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Fannie Mae AMN/HSSN 20.2 Release Notes

Posted on September 13, 2018 by Safeguard

On April 1, Fannie Mae released notes describing updates to the Asset Management Network (AMN)/HomeSaver Solutions Network (HSSN) application, which is scheduled to be released for the weekend of of April 18.

AMN/HSSN 20.2 Release Notes

During the weekend of April 18, 2015, Fannie Mae will implement Asset Management Network (AMN)/HomeSaver Solutions® Network (HSSN) Release 20.2, which includes the changes described below.

Summary:

Description

AMN/TRAX: REOGram Changes
AMN/TRAX: REOGram Changes: Mandatory Attorney Field for Manual REOGram® Processing
AMN/HSSN: New Trial Payment Parameter to Ensure Data Quality
AMN/HSSN: Address FHA Liquidation Cases
AMN/HSSN: Addition of Adverse Action Verbiage to Modification Declination Letter
AMN/HSSN: Address Promissory Notes and Cash Contributions Restriction Needs
AMN/HSSN: New Edit to Prevent Changes to Interest Rates on Loan Modifications
AMN/HSSN: Prevent Submission of Any Workout if a Closed or Completed Liquidation Workout Already Exists
AMN/HSSN: Delinquency Reporting – Description Name Change for Status Codes 15 and 17

Please click here to view the AMN/HSSN 20.2 Release Notes [pdf] in their entirety.

About Safeguard
Safeguard Properties is the mortgage field services industry leader, preserving vacant and foreclosed properties across the U.S., Puerto Rico, Virgin Islands and Guam. Founded in 1990 by Robert Klein and headquartered in Cleveland, Ohio, Safeguard provides the highest quality service to our clients by leveraging innovative technologies and proactively developing industry best practices and quality control procedures. Consistent with Safeguard’s values and mission, we are an active supporter of hundreds of charitable efforts across the country. Annually, Safeguard gives back to communities in partnership with our employees, vendors and clients. We also are dedicated to working with community leaders and officials to eliminate blight and stabilize neighborhoods. Safeguard is dedicated to preserving today and protecting tomorrow. Website: www.safeguardproperties.com.

Fannie Mae: A Soft Start to 2015, but Acceleration Expected

Posted on September 13, 2018September 13, 2018 by Safeguard

On March 23, Fannie Mae issued a news release titled A Soft Start to 2015, but Acceleration Expected.

A Soft Start to 2015, but Acceleration Expected

Modest Housing Expansion Expected in 2015, Despite Weak Outset

WASHINGTON, DC – Economic growth took a hit in the first quarter of 2015 due to temporary factors, including the West Coast port strike and tough winter weather in parts of the country. Nevertheless, much of the economic activity expected at the beginning of the year should shift into the second quarter with growth strengthening in coming quarters, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group. Upbeat labor market conditions and positive consumer and business fundamentals should push growth to 2.8 percent this year, while slowing global growth abroad, geopolitical events, and increased financial volatility domestically due to speculation around the target fed funds rate loom as downside risks to growth.

“We continue to expect the economy to drag housing upward as we move into the second quarter. The economy is getting a boost from the strong employment numbers we’ve seen last year and at the start of 2015. When this employment growth partners with income growth and consumers experience a rise in their personal household income, we should see a similar boost in the housing sector,” said Fannie Mae Chief Economist Doug Duncan. “Overall, we expect an improving 2015 with continued economic growth bringing housing above 2014 levels.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full March 2015 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.

Please click here to view the news release online.

Department of the Treasury Prepared Remarks of Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman

Posted on September 13, 2018September 13, 2018 by Safeguard

On March 2, the U.S. Department of the Treasury released the prepared remarks of Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman before the National Council of State Housing Agencies Legislative Conference.

Remarks of Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman before the National Council of State Housing Agencies Legislative Conference

As prepared for delivery

I last joined you nearly 2 years ago to this day, and it is great to be back at the NCSHA’s winter legislative conference to update you on a few issues that we both care about deeply. While I have worked with housing finance agencies (HFAs) on a wide range of affordable housing issues over several decades in good times and bad, Treasury’s intensive, hands-on experience with HFAs was forged after the financial crisis.

As I said in 2013, “just as the need to overcome a severe challenge may bring out the best in individuals — testing their tenacity, resourcefulness, and resilience – so, too, can such circumstances bring out the best in institutions. We have witnessed and learned from your actions up-close in implementing our crisis-driven programs, and we have come away knowing two things for certain: HFAs are vital elements of our nation’s housing finance and development infrastructure that must be preserved; and the American people are better off thanks to your work, dedication, and resilience.” And that’s why we will continue to count you among our most valued partners and seek opportunities where we can to work together to achieve mutual goals.

In the few minutes I will be with you this afternoon, I would like to bring you up to date on issues that are critical to your mission including helping distressed borrowers and communities, financing affordable rental housing, driving capital to underserved markets and communities, and expanding access to sustainable homeownership for low-and moderate-income, first-time homebuyers.

Housing Finance Reform

But first, I know that many of you want to know where we are on housing finance reform. On this subject, let me be clear: the Administration stands by our belief that the only way to responsibly end the conservatorship of Fannie Mae and Freddie Mac is through legislation that puts in place a sustainable housing finance system that has private capital at risk ahead of taxpayers, while preserving access to mortgage credit during severe downturns.

The Administration remains ready, willing, and able to work in good faith with members of both parties to complete this important but unfinished piece of financial reform. As memories of the financial crisis fade, we cannot become complacent. The best time to act is when the housing market is well along the path to recovery and credit markets are normalizing, not on the precipice of a new economic shock when there is little time to be thoughtful.

Hardest Hit Fund

It is surprising how quickly memories fade, but no one knows how dire the situation was better than you. At the height of the financial crisis, when the Administration was working hard to address the enormous housing crisis facing American families, we turned to you – the experts in what was going on in your states – and created a program that allowed you to tailor your own innovative approaches to prevent foreclosures and stabilize your communities. To date, the Hardest Hit Fund has provided more than $3.8 billion for 70 individual programs, which have helped 227,000 homeowners in some of our nation’s hardest hit communities begin to recover from a brutal recession.

Four and a half years into the program, we are still witnessing innovation, as HFAs adjust their local efforts to respond to the changing housing landscape and needs. For example, fourteen HFAs offer programs that help homeowners achieve long-term sustainability and/or reduce negative equity by providing principal reduction assistance in conjunction with a loan modification, re-amortization, or refinance.

Six HFAs have allocated $372 million to approved blight elimination programs that will help stabilize neighborhoods and prevent avoidable foreclosures. Five years ago, we probably would not have thought about blight elimination when looking for ways to prevent avoidable foreclosures, but for certain communities, that is exactly the type of program needed to help bring back a neighborhood that has been abandoned by many homeowners leaving their neighbors at risk.

It is this kind of flexibility to implement and adapt programs in response to changing economic and housing market conditions and homeowner needs that sets the Hardest Hit Fund apart. But for all the help the program has provided to communities and individual homeowners, I don’t think the Hardest Hit Fund and the HFAs get the credit they deserve.

Treasury is proud of this program, and we know that we need to continue to work with our partners to help you get as much value from the program as possible. We value our partnership with HFAs and look forward to continuing to work together to help our communities become stronger, safer, and more stable.

FFB-FHA Risk Sharing Partnership

I would like to now turn my attention to a recent example how Treasury and the Administration continue to search for creative ways to support the mission of housing finance agencies.

As you know, since 1992, the FHA Risk Sharing program has insured approximately $6 billion of mortgages while maintaining a negative credit subsidy and a lower loss rate than other FHA multifamily insurance programs. The program works by allowing FHA to delegate mortgage underwriting and processing to lenders that take 10-50 percent of the credit loss risk. Lenders that take a 50 percent risk share may use their own underwriting standards rather than FHA’s. To date, state and local HFAs have been the primary lenders, but FHA has authority to partner with other lenders as well.

HFAs have traditionally used Risk Sharing in conjunction with tax-exempt bond financing. Since the financial crisis, however, rates on tax-exempt multifamily bonds have exceeded taxable bond rates. In addition, by statute, Ginnie Mae may not securitize Risk Sharing mortgages as it does other FHA-insured multifamily mortgages. The Administration has continued to propose removing this restriction, but Congress has not acted.

In the absence of congressional action, Secretary Lew announced a brand new partnership with HUD and FHA last June to support the construction and preservation of affordable multifamily rental housing. Under the new partnership, the Federal Financing Bank is providing financing for loans insured under FHA’s multifamily risk-sharing program, significantly reducing the interest rate for affordable multifamily apartment buildings compared to the cost of tax-exempt bonds under current market conditions.

A pilot transaction under this program in Far Rockaway, Queens, sponsored by the New York City Housing Development Corporation closed last October, providing permanent take-out financing for a 1,100-unit apartment complex at an interest rate 87 basis points lower than the rate on a comparable transaction completed the prior month. Based upon the success of the initial pilot, the program is being made available to other approved FHA risk-sharing partners. I am proud to report that we already have a pipeline of acquisition deals in excess of $1.5 billion for fiscal year 2015 from 10 housing finance agencies to finance over 150 projects.

And we are focused on refining the program structure to accommodate demand and improve our ability to serve your needs. We understand that lenders and borrowers need greater certainty around borrowing rates. That is why we are working to provide for a 60-day forward rate lock in order to be more consistent with Ginnie Mae executions. We intend to roll out the next generation of documents to all of the HFAs in the pipeline who have deals that can close in the near future.

Low Income Housing Tax Credits (LIHTC)

Like so many other affordable rental production and preservation programs, this Treasury-HUD financing partnership is built on the strong foundation of Treasury’s Low Income Housing Tax Credit (LIHTC). As you know, I have affirmed the Obama Administration’s strong support for the Low Income Housing Tax Credit every time I meet with affordable housing advocates and the HFA community. We know and appreciate that LIHTC is the very foundation of the affordable rental housing delivery system in this country, and that it has helped produce and preserve nearly 2.5 million affordable rental units in the US since its inception.

Over the past few years, the Administration has proposed several legislative changes to increase LIHTC’s scope and flexibility as part of the budget process, and we look to the Congress once again this year to do the right thing and approve the proposed refinements in LIHTC that would improve its effectiveness.

These refinements include giving states the flexibility to expand their LIHTC volume by nearly 50 percent by converting a portion of their tax-exempt Private Activity Bond authority into additional allocable tax credit authority.

The President’s FY 2016 Budget proposals would also allow larger credits to generate more investment by adjusting the formula for calculating the credits, encourage more mixed income housing as long as the average resident income does not exceed 60 percent of the area median and rents are restricted accordingly, and allow HUD to designate more Qualified Census Tracts that will earn an additional 30 percent LIHTC allocation. The LIHTC is the most efficient tool available to HFAs to provide affordable rental housing to low- and moderate-income families. We believe that the FY 2016 Budget proposals will greatly enhance its effectiveness.

Because the Low Income Housing Tax Credit has important social benefits, the LIHTC proposals are contained in the Administration’s Reserve for Revenue-Neutral Business Tax Reform, indicating our belief that this critical tax credit should be recognized for the important role that it plays in attacking the chronic shortage of affordable rental housing.

New Markets Tax Credits and the Capital Magnet Fund

While LIHTC remains the foundation of the affordable housing delivery system, Treasury also supports the production and preservation of affordable rental housing through the New Markets Tax Credit, which the President’s budget would make permanent beginning in FY 2016, and through a lesser-known program called the Capital Magnet Fund.

Authorized by Congress in 2008 in the Housing and Economic Recovery Act, the Capital Magnet Fund was created to be another source of funding for Treasury’s Community Development Financial Institutions Fund to finance affordable housing and related economic development activities and community service facilities. It would do so through competitive grants to CDFIs and qualified nonprofit housing organizations. When its funding through an assessment on new GSE business was not forthcoming, in FY 2010 Congress funded the Capital Magnet Fund with a one-time $80 million appropriation.
This inaugural round of funding resulted in awards to 23 organizations in 34 states, the District of Columbia and Puerto Rico, resulting in, among other development activities, the creation of more than 8,000 affordable rental units and more than 900 owner-occupied homes and related economic development.

While the Capital Magnet Fund’s lone appropriation is now exhausted and few state and local housing finance agencies were involved in these initial awards, the reason I bring this to your attention is that in December 2014, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to begin setting aside and allocating funds to HUD’s Housing Trust Fund and Treasury’s Capital Magnet beginning January 2015. Resumption of funding is budgeted to generate more than $1.2 billion in additional affordable housing and community development resources over the next five years beginning in 2016, including more than $400 million for the Capital Magnet Fund.

Preventive Servicing

Now I would like to mention an area where housing finance agencies have been ahead of the pack and where we hope to see them continue to be leaders in the future.

The financial crisis revealed fundamental deficiencies in the way mortgages were serviced. The mortgage servicing industry was ill-equipped to help the number of homeowners in need of assistance and in many instances, slow to evolve their practices. As a result, families, communities, investors, and ultimately taxpayers paid the price in the form of unnecessary delays and too many foreclosures relative to other loss mitigation activities that would have produced better outcomes.

My own affordable homeownership research at the University of North Carolina prior to joining Treasury documented the importance of servicing to borrower outcomes. In one published study, my colleagues and I found that after controlling for loan and borrower characteristics and regional economic conditions, the odds that a late-paying borrower would manage to catch up on payments instead of sinking further into serious delinquency and foreclosure can vary as much as 60 percent between servicers. This suggests that servicing strategies do matter.

Nobody knows this better than you do. Since the financial crisis, HFAs have been taking an increasingly proactive role in servicing their loan portfolios, and we believe that HFAs can play a more substantial role in both servicing and lending going forward. HFAs are in a prime position to serve creditworthy borrowers currently shut out the market in part by lender overlays due to concerns around repurchase risk and default servicing. This is precisely because HFAs have developed the capabilities to manage the risks associated with difficult-to-serve borrowers. The HFA business model has been tried and tested, which is why they are a key part of mortgage lending.

It has been shown that HFAs achieve superior outcomes from both a loan performance and loss mitigation standpoint. Many HFAs require borrower counseling for first-time homebuyers and borrowers with FICO scores below a certain level, preparing higher risk borrowers for the financial challenge of homeownership. Studies conducted by the credit rating agencies and the manufactured housing industry have found that HFAs who service their own single-family loan portfolios provide better service and experience superior performance relative to third-party servicers.

Servicing their own loans has allowed HFAs to establish relationships with borrowers, communicate with troubled borrowers earlier in the process, and exercise every available loss mitigation option to keep families in their homes before resorting to foreclosure, leading to better outcomes. Private lenders may not pay enough individualized attention to nonperforming loans to resolve them quickly and are also not set up to utilize both federal and state programs that offer homeowner assistance.

While the start-up costs associated with self-servicing are high, we believe the benefits to both HFAs and borrowers – both existing and potential – can be substantial. Servicing can generate a substantial stream of revenue, permit more flexibility in loan underwriting, and result in better portfolio performance, potentially outweighing the additional cost. And by developing superior abilities to manage the risks associated with difficult-to-serve borrowers, HFAs will be valued partners in the Administration’s effort to ensure broad access to credit for all qualified borrowers.

We are counting on all of you to be strong partners as we work to make the housing finance system fairer and more sustainable, and I look forward to engaging with you in the future.

Thank you.

Please click here to view the prepared remarks online.

Department of the Treasury Prepared Remarks of Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman

Posted on September 13, 2018September 13, 2018 by Safeguard

On March 5, the U.S. Department of the Treasury released the prepared remarks of Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman before the Goldman Sachs Third Annual Housing Finance Conference.

Remarks by Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman Before the Goldman Sachs Third Annual Housing Finance Conference

As prepared for delivery

Good morning, and thank you, Carsten, for that kind introduction. It’s a pleasure to be with you today to engage on a very important issue for our country and our economy.

This morning, I want to discuss the state of housing finance reform and the path we see to a more sustainable mortgage finance system that meets President Obama’s principles and creates a housing finance system that will promote stability in the housing market and the broader economy, and therefore, benefits the American people. First, I’d like to briefly explain why Treasury is devoting significant resources to helping market participants create a robust and responsible non-government-guaranteed securitization market and then discuss our thinking about how to move forward on GSE reform.

Private Label Securities Initiative

The Administration believes that private capital should be at the center of the housing finance system. To that end, Treasury has been working with the industry to develop the structural reforms necessary to help bring the private label securities, or PLS, market back, and get investors off the sidelines. A key component of this effort is rebuilding trust among market participants, and to this end, Treasury published the results of an exercise last month that would provide greater transparency around credit rating agency loss expectations for newly originated mortgage collateral. The goal of this exercise and the broader PLS initiative is to improve confidence in post-crisis practices and encourage investors to return to a reformed PLS market.

Treasury views a diverse housing finance system that features multiple execution channels as essential to promoting competition, market efficiency, and consumer choice. We see the development of a healthy and responsible PLS market as an important component of a sustainable housing finance system and a complement to a reformed government-supported channel, an objective I will discuss in the remainder of my speech.

GSE Reform

With that in mind, let me turn my attention to the GSEs. We are now well into the seventh year of Fannie Mae and Freddie Mac’s conservatorship. We cannot forget that the actions taken in the wake of the financial crisis to backstop the GSEs stabilized the housing market, protected the capital markets, and supported the broader economy. But as I have said many times, the status quo is unsustainable. Taxpayers remain at risk, market participants are uncertain about the government’s longer-term footprint in the mortgage market, and mortgage access and pricing decisions are not in the hands of market participants. The American people deserve better.

They deserve an efficient, sustainable, housing finance system that serves borrowers effectively and efficiently without leaving taxpayers on the hook for potential future bailouts. The critical flaws in the legacy system that allowed private shareholders and senior employees of the GSEs to reap substantial profits while leaving taxpayers to shoulder enormous losses cannot be fixed by a regulator or conservator because they are intrinsic to the GSEs’ congressional charters. And these charters can only be changed by law. That is why we continue to believe that comprehensive housing finance reform is the only effective way forward, not narrowly crafted ad-hoc fixes.

We cannot forget about the important progress made in the Senate during the last Congress and hope that the new Congress will afford the opportunity to again advance bipartisan legislation meeting our principles, even if it is too soon to tell what the ultimate prospects will be. The Administration remains ready, willing, and able to work in good faith with members of both parties to complete this important but unfinished piece of financial reform. As memories of the financial crisis fade, we cannot become complacent. The best time to act is when the housing market is well along the path to recovery and credit markets are normalizing, not on the precipice of a new economic shock when there is little time to be thoughtful.

We do recognize the myriad of challenges to achieving a bipartisan legislative consensus. But as I will explain shortly, we believe that significant progress can be, and is being made, prior to legislation, to help move the housing finance system towards a more sustainable future. While this progress is not a substitute for legislative reform, it can, over time, reduce the challenges to achieving a desired legislative outcome that puts in place a durable and fair housing finance system by advancing us down the path of transition.

Progress under Conservatorship

To that end, I’d like to highlight the steps forward that have been made under the conservatorship – progress that needs to be built upon. Important gains have been and continue to be made in de-risking and preparing the Enterprises for transition. The GSEs’ critical housing finance infrastructure and technology – which was allowed to obsolesce in the years preceding the financial crisis – is being renewed and enhanced.

Furthermore, their business practices are being reformed. Between 1995 and 2008, management grew the GSEs’ retained investment portfolios, which are financed at government-subsidized borrowing costs, fourfold to a combined total of $1.6 trillion. Since entering conservatorship, those portfolios have been nearly halved, and they are required to shrink further to less than $500 billion in total by year-end 2018.

In addition to being a major source of GSE earnings, these portfolios remain a significant source of financial volatility and potential taxpayer risk. These portfolios, the pursuit of maximum earnings, and the drive to recapture market share through greater risk-taking left taxpayers holding the bag when the bets went wrong. In conservatorship, these practices have been replaced with a recommitment to more effective risk management, prudent underwriting, more appropriate pricing, and a greater emphasis on sustainable mortgage finance.

The Federal Housing Finance Agency (FHFA), as the independent regulator and conservator of the GSEs, is laying the groundwork for a future housing finance system based upon private capital taking the majority of credit risk in front of a government guarantee with greater taxpayer protections, broader access to credit for responsible borrowers, and improved transparency and efficiency. These measures include, among others, expanding and diversifying risk-taking among private actors, further focusing GSE businesses on meeting the mortgage finance needs of middle class households and those aspiring to join the middle class, and developing a securitization infrastructure that can serve as the backbone for the broader mortgage market over time. All of these initiatives are consistent with the long-term vision of providing secure homeownership opportunities for responsible middle-class families.

After the failure of both GSEs, FHFA’s ability to stand in the shoes of their respective boards and senior management as conservator in order to set appropriate, statutorily-guided priorities and ensure follow-through has been good for the Enterprises and good for the American people. Preserving FHFA’s role in the future housing finance system merits serious consideration.

Administrative Vision

With that history in mind, I want to expand upon our vision for reforms that would transition the GSEs further along a path toward a future housing finance system while they still benefit from Treasury’s capital support. In turn, the progress we make today could serve both as a framework for, and reduce certain challenges associated with, achieving bipartisan legislative reform. Within the context of a continuing backstop, further de-risking the Enterprises is common-sense, prudent policy. Other actions that improve market efficiency and liquidity and develop infrastructure that would promote competition are consistent with the Administration’s interest in a durable and fair housing finance system.

The first of these areas is in the shedding of GSE legacy risk, both in their retained portfolios and their guarantee book. Given the strengthened underwriting practices and high credit quality of their new guarantee book, this legacy risk represents the overwhelming majority of taxpayer risk exposure to the GSEs today. Despite asset sales and natural run-off, their retained portfolios remain substantial at over $400 billion each and still constitute a significant line of business. The size and complexity of the retained portfolios also necessitate active hedging, introducing considerable basis risk and earnings volatility and making the GSEs susceptible to potentially relying on a future draw of PSPA capital support.

In light of the strong demand for mortgage credit risk in the market today and the market success of Freddie Mac’s first nonperforming loan (NPL) sale in July of last year, it would be both feasible and beneficial to taxpayers to responsibly accelerate the reduction of the most illiquid assets in the GSE portfolios. In particular, Treasury sees value in cultivating programmatic NPL sales at both Enterprises with a focus on market transparency, improving borrower outcomes, and community stabilization.

Similarly, in light of the GSEs’ expertise in transferring credit risk on their new books of business and recognizing that the bulk of credit risk exposure on their guarantee books is tied to their pre-2009 legacy commitments, the potential for transferring credit risk on their legacy guarantee books also merits consideration despite the unique challenges it may entail.

Continuing with the theme of reducing taxpayer exposure to mortgage credit risk, the second area where we see room for progress is in transferring credit risk on new originations. As I said before, the Administration believes that a sustainable housing finance system must have private capital at its core, and in conservatorship, the GSEs have started down a path of transferring greater mortgage credit risk to private market participants.

As you are aware, beginning in 2013, the GSEs have cultivated their respective credit risk transfer programs. These programs and their effectiveness in transferring credit risk have grown substantially in under two years. The GSEs have also engaged in other innovative forms of risk transfers including reinsurance contracts and recourse agreements.

Although the GSEs are directionally on the right path, there is more to be done on this front. Despite issuing 16 credit risk transfer transactions since 2013 referencing $530 billion notional balance, this amounts to approximately 20 percent of the GSEs’ combined guarantees over this time period and roughly 12 percent of the GSEs’ combined books of business. And while recent transactions have made progress by selling first-loss exposure for the first time, these transactions still rely on a defined credit event and fixed severity schedule.

The closer the GSEs can come to transferring the majority of risk to private market participants, the better. Such credit risk transfer activities serve to field-test the role of government as a guarantor of catastrophic risk while private capital bears the risk of the majority of potential losses. We are also sensitive to existing constraints to rapidly expanding credit risk transfer activities today and are supportive of additional, measured efforts to foster this market sustainably over time.

This is why we support the conservator’s efforts to responsibly expand credit risk transfer efforts through continued structural innovation and counterparty strengthening in order to broaden and diversify the investor base and optimize pricing efficiency and stability. Credit risk transfer activities should not be concentrated in any one mechanism or entity.

Rather, they should seek to develop a variety of mechanisms and entities in order to improve pricing efficiency and transparency, provide the lowest cost to borrowers, and ultimately, inform the framework of the future housing finance system. We see great value in leveraging the unique investment needs and competencies of the broad spectrum of market participants in shaping a sustainable model for putting first loss mortgage credit risk in private hands.

Finally, under the direction of FHFA, the GSEs have embarked upon a cutting-edge project to develop a Common Securitization Platform (CSP) and a fungible To-Be-Announced, or TBA, contract. We are broadly supportive of these efforts, which in the immediate future will modernize the GSEs’ collective securitization infrastructure and improve the liquidity and efficiency of the market.

However, given the CSP’s joint ownership by the GSEs and scope narrowly focused on their businesses, the near-term CSP initiative would not succeed at separating the industry’s critical securitization infrastructure from the GSEs’ credit risk-taking activities. This separation is necessary to enhance the stability of the housing finance system. Nor will it use its full potential to reshape the broader housing finance landscape by facilitating standardization, transparency, and competition, and serving as a market gateway for both guaranteed and non-guaranteed securities.

This is why we would support opening up the CSP as early as it can be responsibly done to accommodate non-GSE users, which should be reflected not just in the Platform’s functionality but also in its governance structure. Greater transparency, more concrete timelines, broader engagement with private stakeholders, and ultimately, expanded governance of the CSP joint venture to include non-GSE stakeholders are all in the interests of moving towards a more sustainable future housing finance system.

The nation’s housing finance system is too critical to remain in a state of limbo without a clear, legislated vision for the future. However, the activities I outlined today are representative of the progress that can be made without legislation. By pursuing these and other activities that de-risk the Enterprises, we can put the housing finance system on a course aligned with the Administration’s priorities that would promote greater stability for the housing market and broader economy.

Capital

With the recent release of the GSEs’ 2014 fourth quarter earnings, there seems to be increased interest in the subject of GSE capital. But before we discuss this, it is worth taking a step back to review the purpose of the Senior Preferred Stock Purchase Agreements, commonly referred to as the PSPAs. The PSPAs were put in place as both companies were placed into conservatorship. These agreements were established to protect the solvency of the two companies and to allow them to continue to operate. This was necessary to protect financial stability and to ensure the continued flow of mortgage credit. The PSPAs gave market participants confidence in the GSEs’ debt and MBS obligations through which they fund the majority of the mortgage credit in this country. Without this capital support, it is clear that both GSEs would have been insolvent and that mortgage credit would have dried up as a result.

With this as a backdrop, I want to frame for this group how we think about capital at the GSEs while they are in conservatorship and continue to rely on the PSPAs to support their activities.

Currently, the GSEs operate with a minimal amount of capital at each Enterprise. These capital reserve amounts were established in order to provide protection against unexpected losses related to their retained investment portfolios. This capital amount will amortize to zero by 2018 when we would expect the GSEs to have wound down their legacy investment business. And, from Treasury’s standpoint, we would like to see these retained portfolios wound down even faster to further reduce risk.

Despite having only minimal retained capital levels at the GSEs, investors continue to have confidence in their securities due to the ongoing backstop the PSPAs provide each company. The substantial remaining capital support left under the PSPAs gives market participants the confidence to buy 30-year GSE securities on a day-in and day-out basis. This is despite the fact that the companies remain in conservatorship and have minimal capital levels.

However, as a result of the ongoing capital support through the PSPAs, taxpayers remain exposed to potential future losses at the GSEs. Let me remind you, both recapitalization of the GSEs and draws against the existing Treasury backstop due to potential future losses would come at taxpayers’ expense.

Allowing the GSEs to exit conservatorship within the existing framework that includes their flawed charters, conflicting missions, and virtual monopolistic access to a government support through the PSPAs exposes taxpayers to great risk and is irresponsible. As we have said repeatedly, the only way to responsibly end the conservatorship of the GSEs is through legislation that puts in place a sustainable housing finance system with private capital at risk ahead of taxpayers, while preserving access to mortgage credit during severe downturns.

One final point for those who advocate a recapitalization of Fannie Mae and Freddie Mac while in conservatorship and subsequent privatization. If in the future the GSEs were to operate as they did prior to conservatorship, the GSEs’ size and significance would certainly attract broad regulatory attention due to the financial stability implications of their possible failure. Given this and the associated economic and regulatory ramifications, simply returning these entities to the way they were before is not practical nor is it a realistic consideration.

Conclusion

In closing, I want to return to the issue of timing and the urgency of enacting housing finance reform legislation. We know from experience that mortgage credit will be broadly accessible until it’s not; that capital markets will be liquid until they’re not. When the next crisis hits, it is unlikely that we will have the benefit of advance warning, and at that point, it will be too late for thoughtful reform. Our options will be limited, our hands will be tied, and we will be destined to relive the mistakes of the past.

Reforming a system as complex and as far-reaching as housing finance in a sensible and sustainable way takes time to get things right and to ensure a smooth transition from the existing system to the new, safer, fairer system. The point I want to make today is that there is an enormous amount of very good work underway to de-risk the enterprises, enhance liquidity, and protect taxpayers in a direction aligned with the Administration’s principles for long-term reform.

Nevertheless, institutionalizing these and other critical reforms in bipartisan legislation is by far the better course. Let’s be prudent; let’s have foresight; let’s find a bipartisan pathway to preventing another GSE bailout, which continuation of the status quo guarantees. We can do this, and we must do this.

Please click here to view the prepared remarks online.

CFPB Written Testimony of Richard Cordray

Posted on September 13, 2018September 13, 2018 by Safeguard

On March 3, the Consumer Financial Protection Bureau published a news release containing the written testimony of Richard Cordray before the House Committee on Financial Services.

Written Testimony of CFPB Director Richard Cordray Before the House Committee on Financial Services

Chairman Hensarling, Ranking Member Waters, and Members of the Committee, thank you for the opportunity to testify today about the Bureau’s Semi-Annual Report to Congress. We appreciate your continued leadership and oversight. I look forward to getting to know the new Members of the Committee as we all work together to strengthen our financial system so that it better serves consumers, responsible businesses, and our economy as a whole.

As you know, the Consumer Financial Protection Bureau is the nation’s first federal agency whose sole focus is protecting consumers in the financial marketplace. Financial products like mortgages, credit cards, and student loans involve some of the most important financial transactions in people’s lives. In the wake of the financial crisis, Congress created the Bureau to stand on the side of consumers and ensure they are treated fairly in the financial marketplace. Since we opened our doors, we have been focused on making consumer financial markets work better for the American people, and helping them improve their financial lives.

In this, our sixth Semi-Annual Report to the Congress and the President, we describe the Bureau’s most recent efforts to achieve this vital mission. Through fair rules, consistent oversight, appropriate law enforcement, and broad-based consumer engagement, we are working to restore people’s trust in consumer financial markets and protect them against illegal conduct.

Of course, much of the early work of the Bureau has centered on the mortgage market, which was the primary cause of the financial crisis and thus was where reform was deemed essential by the Congress and most policymakers. Our Ability-to-Repay rule, also known as the Qualified Mortgage rule, put new guardrails in place to prevent the kind of sloppy and irresponsible underwriting that had precipitated the crisis. Our mortgage servicing rules offered new and stronger protections to homeowners facing foreclosure. And our other rules addressed significant problems in the mortgage market deemed in need of repair. During this period, we continued our extensive work on regulatory implementation by providing tools and resources to assist industry in implementing our final rule to consolidate and streamline mortgage disclosure forms at both the application stage and the closing stage.

We also undertook considerable analysis to set the stage for a more recent development, which is a proposed rule we released to provide further latitude for residential mortgage lending by small creditors such as community banks and credit unions. The Bureau shares the Committee’s respect for these institutions, as well as a commitment to promoting access to credit for consumers in rural and underserved areas. And so our proposal would expand the definition of “small creditor” by making certain adjustments to the origination limit to allow for more lending by these small local institutions. We also propose to expand the definition of “rural” areas to provide more access to credit in those areas. As we have demonstrated again and again, we are committed to an even-handed approach to rulemaking that maintains important protections for consumers while listening to all stakeholders and making changes where appropriate to get things as right as we can. We look forward to public comments on these issues, which we are accepting through March 30.

As I have said many times, responsible lending by community banks and credit unions did not cause the financial crisis. These institutions play a vital role in many communities and in our economy. Their traditional model of relationship lending has been beneficial for many people in rural areas and small towns across this country, including the small town in Ohio where I was born and raised. We reinforce our commitment to this model of responsible lending by meeting regularly with community bankers and credit union leaders in all 50 states. We also receive valuable insight and feedback from members of our Credit Union Advisory Council and Community Bank Advisory Council, which consist of more than 30 credit union and community bankers from every region.

During the period of our most recent Semi-Annual Report, we also issued a number of other proposed and final rules. We issued final revisions to the remittance rule to clarify some of the new consumer protections while providing federally insured institutions more time to allow for more accurate disclosures in certain cases. We also moved forward with one of the tasks that Congress set for us by proposing a rule to overhaul the reporting requirements for the Home Mortgage Disclosure Act. It includes a proposed exemption of approximately 25 percent of banks and credit unions that are currently required to submit HMDA reports from the obligation to do so. In related activity, we released new and improved tools to allow the public to access and utilize this data more readily and effectively. And we finalized a rule to promote more effective annual privacy disclosures from financial institutions to their customers. The approach we took considerably eases the burdens of such notices for many companies. We estimate that the industry could save about $17 million annually if the new online disclosure method is widely adopted.

In addition to our rulemaking efforts, the Bureau continues to make progress in all areas of our work. To date, we have helped secure orders through enforcement actions for more than $5.3 billion in relief to more than 15 million consumers who fell victim to various violations of federal consumer financial laws. During the period of the Semi-Annual Report, we brought enforcement actions that secured $1.6 billion in relief for consumers. Those actions included $727 million in relief to consumers who were harmed by a company’s deceptive marketing of credit card add-on products. They included $92 million in debt relief for 17,000 servicemembers and other consumers who were harmed by a predatory lending scheme. And they included $225 million in relief for consumers who were harmed by other deceptive and discriminatory credit card practices. We also filed suit to hold a company accountable for operating a debt collection lawsuit mill that intimidated consumers with deceptive court filings, totaling more than 350,000 lawsuits in four years in Georgia alone.

Our supervision program continues to be refined, improved, and expanded. We consult and collaborate closely with our fellow federal regulators as well as with state regulatory officials to carry out our work. Part of our statutory mandate is to address consumer financial issues in an even-handed manner across all market participants. During this reporting period, we continued to build out our risk-based supervision program both for banks and for non-bank financial firms. That approach is enabling us to provide more consistent treatment that ensures compliance with federal consumer financial laws and helps level the playing field among competing firms in mortgage origination, mortgage servicing, debt collection, student loan servicing, and other markets.

The premise at the heart of our mission is that consumers deserve to be treated fairly in the financial marketplace, and they should have someone stand on their side when that does not happen. Since opening our doors, the Bureau’s Office of Consumer Response has accepted more than 540,000 consumer complaints related to a variety of financial products and services, including mortgages, credit cards, student loans, auto loans, credit reporting, debt collection, and a number of other consumer financial products or services. That has resulted in relief of various kinds, both monetary and non-monetary, for many consumers. It also generates a rich trove of information from individual consumers in real-time about the most urgent problems and challenges they are confronting in the financial marketplace, all of which informs our regulatory, supervisory, and enforcement work.

To promote informed financial decision making, we have continued to develop educational tools for consumers, including the Your Money, Your Goals toolkit. This comprehensive guide is designed to be used by trusted public and private sector intermediaries – such as social workers, legal aid attorneys, and volunteers – to empower the people they serve in personal financial decision-making by covering topics such as budgeting daily expenses, managing debt, and avoiding financial tricks and traps. We are also about to embark on a financial coaching program for transitioning veterans and economically vulnerable populations of consumers in sixty locations all over the country.

The progress we have made has been possible thanks to the engagement of hundreds of thousands of Americans who have utilized our consumer education tools, submitted complaints, participated in rulemakings, and told us their stories through our website and at numerous public meetings from coast to coast. We have also benefited from an ongoing dialogue and constructive engagement with the institutions we supervise, with community banks and credit unions with whom we regularly meet, and with consumer advocates throughout the country.

Our progress has also resulted from the extraordinary work of my colleagues at the Bureau. They are dedicated public servants from a variety of different backgrounds who are committed to promoting a healthy consumer financial marketplace. In standing up the new Bureau from ground zero at almost break-neck speed to meet the expectations and deadlines set by the Congress, we put ourselves under enormous pressure to meet these goals. When we have recognized from time to time that we got things wrong, we have been determined to do what we can to make them right. I am proud to say that our colleagues have regularly risen to the challenges we face. They have consistently delivered great results so that consumers all over the country – in every one of your districts – are treated fairly in the financial marketplace. The American people certainly deserve it.

Thank you for the opportunity to testify today. I look forward to your questions.

Please click here to view the written testimony online.

VALERI Servicer Newsflash

Posted on September 13, 2018September 13, 2018 by Safeguard

On February 23, the U.S. Department of Veterans Affairs (VA) released a VALERI Servicer Newsflash.

VALERI Servicer Newsflash

IMPORTANT INFORMATION
Direct Connect Servicers:
Black Knight Financial Services, Inc. (BKFS) recently established a policy that states, “All user accounts within the BKFS domain require a password reset on an annual basis.” VALERI daily transaction file accounts fall into this classification and are subject to this policy. InterChange Services PowerCell (which supports VALERI) will coordinate the password change with VALERI servicers and will perform a test to ensure successful functionality. BKFS began contacting servicers in order to complete this task on Monday, February 11, 2015. For questions please contact InterchangeServices.Powercell@bkfs.com.

Servicer Calls – Due to limited lines available for our bi-weekly servicer calls, we have split the calls with servicers based on the alphabetical order of servicer names. To receive an invitation for future calls, please send an email request to the VALERI Helpdesk and include your name, position, email and phone number. Our next call is Thursday, February 26, 2015. Below is the breakdown of the call times:

A-L – 1:00 p.m. EST
M-Z – 2:00 p.m. EST

REMINDER
Title Package Due Date – Title packages are due to Vendor Resource Management based on the loan termination date. VA’s definition of loan termination date is the Sale Date or Confirmation of Sale based on the information found in the Title Documentation, Insurance and Timeframe Requirements spreadsheet located on the VALERI internet site.

DEVELOPMENT UPDATES
On Friday, February 20, 2015, VALERI Manifest 3.2 will be deployed. VALERI will be down from 7:00 p.m. EST to 11:00 p.m. EST. The following VALERI application enhancement will be included in the release:

CQ 10504 – Appeal Post Audit Claim is a new process available on the servicer web portal (SWP). This new appeal process is only applicable on Post Audits where VA issued a Bill of Collection (BOC) on a claim. The appeal will allow a servicer to submit documentation/justification for each adjusted line item. The timeframe to appeal a Post Audit claim is 30 days from certification of the post audit.

Please click here to view the newsflash online.

USDA Automation Enabled for Servicers Submitting Documentation for Loss Mitigation, Property Disposition Plans, Loss Claims, and Future Recovery!

Posted on September 13, 2018September 13, 2018 by Safeguard

On February 16, the U.S. Department of Agriculture (USDA) released a Single Family Housing Servicing Update titled Automation Enabled for Servicers Submitting Documentation for Loss Mitigation, Property Disposition Plans, Loss Claims, and Future Recovery!

Automation Enabled for Servicers Submitting Documentation for Loss Mitigation, Property Disposition Plans, Loss Claims, and Future Recovery!

USDA Rural Development launched automation in April 2014, to allow lenders to upload and view supporting Loss Mitigation, Property Disposition, Loss Claim and Future Recovery documentation. This enables lenders to more easily and efficiently submit documents/packages to the Agency for Single Family Housing Guaranteed Loans. With this new automation lenders can now:

Expedite processing of their submissions for Agency review
Streamline document submissions- documents will immediately generate a transaction for processing or attach to an open transaction to expedite processing
Save money through paperless processing–no more overnight delivery fees to submit claim documents to the Agency
Electronically submit the information previously submitted by email or fax
Eliminates the need to send via secured email, encrypting documents, etc.

Quick reference guides to assist you are located in the Training and Resource Library at the link below.
https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do

Manual lenders wishing to take advantage of the benefits of this automation may contact (314) 457-5596

For Policy questions, please contact the Single Family Housing Guaranteed Loan Division by dialing (202) 720-1452 or the Centralized Servicing Center by dialing (866) 550-5887.

Oral Testimony of Secretary Julian Castro U.S. House Committee on Financial Services Hearing on the Federal Housing Administration

Posted on September 13, 2018September 13, 2018 by Safeguard

On February 11, the U.S. Department of Housing and Urban Development (HUD) issued a press release titled Oral Testimony of Secretary Julian Castro U.S. House Committee on Financial Services Hearing on the Federal Housing Administration.

Oral Testimony of Secretary Julián Castro
U.S. House Committee on Financial Services
Hearing on the Federal Housing Administration
Washington, DC

As prepared for delivery

Chairman Hensarling, Ranking Member Waters, members of the Committee — thank you for inviting me to speak with you today about the Federal Housing Administration’s efforts to expand opportunities for working families, to further strengthen the Mutual Mortgage Insurance Fund, and to help continue the economic momentum our nation is building every day.

We gather this morning at an important time for our nation. 2014 was the best year for job growth since the 1990s. Over the last 59 months, businesses have created 11.8 million new jobs — the longest streak of private sector job growth on record. And in recent years we’ve seen existing single-family home sales rise 50 percent, housing starts double, and home equity grow by more than $4 trillion.

It’s clear that housing is reemerging as an engine of economic prosperity. The Federal Housing Administration has been instrumental in this progress. It’s provided access to credit for generations of underserved borrowers and has been a stabilizing force in the housing market.

Unfortunately, there are some who try to include FHA with all the bad actors that caused the housing crisis. That could not be more wrong. FHA never pushed the toxic products that did so much damage. It didn’t bring down the market — it saved it.

FHA both stepped in and stepped up to fill the void created when private capital retreated — work that independent economists say prevented a further collapse in home prices. And now that our nation has turned the page on the crisis, we have a responsibility to give more Americans the chance to participate in this growth.

One challenge we must address is the high cost of homeownership. FHA raised its annual mortgage insurance premiums by 145% between 2010 and 2014. Think about what this means for folks who got an FHA-backed loan last Fiscal Year. FHA will collect an average of $17,000 in fees from them over the life of that loan. And, for those who may encounter hardship, we expect the average loss to be only $4,700.

These numbers show that the costs facing families that want to pursue the American Dream are too high — and unnecessarily so. And it simply isn’t right to unduly burden borrowers in the present because of the misbehavior of others in the past. That’s why last month FHA took action to restore some fairness in the market and to make homeownership more affordable for working families.

FHA reduced annual mortgage insurance premiums by a modest half a percentage point. We expect this to save more than 2 million households over $2 billion during the next three years. That’s money that can now be used on everything from a child’s education to retirement savings. It will also encourage more than 250,000 new borrowers to enter the market, and create tens of thousands of jobs.

FHA is in a strong position to take this modest measure. We’ve taken aggressive action to improve our underwriting standards, including introducing a credit score floor, requiring a higher down payment from borrowers with a FICO score under 580, and imposing higher minimum net worth requirements for lenders — and FHA is back in the black as a result.

Our Mutual Mortgage Insurance Fund has a net worth of $4.8 billion according to the independent actuary’s most recent annual report to Congress. It’s grown more than $21 billion in just two years. Even with the reduction, premiums are still 50% higher than pre-crisis levels.

Furthermore, we expect the Fund’s value to grow by at least $7 billion annually over the next several years, with the expectation that we’ll exceed the 2 percent ratio within 2 years. And our loans will still represent quality because our underwriting standards ensure that we’re lending to responsible borrowers.

So our actions maintain a careful balance between strengthening our fund and advancing our mission. That’s why dozens of nonpartisan groups—from the National Association of Realtors to the National Community Reinvestment Coalition to the Mortgage Bankers Association—are supporting our measures. And we’ll continue to work with stakeholders to preserve FHA’s role as a champion for opportunity.

Over its 80-year history, FHA has helped 40 million families become homeowners and more than half of all first-time homebuyers. In the states this Committee represents, nearly seven million households have FHA insured loans. FHA—as well as Ginnie Mae—also sparks robust economic activity, from the construction site to the local hardware store, to the investment community.

This work has played a critical role in growing the American middle class. With so many Americans working incredibly hard every single day to advance their position in life just a little bit, the question you and I must answer now is this: how can we continue to strengthen the MMI Fund and ensure that everyone who’s responsible and ready and willing to own can achieve their dreams in a growing housing market?

The good news is that HUD and this Committee have a track record. We’ve partnered for progress before — from adjusting the HECM program to eliminating seller-funded down payment assistance, measures that have strengthened the Fund.

Thank you for your bipartisan support. And I look forward to continuing this work to ensure that FHA provides a pathway to prosperity for the American people. Opportunity is our mission and responsibility is our approach. That’s what this premium reduction supports.

Thank you very much.

Please click here to view the press release online.

MHA HAMP Reporting Update Updated Reporting Form Posted on HMPadmincom

Posted on September 13, 2018September 13, 2018 by Safeguard

On February 6, Making Home Affordable (MHA) issued a HAMP Reporting Update, subtitled Updated Reporting Form Posted on HMPadmin.com.

HAMP REPORTING UPDATE

Updated Reporting Form Posted on HMPadmin.com

The LPI Date Correction Request Form (login required) has been updated. Servicers should begin utilizing the updated version today, February 6, 2015.

This form can be found in the Data Reporting tab on the secure side of HMPadmin.com.

Questions?
For more information, email the HAMP Solution Center or call
1-866-939-4469.

Please click here to view the update online.

MHA HAMP Reporting Update January 2015 UP Survey Reminder

Posted on September 13, 2018September 13, 2018 by Safeguard

On February 9, Making Home Affordable (MHA) released a HAMP Reporting Update, subtitled January 2015 UP Survey Reminder.

HAMP REPORTING UPDATE

January 2015 UP Survey Reminder

The January 2015 Home Affordable Unemployment Program (UP) survey will be available on HMPadmin.com (login required) beginning Friday, February 13, 2015. Servicers that have executed a Servicer Participation Agreement (SPA) and have cumulative UP forbearance activity must complete and upload their UP survey response to the HAMP Reporting Tool by Monday, February 23, 2015.

SPA servicers that have any cumulative UP forbearance activity as of January 31, 2015 should submit an UP survey by February 23, 2015.

For details on downloading and submitting the UP survey response, log in to HMPadmin.com, navigate to the HAMP Loan Reporting Tools and Documents area, and select the UP Survey tab.

Questions?

For more information, email the HAMP Solution Center or call 1-866-939-4469.

For questions specifically regarding the survey contents, email the HAMP Servicer Survey Team.

Please click here to view the online update.