Safeguard Properties

Freddie Mac: 4 Smart Ways to Help Combat Mortgage Fraud Scams Targeting Seniors

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Investor Update
May 23, 2017

A woman in her 80s applies for a cash-out refinance mortgage to access her home equity, after a lifetime of saving so she can relax financially. After the loan closes, the woman alleges she didn’t know she’d applied for this mortgage. An investigation reveals that:

  • No one involved in the loan worked with the woman personally – all communications were by phone, email and mail.
  • The woman could no longer make such a financial decision and her power of attorney had changed hands multiple times.
  • Someone may have attempted to steal her hard-earned equity once loan proceeds were in her bank account.

Thankfully, Freddie Mac learned about this before a theft occurred. The funds were returned to the Seller/Servicer and the mortgage was canceled at no cost to the borrower.

Unfortunately, scenarios like this happen far too often and end far less happily. In a recent Virginia case of widespread mortgage fraud, “after being contacted by another member of the conspiracy and told that their mortgage modification had been approved, the victim homeowner would be told that their lender required a ‘reinstatement fee,’ usually in the amount of thousands of dollars.”

Why Are Seniors Targeted?

Fraudsters look for the most vulnerable targets to exploit. Seniors are especially susceptible to predators who are out to fleece them since many older people:

  • Live on fixed incomes and grapple with fears about supporting themselves throughout old age.
  • May not be aware of how advanced technology is and how sharing a little personal information with an untrusted source can lead to a lot of trouble down the road.
  • Face physical and cognitive challenges which can impair their judgment.

“Mortgage fraud aimed at seniors is reprehensible,” says Robb Hagberg, Senior Director of Fraud Risk. “Freddie Mac is committed to educating our customers and the public about what to watch for and how to combat this particularly alarming type of fraud that targets seniors.”

Fraud Aimed at Seniors is Widespread

The New York Times reports that, “As many as 17 percent of Americans 65 and older report being the victim of financial exploitation, according to the Consumer Financial Protection Bureau. Estimates of annual losses are in the billions of dollars. One factor that may play a role is mild cognitive impairment, a condition that can be a precursor to dementia and can diminish an older person’s ability to make financial decisions.”

Even more seniors – one in 10 – are victims of fraud or abuse, and that figure is probably underreported, based on a recent National Center on Elder Abuse webinar, which was hosted in honor of World Elder Abuse Annual Awareness Day (June 15).

Red Flags for Mortgage Fraud Scams Targeting Seniors

Encourage your older borrowers, and trusted family/friends assisting them, to look out for these red flags and follow ways to combat them:

Red Flag #1: You don’t know the person making the offer. 
Only listen to someone you trust. Don’t sign anything until you’ve vetted it with someone who both understands the financial implications and has your best interest at heart.

Red flag #2: You’re asked to sign something right away and/or must “act now” on the offer.
Be skeptical of all offers, especially unsolicited ones and those that require you to commit immediately. Give no personal information to a stranger in person, over the phone or through email. Always ask for everything in writing so you can think it through and take time to talk through the options with a trusted family member, friend or advisor.

Red flag #3: You’re told you don’t need to worry about the fine print.
First, don’t wait until you’re desperate to refinance or get a reverse mortgage. Second, if you’re considering a refinance or reverse mortgage, which are advertised frequently these days, read the fine print about the various plans and consumer protections in place to safeguard your financial interests. (Note: Freddie Mac doesn’t buy reverse mortgages, mortgages, but we try to warn our customers and the public when we learn of potential risks and scams.)

The Top Four Actions Seller/Servicers Should Take

It’s important to be aware of the added challenges and risks older borrowers face. Freddie Mac recommends that Seller/Servicers follow these four actions to mitigate mortgage fraud scams targeting seniors:

1. Make sure your older customers are very clear about what’s happening with all transactions.
2. Double down on your due diligence in investigating all requests, claims and supporting documentation to uncover false or misleading information and/or statements.
3. Watch out for any unscrupulous individuals, including members of the prospective borrower’s family, who might be unduly influencing the older customer. You can contact your local adult protective services agency via the federal eldercare locator website, to request they investigate potential senior exploitation.
4. Contact Freddie Mac immediately if you suspect fraud related to any loans we’re working on together. Call (800)-4FRAUD8 or email Mortgage Fraud Reporting.

New! Freddie Mac Fraud Homepage

We’ve just launched our new Single-Family Fraud Risk homepage. Please visit and bookmark our new homepage, where it’s easier to find Freddie Mac fraud prevention and mitigation news, updates, information and resources.

For More Information

Source: Freddie Mac

FHLMC Guide Bulletin 2017-6: Updates in Response to CFPB Amendments

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Investor Update
May 10, 2017

In today’s Single-Family Seller/Servicer Guide (Guide) Bulletin 2017-6, we’re updating the Guide in response to the Consumer Financial Protection Bureau’s August 4, 2016, amendments [pdf] to its 2013 mortgage servicing rules.

Please read Guide Bulletin 2017-6 [pdf] for more information.

For More Information

Source: Freddie Mac

FHFA: Statement of Melvin Watt

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Investor Update
May 11, 2017

“The Status of the Housing Finance System After Nine Years of Conservatorship” 

Chairman Crapo, Ranking Member Brown, and members of the Committee, thank you for your invitation for me to discuss the critically important and timely hearing subject “The Status of the Housing Finance System After Nine Years of Conservatorship” and to answer any questions you may have about the work we are doing at the Federal Housing Finance Agency (FHFA). 

As the members of this Committee are well aware, since September 6, 2008, Fannie Mae and Freddie Mac (the Enterprises) have been operating in conservatorships under the direction and control of FHFA and with backing of the U.S. taxpayers with explicit dollar limits as set out in the Senior Preferred Stock Purchase Agreements (the PSPAs) with the U.S. Department of the Treasury.  As a result of prior Enterprise draws totaling $187.5 billion against the PSPA commitments, the PSPA commitment still available to Fannie Mae is now limited to $117.6 billion and the commitment still available to Freddie Mac is $140.5 billion.  Additional draws will reduce these commitments further; however, dividend payments do not replenish or increase the commitments under the terms of the PSPAs.

September 6 of this year will mark the beginning of the tenth year that the Enterprises have been in conservatorships.  These conservatorships have been unprecedented in scope, complexity, and duration, especially when you consider that the Enterprises support over $5 trillion in mortgage loans and guarantees.  Since January 6, 2014 when I was sworn in as Director of FHFA, the conservatorships of the Enterprises have been under my direction. 

I pledged to the members of this Committee during my confirmation hearing that I would carry out my responsibilities as Director in accordance with the statutory mandates given to FHFA as regulator and conservator.  I have consistently tried to do just that.  I have found that FHFA and the Enterprises operate with responsibilities that make it impossible to satisfy everyone and sometimes make it impossible to satisfy anyone.  However, I believe that most stakeholders would agree that we have responsibly balanced and met FHFA’s multiple statutory mandates to manage the Enterprises’ day to day operations in what I often refer to as “in the here and now.”  These statutory mandates obligate us to: 

  • Conserve and preserve the assets of the Enterprises while they are in conservatorship;
  • Ensure that the Enterprises provided meaningful assistance to the millions of borrowers who struggled to save their homes in the midst of the economic and housing crisis, as required in the Emergency Economic Stabilization Act; and
  • Oversee the prudential operations of the Enterprises and ensure that they continue to carry out their on-going statutory missions in a safe and sound manner; in a manner that fosters liquid, efficient, competitive, and resilient national housing finance markets; and in a manner that is consistent with the public interest. 

Many Reforms of the Enterprises Have Taken Place Through Conservatorship

I have said repeatedly, and I want to reiterate, that these conservatorships are not sustainable and they need to end as soon as Congress can chart the way forward on housing finance reform.  However, it is important for all of us to recognize that the conservatorships have led to numerous reforms of the Enterprises and their operations, practices, and protocols that have been extremely beneficial to the housing finance markets and have reduced exposure and risks to taxpayers.

It is critically important for the members of this Committee to be well aware of these reforms because you will have the responsibility to ensure that the reforms are not disregarded or discarded because of assertions some will make that the Enterprises now are the same or mirror images of the Enterprises that FHFA placed into conservatorship almost nine years ago.  I can assure you that such assertions would be unfounded.   

We have reported extensively on some of the important reforms we have made and on our  conservatorship priorities in our 2014 Conservatorship Strategic Plan; in our annual scorecards, including the 2017 Scorecard; and in our regular status updates, including three reports released earlier this year – 2016 Scorecard Progress Report, Credit Risk Transfer Progress Report, and An Update on the Implementation of the Single Security and the Common Securitization Platform.

Let me highlight some of the most important changes and reforms that have taken place during the conservatorships. 

1. Board leadership and management:  When the Enterprises were placed into conservatorship, FHFA replaced most members of their boards of directors and many senior managers.  Both through conservatorship and through our on-site regulatory oversight of the Enterprises, FHFA has required Fannie Mae and Freddie Mac to make a number of changes to improve risk management, update many of their legacy systems, prioritize information security and data management, and better address other areas of operational risk.  FHFA has also taken steps to prohibit certain activities, such as lobbying, by either Enterprise.  The Enterprises board of directors and senior management have taken great strides to implement these improvements in coordination with FHFA.  

2. Alignment of certain Enterprise activities:  While some aspects of their pre-conservatorship competition resulted in negative consequences or in a race to the bottom, FHFA has aligned many practices and policies on which the Enterprises are no longer allowed to compete, such as loss mitigation standards and counterparty eligibility standards.  However, based on expectations established in conservatorship and regularly emphasized by FHFA to the Enterprises’ boards and managements, we expect them to compete vigorously to find and implement innovative ways to make the housing finance markets more efficient and liquid, on customer service provided to Enterprise seller/servicers, and on the quality of their business practices.   

3. Sound underwriting practices:  The Enterprises are required to emphasize sound underwriting practices in their purchase guidelines, and these practices facilitate responsible access to credit and sustainable homeownership for creditworthy borrowers.  The Enterprises’ serious delinquency rate on single-family loans is at its lowest level since May 2008.

4. Appropriate guarantee fees:  Guarantee fees have been increased by two and a half times since 2009.  The guarantee fees are set to reflect the cost of covering credit losses in the event of economic stress or a housing downturn and the administrative expenses of running the companies.  While the Enterprises cannot retain capital under the PSPAs, we also set their guarantee fees under the assumption that they are earning an appropriate return on capital.  FHFA regularly reviews the Enterprises’ guarantee fees to ensure that they remain at appropriate levels. 

5. Smaller portfolios for core business purposes:  The retained portfolios of the Enterprises have been reduced over sixty percent since 2009 and both Enterprises are ahead of schedule to meet the 2018 maximum portfolio limits established in the PSPAs.  The Enterprises’ multiyear retained portfolio plans to achieve these reductions have focused on selling less liquid assets and investment assets, in addition to prepayments that have occurred over time.  Their retained portfolios are now focused on supporting the core business operations of the Enterprises, including aggregation of loans from small lenders to facilitate securitizations and holding delinquent loans in portfolio so investors can be made whole, servicers can facilitate loan modifications, and borrowers can stay in their homes whenever possible. 

6. New single-family credit risk transfer programs share credit risk with private investors:  The Enterprises have developed and continue to refine credit risk transfer programs that transfer a meaningful amount of credit risk to private investors on at least 90 percent of their targeted, fixed-rate, single-family mortgage acquisitions.  The Enterprises are also developing their single-family CRT programs with the objective of cultivating a mature and robust credit risk transfer market, including by building and expanding a diverse investor base that will increase the likelihood of having a stable CRT market through different housing and economic cycles. 

7. New securitization infrastructure:  Through a joint venture formed by the Enterprises under FHFA’s direction, the Common Securitization Platform (CSP) is now operating and all of Freddie Mac’s existing single-family, fixed-rate securitizations are being processed using the CSP.  All parties are now well down the multiyear path toward the CSP becoming the infrastructure used by both Enterprises to issue a common single mortgage backed security.  When fully implemented, we believe these changes will facilitate deeper liquidity in the housing finance market, support the to-be-announced market, and eliminate costly trading differences between the Enterprises’ securities.  The Enterprises are developing the CSP with an open architecture such that it will be usable by other market participants.

8. Responsible access to credit supporting sustainable homeownership:  The Enterprises have worked closely with FHFA on a number of initiatives designed to support responsible access to credit and sustainable homeownership.  For example, they undertook a multiyear process to revamp their Representation and Warranties Framework to reduce uncertainty and support access to credit throughout the Enterprises’ existing credit boxes.  We are also requiring the Enterprises to conduct analyses about access to credit barriers and to develop pilots and initiatives to improve access to credit in a safe and sound manner.  Another recent area of focus has been implementing the Enterprises’ statutory duty to serve three underserved markets – manufactured housing, affordable housing preservation, and rural housing.  The Enterprises posted their first draft Duty to Serve Plans for public input just this week.

9. Multifamily market liquidity and affordable rental housing:  The Enterprises’ multifamily programs, which performed well during the crisis while other parts of the housing market struggled, continue to share a substantial amount of credit risk with private investors and continue to provide needed liquidity for the multifamily market with major emphasis on affordable rental housing and underserved markets.  

10. Loss mitigation, foreclosure prevention, and neighborhood stabilization:  The Enterprises have worked with FHFA to develop effective loss mitigation programs that minimize losses to the Enterprises and allow borrowers to avoid foreclosure whenever possible.  This has included aligning the Enterprises loss mitigation standards and developing updated loan modification and streamlined refinance products to follow the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP).  The Enterprises are also effectively pursuing efforts to stabilize neighborhoods, including through the Neighborhood Stabilization Initiative.  

11. Level playing field for lenders of all sizes:  The Enterprises have eliminated volume-based discounts for larger lenders, which has leveled the playing field for lenders of all sizes – small, medium and large.  This new approach, along with supporting the ability of small lenders to purchase loans through the cash window, has significantly increased the percentage of Enterprise acquisitions from smaller lenders during conservatorship. 

Congress Urgently Needs to Act on Housing Finance Reform

While many reforms of the Enterprises’ business models and their operations have been accomplished through conservatorship, FHFA knows probably better than anyone that these conservatorships are not sustainable and we also know that housing finance reform will involve many tough decisions and steps that go well beyond the reforms made in conservatorship.  So I want to reaffirm my strong belief that it is the role of Congress, not FHFA, to make these tough decisions that chart the path out of conservatorship and to the future housing finance system.   

Among the important decisions Congress, not FHFA, will need to make as part of housing finance reform are the following:

  • How much backing, if any, should the federal government provide and in what form?
  • What process should be followed to transition to the new housing finance system and avoid disruption to the housing finance market, and who should lead or implement that process?
  • What roles, if any, should the Enterprises play in the reformed housing finance system and what statutory changes to their organizational structures, purposes, ownership and operations will be needed to ensure that they play their assigned roles effectively?
  • What regulatory and supervisory structure and authorities will be needed in a reformed system and who will have responsibility to exercise those authorities?

I reaffirm my belief that it is the role of Congress, not FHFA, to make those housing reform decisions and I encourage Congress to do so expeditiously. 

FHFA Must Continue to Meet Its Obligations While Housing Finance Reform Takes Place

The final thing I want to discuss is the most significant challenge FHFA faces as conservator while Congress continues to move ahead on housing finance reform.  I first discussed this challenge publicly in a speech I delivered at the Bipartisan Policy Center on February 18, 2016.  The challenge is that additional draws of taxpayer support would reduce the amount of taxpayer backing available to the Enterprises under the PSPAs and the foreseeable risk that the uncertainty associated with such draws or from the reduction in committed taxpayer backing could adversely impact the housing finance market.  Unfortunately, the challenge is significantly greater today than it was last year and will continue to increase unless it is addressed.  Let me explain why that is so.   

At the time I delivered my speech at the Bipartisan Policy Center in 2016, each Enterprise had a $1.2 billion buffer under the terms of the PSPAs to protect the Enterprise against having to make additional draws of taxpayer support in the event of an operating loss in any quarter.  Under the provisions of the PSPAs, on January 1, 2017 the amount of that buffer reduced to $600 million and on January 1, 2018 the buffer will reduce to zero.  At that point, neither Enterprise will have the ability to weather any loss it experiences in any quarter without drawing further on taxpayer support. 

This is not a theoretical concern.  GAAP accounting for any number of non-credit related factors in the ordinary course of business regularly results in large fluctuations in Enterprise gains or losses.  Some of these non-credit related factors include interest rate volatility; the accounting treatment of derivatives used to hedge risks; reduced income from the Enterprises’ declining retained portfolios; and the increasing volume of credit risk transfers which, while supporting our objective of transferring risk and opportunity to the private sector, also transfers current revenues away from the Enterprises.  We also know that a short-term consequence of corporate tax reform would be a reduction in the value of the Enterprises’ deferred tax assets, which would result in short-term, non-credit related losses to the Enterprises.  The greater the reduction in the corporate tax rate, the greater the short-term losses to the Enterprises would be.  In addition to the regular and on-going prospect of non-credit related losses, even minor housing market disruptions or short periods of distress in the economy could also cause credit-related losses to the Enterprises in a given quarter. 

Like any business, the Enterprises need some kind of buffer to shield against short-term operating losses.  In fact, it is especially irresponsible for the Enterprises not to have such a limited buffer because a loss in any quarter would result in an additional draw of taxpayer support and reduce the fixed dollar commitment the Treasury Department has made to support the Enterprises.  We reasonably foresee that this could erode investor confidence.  This could stifle liquidity in the mortgage-backed securities market and could increase the cost of mortgage credit for borrowers.

FHFA has explicit statutory obligations to ensure that each Enterprise “operates in a safe and sound manner” and fosters “liquid, efficient, competitive, and resilient national housing finance markets.”  To ensure that we meet these obligations, we cannot risk the loss of investor confidence.  It would, therefore, be a serious misconception for members of this Committee, or for anyone else, to consider any actions FHFA may take as conservator to avoid additional draws of taxpayer support either as interference with the prerogatives of Congress, as an effort to influence the outcome of housing finance reform, or as a step toward recap and release.  FHFA’s actions would be taken solely to avoid a draw during conservatorship.      

Thank you again for the opportunity to address this Committee.  Please be assured that FHFA and the Enterprises stand ready to assist the Committee in any ways we are asked to do so.  I look forward to answering your questions.       
 
Contacts: 
Stefanie Johnson (202) 649-3030??? / Corinne Russell (202) 649-3032

Source: FHFA

FHFA: Prepared Remarks of Melvin Watt

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Investor Update
May 18, 2017

Thank you for inviting me to speak today.  I don’t get here as often as I used to and it’s always a pleasure to be in North Carolina.   

When I spoke at this conference in 2014, I was relatively new as the Director of the Federal Housing Finance Agency (FHFA).  Among the early priorities I set was making the issues we deal with more understandable and transparent and making FHFA more open and receptive to stakeholder input.  FHFA’s receptivity to good stakeholder input has helped inform numerous decisions since then and many of you here today deserve thanks for the input you have provided on a number of these important decisions.  Among many others, this includes decisions about Fannie Mae and Freddie Mac’s (the Enterprises) guarantee fees, counterparty standards for private mortgage insurers, the Common Securitization Platform and Single Security, the credit risk transfer programs, affordable housing goals for Fannie Mae and Freddie Mac, and, most recently, duty to serve. 

Because the status of the Enterprises in conservatorship and housing finance reform seem to be hot topics these days, it seems appropriate for me today to elaborate on some of the points I made about these topics last week when I testified before the Senate Banking Committee.  In the written statement we delivered to the Committee before last week’s hearing and in my testimony, I drew a distinction between decisions we have made (and continue to make) as conservator and the decisions Congress must make.  The essence of what I said boils down to this:  FHFA has made substantial progress during conservatorship on reforming Fannie Mae and Freddie Mac (what I generally think of as “GSE reform”), but it’s the role of Congress to do the bigger job I generally think of as “housing finance reform.” 

As I’m sure you know, FHFA’s role as conservator of the Enterprises has been unprecedented in duration (now approaching nine years) and in scope and complexity (considering that the Enterprises support over $5 trillion in mortgage loans and guarantees).  

Reforming the Enterprises During Conservatorship

Decisions made by FHFA during conservatorship, many of which were made with your thoughtful input as I have indicated, have fundamentally reformed the Enterprises and their operations, practices, and protocols.  They have also significantly aided the liquidity and efficiency of the housing finance markets and reduced exposure and risks to taxpayers.  Many of the reforms made in conservatorship are extremely important and they should not be ignored or disregarded by Congress while Congress works on housing finance reform.  There are a number of examples.

FHFA has taken steps to reform board governance and day-to-day operations of the Enterprises.  Enterprise leadership today – both their boards of directors and senior management – is significantly different from pre-conservatorship.  With new, committed leadership and with FHFA setting the course both through conservatorship decisions and through on-site regulatory oversight, Fannie Mae and Freddie Mac have significantly improved their risk management and operations.  We’ve aligned certain business practices, such as loss mitigation standards and counterparty requirements.  And we expect the Enterprises to compete on things that matter – like innovation to improve liquidity across all segments of the market, customer service to seller/servicers, and better business practices.

Many of the changes we have made during conservatorship have the effect of reducing the risk of the Enterprises’ business model.  Before conservatorship, the Enterprises undercharged for their guarantee fees and used their large retained portfolios for investment purposes to drive up their earnings, all while taking on additional interest rate, liquidity, and credit risk.  And in conducting their guarantee business for single-family mortgages, except for loans for which they were required to have private mortgage insurance policies, they held on to all of this credit risk. 

After careful review and adjustments, the Enterprises’ guarantee fees are now appropriately priced.  The Enterprises have reduced their retained portfolios by over 60 percent and are well ahead of schedule to meet their PSPA limits.  In addition, they have created new programs that transfer a meaningful amount of credit risk to private investors on over 90 percent of their targeted mortgage acquisitions. 

The Enterprises are also many years down a path toward developing a common securitization platform and a Single Security, which will facilitate market liquidity by eliminating the differences in the trading price of Fannie Mae and Freddie Mac securities.

We have also worked with Fannie Mae and Freddie Mac to develop policies and programs that safely and soundly further their missions.  Many of their efforts are focused on addressing the challenge of providing greater access to credit and providing affordable housing, both ownership and rental.  While capping overall participation in the multifamily market so as not to compete with the private sector, our exclusions from the multifamily purchase cap allow participation in the affordable rental and underserved markets, constrained of course by safety and soundness considerations. 

FHFA, Fannie Mae, and Freddie Mac have also developed effective loss mitigation programs that minimize losses to the Enterprises, including the new Flex Modification that will be available in October, and allow borrowers to avoid foreclosure whenever possible.  We also developed a Neighborhood Stabilization Initiative that focuses property dispositions on stabilizing neighborhoods in the areas hardest hit by the crisis. 

The Enterprises have also eliminated volume-based discounts for larger lenders, which has leveled the playing field for lenders of all sizes – small, medium and large.  This change, along with providing support for small lenders by purchasing loans through the cash window, has resulted in the percentage of Enterprise acquisitions from smaller lenders increasing significantly during conservatorship. 

Among these reforms, two areas of emphasis – the Enterprises’ credit risk transfer programs and our efforts to improve access to credit – warrant further discussion. 

New Credit Risk Transfer Programs Share Credit Risk with the Private Investors 

I’ll start with a discussion of credit risk transfer (CRT).  The Enterprises’ credit risk transfer programs are a significant departure from their prior business model.  Instead of securitizing loans into mortgage-backed securities and then holding on to the credit risk of those mortgage-backed securities, the Enterprises have worked to develop programs that transfer a significant portion of this credit risk to private investors.  These credit risk transfer programs are separate from, but complement, the role played by primary mortgage insurance and other forms of credit enhancements required by the Enterprises’ charters for loans with higher loan-to-value ratios.

The credit risk transfer programs have become regular parts of Fannie Mae and Freddie Mac’s businesses and are now part and parcel of the way the Enterprises do business.  Both Fannie Mae and Freddie Mac have dedicated teams to carry out these transactions in a manner that reduces risk at a reasonable cost.  FHFA and the Enterprises are committed to supporting these programs and are continually improving them.

Our annual scorecard directs the Enterprises to transfer a portion of credit risk on 90 percent of targeted loan categories.  In setting these targets, we strategically focused on loan categories with the greatest amount of credit risk and on loans that could support a stable, liquid market for investors.  This means we target fixed-rate mortgages with 20-year terms or greater and with loan-to-value ratios above 60 percent.  For 2015, these targeted loans totaled about 55 percent of the Enterprises’ new loan acquisitions. 

The Enterprises have made a tremendous amount of progress on credit risk transfers in a short amount of time.  The volume of single-family mortgages included in credit risk transfer transactions has increased from an unpaid principal balance of about $90 billion in 2013 for both Enterprises combined to $548 billion in 2016.  Similarly, the risk in force of these transactions, which measures the maximum amount of credit losses that could be absorbed by CRT investors, has increased from $2 billion in 2013 to $18 billion in 2016.  All total from 2013 through the end of 2016, the Enterprises have transferred a meaningful portion of credit losses on a combined $1.4 trillion in mortgages, with a risk in force of about $49 billion. 

As we work to enhance and oversee the Enterprises’ CRT programs, FHFA applies a number of principles.   First and foremost, CRT transactions need to reduce taxpayer risk by transferring a meaningful amount of credit risk to the private sector.  Here, we are working to develop additional metrics to quantify and describe the amount of risk being transferred. 

Second, credit risk transfer transactions have to make economic sense.  We take our statutory obligations to operate the Enterprises in a safe and sound manner seriously.  So, consequently, the cost of these transactions should not exceed their CRT benefits.  Like any kind of insurance, the Enterprises must either pay a premium or forgo a portion of their guarantee fee income to secure the participation of CRT investors, and these payments must make economic sense.  There is no free lunch in securing this investor participation, and we expect the Enterprises to closely monitor both sides of this cost-benefit equation.  Pursuing non-economic deals could reduce the value of existing transactions.  Engaging in non-economic transactions could cause current investors to potentially back away from further CRT transactions and reduce the liquidity of the CRT market.

One takeaway from this monitoring is about the cost of transferring expected credit losses to investors.  This is specifically about the credit losses that the Enterprises expect to face from borrowers defaulting in normal market conditions.  We sometimes talk about this as transferring first dollar losses or first losses.

Prior to this year, the Enterprises experimented with selling the first 100 basis points of credit losses to investors.  As a result of feedback we have received from market participants and from credit risk transfer transactions to date, we have learned that selling the first 50 basis points of this expected credit losses is expensive.  Investors, like the Enterprises, know that there will be some degree of expected credit losses for any portfolio of mortgages no matter the economic conditions.  As a result, investors charge more for providing credit risk protection for expected credit losses. 

Based on this information, FHFA and the Enterprises have determined that it is better if Fannie Mae and Freddie Mac retain the first 50 basis points of expected losses in most transactions.  This means that the Enterprises have begun selling credit losses between 50 to 100 basis points.  Early indicators have not only reflected better pricing, but greater competition for credit losses beginning at 50 basis points, rather than zero basis points.  In the terminology used in the industry, this is using an attachment point of 50 basis points, rather than an attachment point of zero.  The detachment point for CRT transactions, or the point at which investors stop bearing credit losses, is generally 3.75 or 4 percent of the unpaid principal balance of the mortgages included in the transaction.

As in other parts of the Enterprises’ business, we also expect the Enterprises to effectively manage their counterparty risks of credit risk transfer transactions.  This is also another important part of ensuring that their CRT programs are based on sound economics.  Consequently, for those transactions that are not fully collateralized, the Enterprises must work to appropriately mitigate the risk of a counterparty not being able to fulfill its credit risk sharing obligations in the event of a market downturn.      

Our third principle is that the Enterprises’ credit risk transfer programs must cultivate a more stable, robust, and mature CRT market.  While there have been a lot of positive developments, we also view the credit risk transfer market as still in development and not yet fully mature.  With this in mind, we expect the Enterprises to develop a portfolio of different CRT transaction structures that can attract a broad and diverse investor base, can be brought to scale, and can remain stable through different housing and economic cycles.  The Enterprises will, therefore, continue to refine and improve their existing transaction types and support pilots for new structures that can be brought to scale.  After issuing a request for input about front-end credit risk transfers transactions, the Enterprises launched pilots with mortgage insurer affiliates in 2016 and these front-end pilots are continuing into 2017.

Earlier this month, Fannie Mae and Freddie Mac also announced that they are exploring changes to their STACR/CAS transaction structure to expand the investor base for this product.  The Enterprises are gaining market feedback about these potential changes and will be working toward a decision of whether to move forward with these transaction changes over the next several months. 

In addition, the Enterprises are exploring ways to do credit risk transfers on non-targeted loan categories, such as 15-year term loans and adjustable rate mortgages.  Pursuing different transactions is exactly what we want the Enterprises to do to continue developing the credit risk transfer market.  We want them to do responsible innovation. 

A final principle to emphasize is that we also expect the Enterprises to provide a transparent and level playing field for their credit risk transfer programs.  Just as we’ve done on the guarantee fee pricing side, the Enterprises’ credit risk transfer transactions cannot provide volume based guarantee fee concessions that benefit larger entities over smaller ones. 

Work Is Needed to Support Responsible Access to Credit 

I also want to say a few words about FHFA’s priority of supporting sustainable homeownership and improving access to credit.  FHFA has undertaken a number of initiatives with Fannie Mae and Freddie Mac to try and break through difficulties in supporting responsible access to credit for borrowers.  We worked with Fannie Mae and Freddie Mac on a multiyear initiative to provide certainty to lenders by revising the Representation and Warranty Framework.  This was an extensive process to improve certainty, which lenders needed to eliminate overlays and lend within the Enterprises full credit box.

While we have seen some progress in improving access to credit and reducing lender overlays, I think it’s safe to say that we’re not yet where we want to be.

This year, as part of our annual scorecard, we have required the Enterprises to take a broader assessment of barriers to access to credit and to think more holistically about how to develop pilots and initiatives that help address these challenges.  While we understand that there are a number of headwinds keeping some potential homeowners on the sidelines, we continue to work diligently to find areas where we can have a positive impact.

FHFA continues to move forward on the related effort of implementing the Enterprises’ duty to serve three underserved markets – manufactured housing, affordable housing preservation, and rural housing.  We published our final rule in December of last year, and the Enterprises just posted their initial Duty to Serve plans last week.  Receiving public input on these draft plans is an essential part of our process, and we will receive input until July 10.  I encourage all stakeholders to submit your views to FHFA for our consideration.  After reviewing public input and FHFA’s feedback, the Enterprises will update their plans and the plans will go into effect on January 1, 2018.

Fannie Mae and Freddie Mac also continue to focus on how to responsibly meet their housing goals, and FHFA is in the process of developing our proposed rule for the Enterprises’ housing goals from 2018-2020.  We also look forward to receiving public comment on this important aspect of the Enterprises’ work to support affordable and sustainable homeownership for low-income families.

As lenders, you are partners with the Enterprises to provide access to credit for prospective, creditworthy homeowners across all geographic areas and all demographics.  I encourage you to innovate and work aggressively to find new ways to develop responsible solutions that help households achieve homeownership.  While I have focused my remarks on the Enterprises, I should note that the Federal Home Loan Banks also offer solutions that support liquidity in the housing finance market, including programs that support access to credit and affordable rental housing.

Conclusion

Appropriately, virtually everything I have said thus far today has been about what we have done, and continue to do, to reform the Enterprises while they are under FHFA’s control in conservatorship.  This is what I often refer to as our work focused on the “here and now.”  As the summary I have provided confirms, the reforms we have made lay a good foundation.  But, as I said at the outset, we view these reforms as GSE reform, not housing finance reform.  Housing finance reform is the responsibility of Congress and it goes far beyond what we can, or should, do in conservatorship.  Consequently, last week I encouraged the Senate Banking Committee to move forward expeditiously on housing finance reform and suggested questions that they will have to answer to do so. 

  • How much backing, if any, should the federal government provide and in what form?
  • What process should be followed to transition to the new housing finance system and avoid disruption to the housing finance market, and who should lead or implement that process?
  • What roles, if any, should the Enterprises play in the reformed housing finance system and what statutory changes to their organizational structures, purposes, ownership and operations will be needed to ensure that they play their assigned roles effectively?
  • What regulatory and supervisory structure and authorities will be needed in a reformed system and who will have responsibility to exercise those authorities?

These are questions that only Congress can answer.  We should all encourage them to answer these questions soon.

I want to thank you again for having me here with you this morning. 
 
Contacts: 
Media: Stefanie Johnson (202) 649-3030 / Corinne Russell (202) 649-3032
Consumers: Consumer Communications or (202) 649-3811

Source: FHFA

FHFA: Foreclosure Prevention Report – February 2017

Posted on by Safeguard

Investor Update
May 11, 2017

February 2017 Highlights

The Enterprises’ Foreclosure Prevention Actions:

  • The Enterprises completed 14,549 foreclosure prevention actions in February, bringing the total to 3,862,467 since the start of the conservatorships in September 2008.  Over half of these actions have been permanent loan modifications.
  • There were 9,076 permanent loan modifications in February, bringing the total to 2,040,802 since the conservatorships began in September 2008.
  • The share of modifications with principal forbearance accounted for 19 percent of all permanent modifications in February. Modifications with extend-term only remained at 44 percent during the month due to continuing improvement in house prices.
  • There were 1,494 short sales and deeds-in-lieu completed in February, down 7 percent compared with January.

The Enterprises’ Mortgage Performance:

  • The serious delinquency rate fell slightly from 1.12 percent at the end of January to 1.11 percent at the end of February.

The Enterprises’ Foreclosures:

  • Third-party and foreclosure sales decreased 12 percent from 6,705 in January to 5,909 in February.
  • Foreclosure starts increased 11 percent from 16,604 in January to 18,447 in February.

Attachments: 

Foreclosure Prevention Report – February 2017

Source: FHFA

FHFA: Refinance Volume Continued to Slow in First Quarter

Posted on by Safeguard

Investor Update
May 16, 2017

Washington, D.C. – The Federal Housing Finance Agency (FHFA) today reported that just over 510,000 refinances were completed in the first quarter of 2017, compared to more than 750,767 in the fourth quarter of 2016.   FHFA’s first quarter Refinance Report also shows that 3 percent or 13,425 of the mortgages refinanced from January through March were through the Home Affordable Refinance Program (HARP).  Total HARP refinances now stand at 3,461,096 since inception of the program in 2009.

According to new data released today, 137,594 borrowers could still benefit financially from a HARP refinance as of the fourth quarter of 2016.  See the new, updated U.S. map showing the number of HARP-eligible borrowers by state, Metropolitan Statistical Area, county and zip code.  These borrowers meet the basic HARP eligibility requirements, have a remaining balance of $50,000 or more on their mortgage, have a remaining term on their loan of greater than 10 years, and their mortgage interest rate is at least 1.5 percent higher than current market rates.  These borrowers could save, on average, $2,400 per year by refinancing their mortgage through HARP.

Also in the Refinance Report:

  • Total refinance volume fell in March as mortgage rates remained above the levels observed in 2016.
  • Borrowers who refinanced through HARP had a lower delinquency rate compared to borrowers eligible for HARP who did not refinance through the program.
  • Ten states accounted for over 60 percent of the nation’s HARP eligible loans with a refinance incentive as of December 31, 2016.

Link to Refinance Report

Link to HARP.gov
 
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.8 trillion in funding for the U.S. mortgage markets and financial institutions. Additional information is available at www.FHFA.gov, on Twitter @FHFA, YouTube and LinkedIn. 

Contacts: 
Media: Corinne Russell (202) 649-3032 / Stefanie Johnson (202) 649-3030

Consumers: Consumer Communications or (202) 649-3811

Source: FHFA

Fannie Mae: Standard Modification Interest Rate Exhibit

Posted on by Safeguard

Investor Update
May 5, 2017

The Fannie Mae Standard Modification Interest Rate is subject to periodic adjustments based on an evaluation of prevailing market rates. The servicer must use the current Fannie Mae Standard Modification Interest Rate indicated below when evaluating a borrower for a conventional mortgage loan modification, excluding Fannie Mae HAMP Modifications.

NOTE: As a reminder, the interest rate used to determine the final modification terms must be the same fixed interest rate that was used when determining eligibility for the Trial Period Plan and calculating the Trial Period Plan payment.

Source: Fannie Mae (full exhibit)

Fannie Mae: Simplifying Servicing and More

Posted on by Safeguard

Investor Update
May 3, 2017

Did you hear? We’re Simplifying Servicing!

Fannie Mae is Simplifying Servicing™ across the servicing lifecycle. Whether it’s technology, policy, or operations, we’re working to simplify the process for our customers and driving toward a clear vision for the future. Learn more about the many ways we’re Simplifying Servicing™ for our customers.

Join us for an investor reporting webinar in May

Now that we’ve made the transition to the new investor reporting environment, we’ll host forums on May 9 and May 16 for servicers to share reporting best practices and ask questions about the process. To stay on track with reporting compliance, servicers can review the Navigation Tips checklist. Visit the Fannie Mae Changes to Investor Reporting page to register for a webinar today.  

AAA Matrix updates

The Hawaii AAA matrix has been updated with a revised effective date for the most recent foreclosure allowable increases to reflect all active files as of April 12, 2017. To view the updated matrix, visit the Excess Attorney Fee/Cost Guidelines page.  

Learn more. Do more.

Check out our redesigned training pages. Now it’s even easier for you to select the training you need any time, from any location, to make your business more simple and certain. Select the mortgage process you’re interested in to easily find eLearning and job aids developed by our experts.

eLearning requires less time than traditional learning methods, increases retention rates, and gives you a competitive edge. View the infographic to learn more.

Join us at these upcoming events:

May 2-5 | MHI National Congress & Expo | Las Vegas, NV
May 9-11 | Great River MBA | Memphis, TN
May 15-16 | Ohio MBA Annual Convention | Columbus OH 

View more events.

You may also be interested in…

Changing zoning laws target affordability, with debt financing following
Inclusionary zoning laws vary widely across the nation, though they share the same goal of providing more affordable housing. Read more

Receive regular content updates by registering at The Home Story.

Recent Tweets

Did you miss #MBASecondary17? We demonstrated how we’re helping create a better borrower experience. The highlights:
https://t.co/fGZT1vgPYE

May 3
 
Our Bon Salle just mentioned our new solutions for borrowers with #studentdebt. More info here #MBASecondary17:
http://bit.ly/2p1AKK5

May 2
 
Source: Fannie Mae

Fannie Mae: Free Servicer Learning Series and Loss Mitigation Training

Posted on by Safeguard

Investor Update
May 17, 2017

Knowledge is power: Sign up for a Servicer Learning Series webinar

Please join us for a new webinar in the Servicer Learning Series, hosted by the Servicer Support Center. We’ll discuss recent Servicing Guide announcements, Flex Modification program highlights, SMDU™ user interface features, and how to use Fannie Mae Connect™ to advance Simplifying Servicing™ efforts. This webinar, scheduled for May 22 and June 7, is recommended for general servicing, collections, foreclosure, default prevention, investor reporting, audit, and compliance personnel. Register here to take advantage of this opportunity.

Looking for free loss mitigation training? Attend a live webinar

Did you know that Fannie Mae provides participating servicers with free loss mitigation training? Our Know Your Options™ Customer CARE (Connect, Assess, Resolve, and Execute) team will present two live webinars in June. Sign up to learn how to leverage your own servicer model to develop rapport and establish consultative customer relationships, communicate more effectively with borrowers about their options to avoid foreclosure, increase your workout percentage, and more. Learn more and register today.  

Duty to Serve Plan posted for comment

Fannie Mae’s proposed Underserved Markets Plan, required by the Federal Housing Finance Agency’s Duty to Serve rule, is available for public comment. The draft Plan addresses the needs of America’s most challenging housing markets and focuses on three key underserved areas: manufactured housing, affordable housing preservation, and rural housing. To learn more, visit our Duty to Serve page. FHFA is accepting public comments on our proposed Plan through July 10.  

Hawaii AAA Matrix clarification

A clarification to effective dates for a prior foreclosure allowable increase has been made to the Hawaii AAA Matrix. To view the updated matrix, visit the Excess Attorney Fee/Cost Guidelines page.  

Join us in San Antonio!

Stop by booth #67 at the Texas MBA’s 101st annual convention, May 21-23, to learn how Day 1 Certainty™ and Simplifying Servicing can help you improve your borrowers’ experience and reduce costs. Network with real estate finance industry leaders and top performers, and learn about the changes that are redefining the future of the mortgage industry.  

Join us at these upcoming events:

  • May 17-19 | NC Bankers American Mortgage Conference | Raleigh
  • May 21-23 | Texas MBA Annual Convention | San Antonio
  • June 6 | MBA’s Document Custody Workshop | McLean, VA

View all events.

You may also be interested in…

Andrew Bon Salle recaps thoughts shared earlier this month at MBA Secondary
Fannie Mae’s Single-Family Business chief shared some key updates at MBA’s National Secondary Market Conference & Expo. But mostly he was listening. Read more

Receive regular content updates by registering at The Home Story.

Recent Tweets

NEW: See the progress we’re making.
http://bit.ly/2pUwbCC

May 17
 
Incoming economic data suggests economy will rebound this quarter. Our newest Outlook:
http://bit.ly/2roum1i

May 16

Source: Fannie Mae

Fannie Mae: Flex Modification Training and More

Posted on by Safeguard

Investor Update
May 31, 2017

Questions about Flex Modification? Check out our new tutorial

Our new on-demand eLearning course, Fannie Mae Flex Modification, is now available. The course covers Flex Modification eligibility, terms, trial period plan, and how to complete a modification. It also describes the servicer’s responsibilities in implementing Flex Mod and retiring Standard and Streamlined Modifications, as well as impacts to the Disaster modifications. Visit the Single-Family Training page to access this course and other resources at your convenience. 

Duty to Serve webinars now available

Learn more about Fannie Mae’s proposed Underserved Markets Plan, developed in support of the Federal Housing Finance Agency’s Duty to Serve rule. Our housing experts will review the actions we’re proposing to help the manufactured housing, affordable housing preservation, and rural housing markets identified by Duty to Serve. We welcome your questions and will share how to submit formal comments on our plan. Sessions are available Tuesday, June 6, 10-11 a.m. ET or Thursday, June 8, 3-4 p.m. ET. Click on the links to attend the session or to add it to your calendar. No advance registration is required. Space is limited. To learn more about Duty to Serve, visit our Duty to Serve page.  

Knowledge is power: Sign up for a Servicer Learning Series webinar

Please join us for a new webinar in the Servicer Learning Series, hosted by the Servicer Support Center. We’ll discuss recent Servicing Guide announcements, Flex Modification program highlights, SMDU™ user interface features, and how to use Fannie Mae Connect™ to advance Simplifying Servicing™ efforts. This webinar, scheduled for June 7, is recommended for general servicing, collections, foreclosure, default prevention, investor reporting, audit, and compliance personnel. Register here to take advantage of this opportunity.

Looking for free loss mitigation training? Attend a live webinar

Did you know that Fannie Mae provides participating servicers with free loss mitigation training? Our Know Your Options™ Customer CARE (Connect, Assess, Resolve, and Execute) team will present two live webinars in June. Sign up to learn how to leverage your own servicer model to develop rapport and establish consultative customer relationships, communicate more effectively with borrowers about their options to avoid foreclosure, increase your workout percentage, and more. Learn more and register today.   

Washington AAA Matrix clarification

The Washington AAA matrix has been updated with a revised allowable fee for Judicial E-Note foreclosure effective for all files active and referred as of May 31, 2017, and after that date. To view the updated matrix, visit the Excess Attorney Fee/Cost Guidelines page.  
 

Join us at these upcoming events:

  • June 6 | MBA’s Document Custody Workshop | McLean, VA
  • June 6-7 | MBA of Alabama 33rd Annual Convention | Birmingham
  • June 13-16 | NAFCU 50th Annual Conference and Solutions Expo | Honolulu, HI

View all events.

You may also be interested in…

The cost of home is big but not easy for residents of New Orleans
Exhibit chronicles the housing struggle faced by residents of New Orleans — which has the second least affordable housing market in the country. Read more

Helping homeowners refinance and pay down student debt
Homeowners who have student debt or have cosigned for it can refinance their mortgages at a lower rate than what’s typically available. Read more

Receive regular content updates by registering at The Home Story.

Recent Tweets

When asked about tech innovation in mortgage industry, 40% of lenders said pace is too slow. What do you think?
http://bit.ly/2sjNfD1

May 30
 
We’re committed to helping homeowners avoid foreclosure.
http://bit.ly/2qj3ovK

May 26
 
Source: Fannie Mae

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to Chief Operating Officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur Of The Year® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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COO

Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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Business Development

Carrie Tackett

Business Development Safeguard Properties