Page 437 – Safeguard Properties

USDA RD Operations Plan in Absence of Appropriations

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

On September 18, the U.S. Department of Agriculture (USDA), Rural Development released an anticipatory plan for operations in the absence of appropriations.

Link to plan:
Rural Development Plan for Operations in the Absence of Appropriations

About Safeguard
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

USDA Buyers Stuck in Limbo as Shutdown Hurts Housing

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

On October 8, BloombergBusinessweek published an article titled USDA Buyers Stuck in Limbo as Shutdown Hurts Housing: Mortgages.

USDA Buyers Stuck in Limbo as Shutdown Hurts Housing: Mortgages

Jacob Smith, a 25-year-old Florida firefighter, wasn’t paying much attention to the U.S. government shutdown until it threw his move to a new three-bedroom home near Daytona Beach into limbo.

Smith was ready to complete the purchase Oct. 1, the day the closure began. Now he has to wait until the Department of Agriculture reopens its mortgage business. For now, Smith’s landlord is allowing him to stay in his one-bedroom rental, crammed with boxes and furniture meant for the larger property. His builder, Adams Homes of Gulf Breeze, Florida, said it has about 10 other customers on the east coast of the state with purchases also on hold.

“It’s pretty ridiculous,” Smith said. “It seems rare that what you see on the news is directly affecting you. Hopefully it will end soon.”

USDA loans account for about 132,000 mortgages a year in areas designated by the agency as rural, according to the Mortgage Bankers Association. While they make up just 1.4 percent of the U.S. mortgage market, the product is one of the few available that allow zero-down payment loans and are an early warning of how the government’s first partial closing in 17 years could put a drag on the wider housing market.

“This is going to be devastating for people in the middle of getting USDA loans and for the communities that rely on the loans to support their housing markets,” said Camden Fine, president and chief executive officer of the Independent Community Bankers of America. “Everything has ground to a halt until the agency opens for business again.”

Budget Stalemate
The shutdown resulted in hundreds of thousands of federal workers being furloughed, the closure of national parks and Internal Revenue Service call centers, suspension of clinical research trials at the National Institutes of Health and a halt to grants that fund Head Start, which offers educational programs and health care for 967,000 children whose parents live below the poverty line.

The budget stalemate centers on opposition by some House Republicans to President Obama’s healthcare law. Other consequences include lenders being blocked from verifying Social Security numbers and accessing Internal Revenue Service tax transcripts to confirm the validity of documents borrowers provide. The process also may lengthen the wait for borrowers seeking approval for mortgages backed by the Federal Housing Administration because its fulltime staff is now less than one-tenth of its normal size.

Soft Recovery
“The last thing we need is anything that shakes the confidence in a softly recovering housing market,” David Stevens, chief executive officer of the Mortgage Bankers Association and former head of the FHA, said in a telephone interview last week.

Home prices, which have climbed 21 percent nationally since hitting a post-recession low in March 2012, are still 21 percent below their June 2006 peak, according to the S&P/Case-Shiller index of property values in 20 cities.

“If it’s a short-term shutdown, it’s a story about these employees put out of work. If it’s long term, it’s a broader story about the adverse impact to the economic recovery,” Stevens said.

If the shutdown continues for more than two weeks, it will begin to “have an immense adverse impact,” on the economies of rural communities, according to a USDA September report detailing contingency plans for a shutdown. Fifteen percent of the nation’s population, or 46.2 million people, live in rural counties that account for 72 percent of the U.S. land base, according to a May report from the USDA.

Void Filled
The USDA’s Rural Housing Services that administers the mortgages has its roots in the Great Depression in the 1930s, when it was established to aid farming communities including central areas devastated by drought that became known as the Dust Bowl. After the subprime mortgage collapse of the last decade, the program filled a void in lending products for first-time buyers.

The zero-down payment mortgages are for borrowers with incomes of as much as 115 percent of an area’s median pay. USDA borrowers pay an upfront fee equal to 2 percent of the borrowed amount and an annual insurance fee of 0.4 percent.

In addition to farm states such as Iowa and Ohio, the agency’s definition of eligible communities includes areas in western Massachusetts, New York’s Long Island, and other places that residents may not consider rural. The program extends to towns and cities with populations of up to 25,000 that the agency designates as “rural” if they are not suburbs and if their loans are used to purchase homes that are “modest in design, size and cost,” according to the Office of the Comptroller of the Currency.

Chain Reaction
About 6 percent of mortgages last year were USDA loans in Louisiana, Wyoming and Arkansas, the states with the largest shares, according to the Mortgage Bankers Association.

The loans account for about 1 percent of the Florida market, according to the Mortgage Bankers Association. Their use is more concentrated in areas of central Florida, said Rob Nunziata, co-Chief Executive Officer of FBC Mortgage LLC in Orlando.

The USDA delays will cause a chain reaction in rural housing markets that reaches sellers, mortgage brokers, Realtors, movers and builders, Nunziata said.

Smith, who is buying the new house in Port Orange, Florida for $162,000, said his original purchase date at the end of September was delayed because the USDA was already backed up. Now the 4.1 percent rate he locked in 90 days ago has expired and it will cost him to lock it in for another 30 days. The rate offered by his bank is now about 3/8 of a percentage point higher.

“It has taken longer than it was supposed to already,” Smith said. “Everything is in boxes and I’m ready to go.”

Longer Delays
His builder, Adams Homes, which also works in Alabama, Mississippi, Georgia, Tennessee, South Carolina and North Carolina, has cash tied up in these transactions that could be deployed in other projects, said Keith Clarkson, regional manager for the Florida east coast division of Adams Homes. The agency normally takes 15 to 20 days to provide letters of commitment, which are necessary for purchases to close, and the delays will likely be much longer when the agency begins issuing them again, he said.

“The whole company has a ton of USDA-eligible areas,” Clarkson said. “We take out construction loans or sometimes we build out of our own cash. Either way, we’re going to have a home tied up and won’t be able to get this house turned over to the new buyer.”

The immediate effect of the government shutdown won’t be felt beyond the disruption to home-sale transactions currently in the works, Jaret Seiberg, a senior policy analyst with Guggenheim Securities LLC’s Washington Research Group, said. Longer term, the value of real estate in rural communities will decline without USDA mortgages, he said.

Buyer Backlog
“Over time, you’re going to have a backlog of buyers and borrowers who are hoping to get the loans, and in those rural markets that’s going to matter,” Seiberg said. “It’s going to put downward pressure on home prices in those rural areas and it’s going to bring the market to a standstill.”

Many states with economies dominated by agriculture escaped the housing crash, registering small gains as prices were plunging in much of the rest of the country. Since the crash, prices in Iowa and Nebraska have gained about 5 percent, reaching records in the second quarter.

The USDA closed down its website and telephone calls to its headquarters in Washington and its mortgage servicing center in St. Louis, Missouri, aren’t being answered. For now, a skeleton staff is working to process mortgage payments, administer escrow accounts and preserve foreclosed properties.

“USDA is the be-all and end-all for some of these communities,” said Fine, of the community bankers group. “People in most rural areas are culturally very comfortable dealing with the USDA, so it’s natural they would rely on it for mortgages.”

To view the online article, please click here.

Senate Committee Statement by Crapo on Housing Finance Reform for Consumers

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

On October 29, the United States Senate Committee on Banking, Housing, & Urban Affairs released a statement by Mike Crapo, ranking member, on housing finance reform for consumers.

CRAPO STATEMENT ON HOUSING FINANCE REFORM FOR CONSUMERS

WASHINGTON – U.S. Senator Mike Crapo (R-Idaho), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing entitled, “Housing Finance Reform: Essentials of a Functioning Housing Finance System for Consumers:”

“Thank you, Mr. Chairman.

“Today’s hearing will focus on the consumer experience in a reformed housing finance system.

“Homeownership is central to our nation’s economy, offering financial and social benefits for families, communities and the country as a whole.

“The policies we choose to adopt during this process will determine not only the sustainability of a robust housing market, but also the future economic opportunities for millions of families and individuals.

“A reformed housing finance system can help consumers achieve their dream of homeownership, but this must be done responsibly.

“Doing this in a sustainable manner requires strong underwriting, as well as real estate contracts which can be expected to protect the rights of all parties.

“Failing to meet these two critical objectives will increase the risks and costs to both taxpayers and consumers.

“One of the major causes of the financial crisis was a significant deterioration in underwriting standards.

“Many mortgages turned out to be unaffordable, and a large number of these mortgages were guaranteed by Fannie Mae and Freddie Mac.

“Staggering mortgage losses were ultimately paid for by taxpayers after the federal government bailed out Fannie and Freddie in July of 2008.

“In addition to the lessons of Fannie’s and Freddie’s failures, the Federal Housing Administration (FHA) has further demonstrated the importance of returning to responsible underwriting.

“Last year’s actuarial report found that the FHA insurance fund’s net worth was negative $16 billion, and last month the FHA required a nearly $2 billion federal bailout, the first in its history.

“With these experiences in mind, if we are going to consider options for reforming the housing finance system that include a taxpayer guarantee, we must ensure that the taxpayer is only guaranteeing mortgages that meet strong, basic underwriting standards.

“A bipartisan coalition of Banking Committee Senators has introduced S. 1217.

“This legislation required a number of compromises to secure support from members from both sides of the aisle.

“One important compromise is that in exchange for including an explicit government guarantee of mortgages, private capital would take a strong first loss position and loans would need to have a minimum down payment of five percent while meeting the Consumer Financial Protection Bureau’s (CFPB) Qualified Mortgage (QM) definition.

“Fannie’s and Freddie’s current underwriting standards for guaranteeing loans are generally more difficult to meet than a QM loan with a five percent down payment.

“Further, to my knowledge, no one is proposing to prohibit lenders from making loans that do not meet this standard; existing proposals merely affirm that taxpayers will not be on the hook if those loans fail.

“In addition to protecting taxpayers, it is important that the future housing system ensures there is adequate liquidity in the market so that qualified borrowers have ample access to mortgage credit.

“An essential element of ensuring that credit availability is preserving our system of secured lending in which a borrower’s home is seen as adequate collateral for the mortgage the borrower seeks.

“Some have proposed very proscriptive laws and regulations regarding how a mortgage can be serviced, including numerous restrictions on how the collateral could be obtained in the regrettable event that a borrower could not maintain his or her obligations.

“Currently, servicing reforms are already being implemented.

“The CFPB issued new servicing rules earlier this year, and the National Mortgage Settlement last year established new standards for the nation’s largest servicers.

“None of us like the idea of any borrower losing his or her home, and none of us have forgotten, nor excuse, legal and contractual violations of the past.

“However, if we take actions that call into question whether mortgage contracts are viewed as adequately secured lending, homeowners across the board could pay considerably higher rates.

“I look forward to hearing from today’s witnesses and working with the Chairman and the other members of the Committee as we address these critical issues.

“Mr. Chairman, thank you.”

To view the online statement, please click here.

MHA SD 13-10: Guidance for Effects of Government Shutdown

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

On October 22, Making Home Affordable (MHA) released Supplemental Directive 13-10: MHA Program – Guidance for the Effects of the Government Shutdown.

Supplemental Directive 13-10: MHA Program – Guidance for the Effects of the Government Shutdown

Today, October 22, 2013, Supplemental Directive (SD) 13-10: Making Home Affordable Program – Guidance for the Effects of the Government Shutdown was issued, providing guidance to servicers to offer assistance to borrowers adversely impacted by the federal government shutdown that occurred from October 1-17, 2013.

This SD is effective immediately and expires November 30, 2013.

The following topics are covered:

Forbearance Plans Due to the Government Shutdown
Borrowers in a Home Affordable Modification Program^® (HAMP) or the Second Lien Modification Program^SM (2MP) Trial Period
Borrowers in a HAMP or 2MP Permanent Modification

This guidance does not apply to mortgage loans that are owned or guaranteed by Fannie Mae or Freddie Mac, insured or guaranteed by the Veterans Administration, the Department of Agriculture’s Rural Housing Service or the Federal Housing Administration.

Read SD 13-10 in its entirety for detailed information.

OCC Publishes Joint Notice Regarding Biggert-Waters Act

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

On October 11, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), Farm Credit Administration (FCA), and National Credit Union Administration (NCUA) issued a Notice of Proposed Rulemaking that would amend regulations regarding loans in areas having special flood hazards to implement certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act or Act).

Please click here for prior reporting.

Summary
The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), Farm Credit Administration (FCA), and National Credit Union Administration (NCUA) have issued a Notice of Proposed Rulemaking that would amend regulations regarding loans in areas having special flood hazards to implement certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act or Act). Specifically, the proposal would establish requirements with respect to the escrow of flood insurance payments, the acceptance of private flood insurance policies, and the force-placement of flood insurance. Furthermore, the OCC is proposing to integrate its flood insurance regulations for national banks and federal savings associations (collectively, banks), currently set forth at 12 CFR 22 and 12 CFR 172. The proposed rule has a 60-day comment period, ending on December 10, 2013.

Highlights

Escrow of Flood Insurance Payments

Pursuant to section 100209 of the Biggert-Waters Act, the proposal generally would require banks, or servicers acting on their behalf, to escrow premiums and fees for flood insurance for residential improved real estate or a mobile home securing any residential mortgage loan outstanding or entered into on or after July 6, 2014, unless the bank qualifies for the statutory exception.
- For loans requiring flood insurance that are made on or after July 6, 2014, banks would be required to begin escrowing upon loan consummation. For loans that are outstanding on July 6, 2014, banks would be required to begin escrowing with the first loan payment after the first renewal date of the borrower’s flood insurance policy on or after July 6, 2014. This timing for outstanding loans is intended to alleviate the potential burden of the new requirement on lenders and borrowers.
The proposal would require banks to mail or deliver a written notice informing borrowers of the escrow requirement. For loans outstanding on July 6, 2014, banks must provide this notice at least 90 days before they must begin escrowing. For loans made on or after July 6, 2014, banks must provide this notice at the time they provide the general notice of the flood insurance requirement. The proposal includes sample forms of this notice.
Except as may be required under applicable state law, a bank is not required to escrow if it has total assets of less than $1 billion and, as of July 6, 2012, was not required by federal or state law to escrow taxes or insurance for the term of the loan and did not have a policy to require escrow of taxes and insurance.

Private Flood Insurance

Under current law, banks may accept private flood insurance in satisfaction of National Flood Insurance Program (NFIP) requirements if certain conditions are met. Pursuant to section 100239 of the Biggert-Waters Act, the proposal would require that banks accept “private flood insurance” as defined in the Act. To assist banks in complying with this requirement, the proposal includes a safe harbor under which a flood insurance policy is deemed to meet the definition of “private flood insurance” if a state insurance regulator makes a determination in writing that the policy meets this definition.
The preamble to the proposed rule explains that the agencies also are considering including in the final rule a provision expressly permitting the discretionary acceptance of private policies that do not meet the statutory definition of “private flood insurance” if the policies meet certain standards and requirements.

Force Placement

Pursuant to section 100244 of the Biggert-Waters Act, the proposal would amend the current rule’s force-placement of flood insurance provision to clarify that a bank or its servicer has the authority to charge a borrower for the cost of flood insurance coverage commencing on the date on which such coverage lapsed or on which the coverage became insufficient.
The proposal also would stipulate the circumstances under which a lender or its servicer must terminate force-placed flood insurance coverage and refund payments to a borrower.
The proposal sets forth the documentary evidence a lender must accept to confirm that a borrower has obtained an appropriate amount of flood insurance coverage.

Note for Community Banks
The amendments proposed by this rulemaking would apply to all banks, including community banks. The escrow requirement for flood insurance premiums does not, however, apply to banks with total assets of less than $1 billion and that, as of July 6, 2012, were not required by federal or state law to escrow taxes or insurance for the term of the loan and did not have a policy to require escrow of taxes and insurance. With respect to private insurance, the proposed safe harbor provision would assist community banks in determining whether they are required to accept a particular policy as satisfaction of the mandatory flood insurance requirement.

Background
The National Flood Insurance Act of 1968 and the Flood Disaster Protection Act, as amended, govern the NFIP. Among other things, these statutes require the purchase of flood insurance on certain properties and make available federally subsidized flood insurance to owners of improved real estate or mobile homes located in special flood hazard areas if the community where the improved real estate or mobile home is located participates in the NFIP.1 The Federal Emergency Management Agency (FEMA) administers the NFIP.2 OCC, Board, FDIC, NCUA, and FCA regulations implement these statutes for the lending institutions they supervise.

The Biggert-Waters Act significantly amends the NFIP requirements. Among other things, the Act (1) requires regulated lending institutions to escrow premiums and fees for flood insurance on residential improved real estate, unless the regulated lending institution meets the statutory small institution exception;3 (2) directs regulated lending institutions to accept private flood insurance, as defined by the Act, and to notify borrowers of the availability of private flood insurance; and (3) clarifies that the cost of premiums and fees incurred for force-placed insurance may include costs for coverage beginning on the date on which the flood insurance coverage lapsed or did not provide sufficient coverage, and establishes procedures for terminating force-placed insurance.

To view the notice in its entirety, please click here.

OCC Discusses Role of Housing Counselors

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

On October 18, the Office of the Comptroller of the Currency (OCC) released an update titled Comptroller Discusses Role of Housing Counselors.

Comptroller Discusses Role of Housing Counselors

SAN DIEGO — In a speech to the National Asian American Coalition, Comptroller of the Currency Thomas J. Curry discussed the important role housing counselors play in providing prospective home buyers with the knowledge they need to make sound financial decisions in purchasing and maintaining a home.

Related Links

Remarks (PDF)

Comptroller of the Currency Thomas J. Curry

To view the online release, please click here.

MHA Unaffected by Potential Government Shutdown

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

On September 30, the Making Home Affordable program announced MHA Unaffected by Potential Government Shutdown.

MHA Unaffected by Potential Government Shutdown

MHA programs, including personnel, events, reporting, etc., will not be affected by the potential lapse in appropriations for Fiscal Year 2014, beginning October 1.

Personnel at the U.S. Department of the Treasury’s Office of Financial Stability, the Program Administrator (Fannie Mae), and MHA-C (Freddie Mac) will report to duty as scheduled and business will continue as usual.

To view the online announcement, please click here.

MHA SD 13-08: Post-Modification Counseling; Servicer Incentives

Posted on September 13, 2018 by Safeguard

On September 30, the Making Home Affordable Program (MHA) released Supplemental Directive 13-08: Making Home Affordable Program – Borrower Post-Modification Counseling and Servicer Incentives.

Supplemental Directive 13-08: Making Home Affordable Program – Borrower Post-Modification Counseling and Servicer Incentives

Today, September 30, 2013, Supplemental Directive (SD) 13-08 was issued, providing guidance to servicers regarding borrower financial counseling, single point of contact clarifications, and a new sliding scale of servicer incentives for completed modifications.

Unless otherwise stated therein, SD 13-08 is effective March 1, 2014, and amends and supersedes the notated portions of version 4.3 of the Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages (Handbook).
The following topics are covered:

Borrower Post-Modification Counseling Requirement
Single Point of Contact Clarifications
Servicer Incentive for Completed Modifications

This guidance does not apply to mortgage loans that are owned or guaranteed by Fannie Mae or Freddie Mac, or insured or guaranteed by the Veterans Administration, the Department of Agriculture’s Rural Housing Service (RHS) or the Federal Housing Administration (FHA).

Read SD 13-08 in its entirety for more information.

MHA SD 13-09: CFPB Mortgage Servicing Regulations

Posted on September 13, 2018 by Safeguard

On October 18, the Making Home Affordable Program (MHA) released Supplemental Directive 13-09: MHA Program – CFPB Mortgage Servicing Regulations.

Supplemental Directive 13-09: MHA Program – CFPB Mortgage Servicing Regulations

Today, October 18, 2013, Supplemental Directive (SD) 13-09: Making Home Affordable Program — CFPB Mortgage Servicing Regulations was issued, providing guidance permitting reconciliation of Making Home Affordable Program guidance with certain mortgage servicing rules issued by the Consumer Financial Protection Bureau (CFPB).

Effective January 10, 2014, this SD revises MHA Program guidance in areas listed below. Additional guidance is forthcoming indicating changes to version 4.3 of the Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages that will be made pursuant to this SD.

The following topics are covered in this SD:

Loss Mitigation Application
Right Party Contact
Acknowledgment and Incomplete Information Notice
Review of Loss Mitigation Application
Home Affordable Unemployment Program^SM (UP)
Home Affordable Foreclosure Alternative^® (HAFA) Program

To view the online update, please click here.

MHA Releases Updated Reporting Job Aids

Posted on September 13, 2018 by Safeguard

On October 24, Making Home Affordable (MHA) released a notice titled Updated Reporting Job Aids; System Maintenance this Weekend.

Updated Reporting Job Aids

The following job aids were updated and posted on HMPadmin.com:

The Reporting GSE HAMP Permanent Modifications Using GSE Streamlined Modification Trial Payments Job Aid has been updated to include guidance for reporting the Trial Not Approved/Not Accepted Reason Code when streamlined modification monthly payments are lower than HAMP modification monthly payments.
The Reporting Loan Data OMR Guidance Loan State Code Descriptions for 2MP Mods Job Aid has been updated to clarify the HAMP Reporting System Loan State Codes.

Servicers are encouraged to refer to these updated job aids, which can be found in the Servicer Job Aids section on HMPadmin.com.

HMPadmin.com, HAMP Reporting Tool, and NPV Transaction Portal Outages This Weekend

Due to system maintenance, HMPadmin.com, the HAMP Reporting Tool (including the HAMP Reporting System), and the NPV Transaction Portal will be unavailable from 8:00 a.m. ET Saturday, October 26 through 8:00 a.m. ET Monday, October 28.

To view the online release, please click here.