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AGENCY SPOTLIGHT A LOOK AT THE GSES' LATEST POLICY DEVELOPMENTS AND TOP HEADLINES GSES ANNOUNCE NEW MORTGAGE INSURANCE REQUIREMENTS Moving forward on another of its performance goals for 2013, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac have completed a major overhaul of mortgage insurance master policy requirements. In early 2013, FHFA laid out its Conservatorship Scorecard, which, among other things, calls for the GSEs to develop aligned requirements for master policies. Through an ongoing effort, FHFA says both enterprises have worked with the mortgage insurance industry "to address and update gaps in the existing master policy framework." "Updating the mortgage insurance master policy requirements is a significant accomplishment for Fannie Mae and Freddie Mac," said FHFA acting director Ed DeMarco. "The new standards update and clarify the responsibilities of insurers, originators, and servicers, and they enhance the insurance protection provided to Fannie Mae and Freddie Mac, which ultimately benefits taxpayers." The new requirements include a number of provisions intended to facilitate faster and more consistent claims processing, establishing specific timeframes, and creating standards for the circumstances under which coverage must be maintained and when it may be revoked. Also included are requirements for master policies to support recently developed loss mitigation strategies and guidelines to promote information sharing among mortgage insurers, servicers, and the GSEs. FHFA anticipates the master policies will go into effect in 2014 pending review and approval GSEs Update Short Sale Policies Fannie Mae and Freddie Mac announced changes to their Servicing Guides aimed at helping more borrowers avoid foreclosure through short sales and deeds-in-lieu of foreclosure (DILs). Some of the changes are to align with certain Consumer Financial Protection Bureau (CFPB) rules and regulations that implement the mortgage servicing provisions of the DoddFrank Act, and some are simply to ease eligibility requirements for liquidation workout options. The new GSE requirements also become effective January 10, the same effective date as the CFPB's new mortgage servicing standards. Documentation Exceptions: Eligibility for a short sale or DIL with borrower documentation exceptions has been expanded to include borrowers whose mortgage debts have been discharged in a Chapter 7 bankruptcy, regardless of the borrower's FICO score. Additionally, mortgages that were originated as investment properties are no longer eligible for the exception to borrower documentation. Servicers must now review a complete Borrower Response Package (BRP) to evaluate these borrowers for a short sale or DIL. 24 Cash Reserves: Servicers must now submit a short sale or DIL recommendation to Freddie Mac for approval when the borrower's cash reserves exceed $50,000. Foreclosure Delays: Servicers and their counsel must delay the next legal action in the foreclosure process when the first complete BRP is received more than 37 days prior to the scheduled foreclosure sale date and evaluation of the package results in an offer to proceed with a short sale or DIL. Expedited Reviews: Servicers are no longer required to conduct an expedited review when a completed BRP with a short sale purchase offer is received greater than 37 days prior to a scheduled foreclosure sale date. However, servicers must continue to expedite review of a complete BRP received between 37 days and 15 days prior to a scheduled foreclosure sale date. Trial Period Plans: If a borrower remains eligible for the original Trial Period Plan (TPP) offer after receiving an appeal decision and accepts the original offer, servicers must reissue the original offer with a new TPP due date. Any delinquent amounts accrued during the appeal review process should be included in the modified principal balance. by state insurance regulators. Fannie Mae and Freddie Mac both put their support behind the new master policies. "The updated master policy for mortgage insurance announced today builds on the market reforms of the past five years, and we were happy to work with FHFA to bring about this latest step toward greater operational efficiency and transparency in the mortgage market," said Paige Wisdom, EVP and chief enterprise risk officer at Freddie Mac. "We look forward to working with our servicers and the nation's mortgage insurers as they adopt the new master policy." "Mortgage insurers are an important part of the mortgage finance system and these changes help lay the foundation for a stronger system going forward," added Andrew Bon Salle, EVP of single-family underwriting, pricing, and capital markets at Fannie Mae. "These updates will help us better manage our credit risk, which we believe will ultimately benefit Fannie Mae, mortgage insurers, homeowners, and taxpayers." STAT INSIGHT Fannie Mae Taxpayers invested $116 billion from 2008-2012 Dividends paid totaling $114 billion Freddie Mac Taxpayers invested $71 billion from 2008-2012 Dividends paid totaling $71 billion