Apr. 28, 2012: It's an agency world (including a reminder about the 120 day premium recapture) with lots of updates; at least the joke is a classic
Rob Chrisman

In your weekend discussion with neighbors while mowing the lawn, and they bring up Fannie Mae and Freddie Mac and how much money they’re losing, be sure to remind them that the press seems to leave out one important issue: the preferred dividends paid to the U.S. Government (and thus the taxpayer). This 10% dividend, which has accounted for billions and made up a large portion of the reported losses, is usually mentioned almost as an afterthought. (It is also believed, and I have not checked this out, that neither Fannie nor Freddie has ever made enough profit to cover the basic “nut” that the dividend amounts to.) The latest on Fannie, by the way, involves its ex-CEO Daniel Mudd’s legal battles: http://www.businessweek.com/articles/2012-04-26/fannie-maes-former-chief-fights-to-clear-his-name.


According to Freddie Mac's Monthly Volume Summary for March, its total mortgage portfolio decreased at an annualized rate of 2.9% in March compared to a decrease of 3.3% in February.  So far in 2012 Freddie’s portfolio has shrunk by 3.8% - but it is not a matter of simply saying, “Uh oh, Freddie’s shrinking, and Wells Fargo is larger!” since the portfolio has many pieces. The unpaid principal balance of the mortgage related investments portfolio at the end of the period was $618 billion: $202 billion in PC’s, REMIC’s, and other structured securities, $20 billion in agency securities, $138 billion in non-agency securities, and $248 billion in mortgage loans. The total mortgage portfolio balance was $2.1 trillion.


It is good to note that the single family seriously delinquent rate was 3.51% March, down from 3.57% in February.  Freddie Mac approved 4,308 loan modifications in March 2012 and 13,677 for the three months ended March 31, 2012.


Fannie Mae issued guidelines to its servicers today improve the timing and methods of handling short sales, and the industry said, “What took so long with short sale procedures?” Fannie Mae completed 70,025 short sales in 2011 and 69,634 in 2010. The new rules apply to all conventional mortgage loans held in Fannie Mae's portfolio, loans purchased for that portfolio but subsequently securitized into Fannie Mae mortgage backed securities (MBS) pools and those originally delivered as part of an MBS pool.  While not required, servicers are encouraged to follow the guidelines for loans sold to Fannie Mae that are guaranteed or insured by government agencies or which are sold to Fannie Mae under a recourse arrangement as long as that does not preclude Fannie Mae from a full recovery under the guarantee or recourse arrangement.


The policies include a) Establish maximum required response time for pre-foreclosure sale offers submitted on properties securing loans as described above, b) Requires servicers to provide borrowers with status updates during the evaluation process, and c) Eliminates the need for servicers to first conduct an evaluation for alternative solutions before responding to an offer. Servicers have until June 25th to comply, but may-as-well do it sooner than later.

The new guidelines are part of the Federal Housing Finance Agency's (FHFA) Servicing Alignment Initiative to better match the servicing and loss mitigation standards of Fannie Mae and Freddie Mac. It establishes deadlines for acknowledging receipt of the BRP, notifying the borrower of any missing documentation, and sets up reporting specifications if the servicer is unable to provide the borrower with an approval, approval with conditions or a denial with a counteroffer within 30 days.  The servicer has a maximum of 60 days to complete the pre-foreclosure sale evaluation and must inform Fannie Mae if exceeding the original 30 day deadline.  There are also requirements for documenting borrower contacts in the loan files.

Freddie Mac is adjusting loss mitigation options to help struggling borrowers through a number of initiatives, including the revision of the State Housing Finance Agencies (HFAs) Mortgage Assistance and Hardest Hit Fund programs.  Transition assistance funds from state HFAs must be accepted provided that it doesn’t conflict with Freddie protocol.  Effective for trial period plan evaluations conducted on and after July 1, 2012, Freddie will also be adjusting its Standard Modification interest rate, which is currently at 5%.  The new rate will be published on the Standard Modification interest rate site (http://freddiemac.sparklist.com/t/408395/4682832/4992/26/), which will list the rate that must be used when calculating the terms of a trial period payment plan.

Other Freddie changes include the extension of the Home Affordable Foreclosure Alternatives initiative (HAFA) and HAMP through December 31, 2013, the exclusion of borrowers with mortgages that are subject to full recourse or indemnification agreements from HAMP, and updates to the Guide Directory 5 and Guide forms.

Fannie Mae has announced that the new Loan Delivery application, used to support the Uniform Loan Delivery Dataset (ULDD) requirements, will be required for all loans whose applications are dated December 1, 2011 or before and that are delivered July 23, 2012 or after.  The application can be accessed at http://cl.exct.net/?qs'69558a8a4943d1dd8a61adaf373c3e3fbd47a22669afe99a3a13e1e4c868b7.  A live webinar on the application is also available; loan delivery file import users can register at http://cl.exct.net/?qs'69558a8a4943d16df170fdf36fe910c0604d4ffde6ecb22048019985fed9e7, and loan delivery data entry users can register at http://cl.exct.net/?qs'69558a8a4943d15c5e4d2372dbfedbc84019741d10654b8ac5898067878dbd.


And as a reminder, since I am asked about this often enough, FNMA has stated that if a loan pays off within 120 days after MBA ISSUE DATE, they can recapture the premium. Expect the industry to follow:


In an effort to improve the foreclosure sale process, Fannie is setting down maximum required response times for sale offers, permitting servicers to respond to unsolicited offers without a HAMP evaluation, and requiring servicers to give borrowers regular updates throughout the evaluation process.

Fannie will be revising its policies on Delinquency Management and Default Prevention Requirements for HAMP modifications, standard modifications, and modification programs issued through a directive or delegation.  The relevant guidelines on Letters and Notices, Income Documentation Requirements, and Frequently Asked Questions will be updated accordingly.


Servicers in Florida should be aware that, at present, Fannie Mae requires that pre-filing mediation vendor fees paid for the Florida Pre-filing Mediation Program be reimbursed via the Cash Disbursement Request (Form 571).  Servicers should submit their invoices for fees incurred on or after April 1st directly to Fannie, as Fannie plans to pay the pre-mediation filing fees directly to vendors.  Fannie will only reimburse servicers such fees if the vendor issued the invoice before April 1st.

Both Fannie and Freddie will be releasing updates on their delivery applications in accordance with the Uniform Loan Delivery Dataset (ULDD) requirements on Monday, April 23rd, which marks the beginning of the ULDD transition period.  Freddie is rolling out an updated version of the selling system that will reflect the ULDD-named fields and converting all relevant loan data to MISMO® 3.0 format.  The GSEs will be providing various resources to help make the transition smooth; see Freddie’s customer test environment (CTE) tool for assistance in navigating this Monday’s new selling system. Bear in mind that all loans with applications dated December 1, 2011 or earlier must comply with the new requirements by July 23, 2012.

The recent FHA underwriting changes on disputed credit have been updated to include an identity/credit theft and/or unauthorized use loophole.  If a borrower’s outstanding debt was incurred due to credit/identity theft or unauthorized use, the borrower may provide supporting documentation and have these collections excluded from the $1,000 limit on outstanding collections.  HUD has delayed these changes such that they will affect all case numbers assigned on or after July 1, 2012.

Effective for case numbers dated April 1st or after, the FHA has also clarified that, for the purposes of defining a “family member,” a son, stepson, daughter, or stepdaughter may all be classified as a “child,” and step-parents/grandparents and foster parents/grandparents are classified as “parents.”

As an addendum to the guidelines for year-to-date Profit and Loss and Balance Sheets, the FHA requires an audited P&L or signed quarterly tax returns from the IRS if the income designated to qualify the borrower exceeds the two-year average of tax returns.  This also affects all case numbers assigned on or after April 1st.

THE TOP 31 THINGS THAT YOU WILL NEVER HEAR A SOUTHERN BOY SAY! (Given that my son will be spending the summer in Mississippi, and that this was sent to me by someone in Alabama, I can get away with this.):
31. When I retire, I'm movin' north.
30. Oh I just couldn't, she's only sixteen.
29. I'll take Shakespeare for $1,000, Alex.
28. Duct tape won't fix that.
27. Come to think of it, I'll have a Heineken
26. We don't keep firearms in this house.
25. You can't feed that to the dog.
24. No kids in the back of the pickup, it's just not safe.
23. Wrestling is fake.
22. We're vegetarians.
21. Do you think my gut is too big?
20. I'll have grapefruit and grapes instead of biscuits and gravy.
19. Honey, we don't need another dog.
18. Who gives a darn who won the Civil War?
17. Give me the small bag of pork rinds.
16. Too many deer heads detract from the decor.
15. I just couldn't find a thing at Wal-Mart today.
14. Trim the fat off that steak.
13. Cappuccino tastes better than espresso.
12. The tires on that truck are too big.
11. I've got it all on the C: DRIVE.
10. Unsweetened tea tastes better.
9. My fiancée, Bobbie Jo, is registered at Tiffany's.
8. I've got two cases of Zima for the Super Bowl.
7. Checkmate
6. She's too young to be wearing a bikini.
5. Hey, here's an episode of "Hee Haw" that we haven't seen.
4. I don't have a favorite college team.
3. You Guys.
2. Those shorts really ought to be a little longer, Betty Mae.
1. Nope, no more for me. I'm driving!


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at


Copyright - Rob Chrisman