.va.gov/homeloans/documents/docs/va_policy_regarding_natural_disasters.pdf or https://www.benefits.va.gov/WARMS/docs/admin26/m26_04/Chapter_21.docx.)

2. Forbearance Request. VA encourages holders of guaranteed loans to extend forbearance to borrowers in distress as a result of the disaster. Careful counseling with borrowers should help determine whether their difficulties are related to this disaster, or whether they stem from other sources that must be addressed. The proper use of authorities granted in VA regulations may be of assistance in appropriate cases. For example, Title 38, Code of Federal Regulations (C.F.R.), section 36.4311 allows the reapplication of prepayments to cure or prevent a default. Also, 38 C.FR. 36.4315 allows the terms of any guaranteed loan to be modified without the prior approval of VA, provided conditions in the regulation are satisfied.

3. Moratorium on Foreclosure. Although the loan holder is ultimately responsible for determining when to initiate foreclosure, and for completing termination action, VA has requested on its website (https://www.benefits.va.gov/homeloans) that holders establish a 90-day moratorium from the date of a disaster declaration on initiating new foreclosures on loans
affected by major disasters. VA regulation 38 C.F.R. 36.4324(a)(3)(ii) allows additional interest on a guaranty claim when eventual termination has been delayed due to circumstances beyond the control of the holder, such as VA-requested forbearance. Due to the widespread impact of the disaster, holders should review all foreclosure referrals to ensure that borrowers have not been affected significantly enough to justify delay in referral. Any questions about impact should be discussed with the VA Regional Loan Center (RLC) of jurisdiction.

4. Late Charge Waivers. VA believes that many servicers plan to waive late charges on affected loans, and encourages all servicers to adopt such a policy for any loans that may have been affected.

5. Credit and VA Reporting. In order to avoid damaging credit records of Veteran borrowers, servicers are encouraged to suspend credit bureau reporting on affected loans. VA will not penalize affected servicers for any late default reporting to VA as a result. Please contact the appropriate RLC with any questions.

6. Activation of the National Guard. Members of the National Guard may be called to active duty to assist in recovery efforts. VA encourages servicers to extend special forbearance to National Guard members who experience financial difficulties as a result of their service.

7. Rescission: This Circular is rescinded October 1, 2020.

By Direction of the Under Secretary for Benefits

Jeffrey F. London
Director, Loan Guaranty Service

Freddie Mac: FHLMC Guide Bulletin 2019-21: Updates to Servicing Gateway

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Investor Update
October 9, 2019

Source: Freddie Mac

In Single-Family Seller/Servicer Guide (Guide) Bulletin 2019-21, we’re extending the implementation of Servicing Gateway and the mandatory adoption of the Servicing Data Corrections tool to December 9, 2019.

The Guide Bulletin also announces servicing updates related to the following:

– Document custody requirements

– Settling charge-offs via Workout Prospector®

– Freddie Mac access to mortgage records

Other servicing updates that may be important to your business

For More Information

– Read Guide Bulletin 2019-21.

– Contact your Freddie Mac representative.

Need help looking for a requirement in our Guide? Try Cobrowse.

 

Fannie Mae: Servicing Notice

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Investor Update
October 9, 2019

Source: Fannie Mae

At varying times in 2017 and 2018, for both forward mortgage loans and reverse mortgage loans, we accepted responsibility for the payment of property taxes, HOA or condo association fees and assessments, co-op fees and assessments, and ground rents for acquired properties. In some cases, the responsible party was determined by the date of foreclosure sale or final acceptance of an executed Mortgage Release™.

With this Notice, we assume responsibility – without regard to the foreclosure sale or Mortgage Release date – as follows:

• for the payment of HOA and condo association fees and assessments for all acquired properties, effective July 1, 2019; and

• for the payment of co-op corporation fees and assessments for all acquired properties, effective November 1, 2019.

As a result, we now assume the responsibility for the payment of all property taxes, ground rents, as well as fees and assessments invoiced by an HOA, condo association, or co-op corporation once the foreclosure sale or Mortgage Release occurs. As outlined in E-4.3-01, Managing the Property Post-Foreclosure Sale, the servicer is not responsible for these expenses after we acquire the property, unless we direct otherwise. This includes reverse mortgage loans.