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27 » VISIT US ONLINE @ DSNEWS.COM PLANS TO WIND DOWN FANNIE AND FREDDIE MOVE FORWARD e leaders of the Senate Banking Commit- tee announced in March plans to move forward on a new proposal to wind down Fannie Mae and Freddie Mac in favor of a new government backstop for private financiers. According to committee chairman Tim John- son (D-South Dakota) and ranking member Mike Crapo (R-Idaho), the reform proposal is the result of months of exploratory hearings, negotiations, and drafting work from members on both sides of the aisle. "ere is near unanimous agreement that our current housing finance system is not sustainable in the long-term and reform is necessary to help strengthen and stabilize the economy," Johnson said. "is bipartisan effort will provide the market the certainty it needs, while preserv- ing fair and affordable housing throughout the country." e proposal builds on a bill introduced last year by Sens. Bob Corker (R-Tennessee) and Mark Warner (D-Virginia), keeping as its base the even- tual elimination of Fannie Mae and Freddie Mac and installation of a Federal Mortgage Insurance Corporation (FMIC), which would be modeled after FDIC and which would assist private credi- tors with losses after the first 10 percent. Also included in the proposal is a provision requiring strong underwriting standards that would mirror the Consumer Financial Protec- tion Bureau's qualified mortgage definition and would set a phased-in down payment require- ment of 5 percent—except for first-time borrow- ers, who would be required to pay 3.5 percent. Finally, other provisions in the outlined plan call for the elimination of affordable housing goals (to be replaced with funds created through a small FMIC user fee) and the formation of a mutual cooperative owned by small lenders to ensure institutions of all size have access to the secondary market. "is agreement moves us closer to ending the five-year status quo and beginning the wind-down of Fannie and Freddie while protecting taxpayers with strong private capital, building the compo- nents for a stable secondary market, and avoiding repeating the mistakes of the past," Crapo said. With Johnson and Crapo's draft not yet com- plete, it remains to be seen how the proposal will fare in front of the largely Democratic Senate and the Republican-controlled House. On the industry side, responses seemed positive, with Mortgage Bankers Associa- tion (MBA) president and CEO David Stevens saying the announcement "reinforces the imme- diate need to address GSE reform in a substan- tive, transparent way." "Chairman Johnson and ranking member Crapo are to be commended for coming together in a bipartisan fashion and advancing a compre- hensive solution to improve the function of the secondary mortgage market in a way that engages private capital and reduces risk for taxpayers," he added. Perhaps less enthusiastic would be Fannie and Freddie's investors, who have sued the govern- ment, urged corporate changes, and even offered to buy parts of the GSEs' businesses in hopes of seeing returns now that both enterprises are profiting again. FANNIE MAE INCREASES FINES FOR LATE OR INACCURATE REPORTING Fannie Mae announced it has revised its maximum fee assessment for servicers that submit late or inaccurate loan report- ing. "Currently, Fannie Mae sends a Failed Business Rules Report to a servicer that fails to submit its Fannie Mae investor reporting system reports on a timely basis or fails to use the correct data and formats," the company said in a release. Fannie Mae then fines servicers in order to recoup the losses and damages that result from servicing breaches, "including reimbursement for Fannie Mae's internal administrative costs in tracking, reporting, and correcting these errors." For the first instance of late or inaccurate reporting, Fannie Mae will fine servicers the greater of $250 or $50 per mortgage loan, up to a maximum of $5,000. e second instance increases both fig- ures—the greater of $500 or $50 per mortgage loan, up to a maximum of $10,000. e Fannie Mae release notes in order to qualify as a sec- ond violation, late or inaccurate reporting must occur within one year of the first instance. e third offense is a similar step up in penalties. A third instance results in $1,000 or $50 per mortgage loan, up to a maximum of $15,000, if any subsequent issue occurs within one year from the most recent previous instance. e new fee structure goes into effect May 1. "Fannie Mae will begin issuing warn- ing letters and assessing compensatory fees to affected servicers for failing to meet these servicing requirements. Alternatively, Fannie Mae reserves the right to issue an indemnifi- cation demand to any servicer that breaches these servicing requirements," the release said. Fannie Mae encourages servicers to work with their Investor Reporting and Exceptions Management Team Analysts to review and remediate the Failed Business Rules Report. FANNIE MAE REPORTS DECLINE IN BUSINESS Fannie Mae reported further contraction in its book of business for February—the second this year and the third in as many months—as new business acquisitions dropped to a five-year low. According to the enterprise's monthly vol- ume summary for February, business shrank at a compound annual rate of 1.4 percent, bringing the book's total growth rate for the year to -2.4 percent. As of the end of the month, the book's total value was approximately $3.15 trillion. e decline in business was accompanied by a slight dip in new acquisitions, which totaled $29.3 billion for the month. e last time new business acquisitions were that low was January 2009, when they totaled $28.8 billion. Also down once again was the single- family serious delinquency rate, which ended the month at 2.27 percent—the lowest since November 2008. e multifamily delinquency rate, meanwhile, edged up 1 basis point to 0.11 percent. Fannie completed 10,837 loan modifications in February, totaling 23,402 year-to-date. Delinquencies are below 6 percent for the first time since 2008; foreclosures down 34 percent year-over-year, according to Black Knight Financial Services Mortgage Monitor. KNOW THIS

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