The pandemic appears to be resurging amidst a quasi-plateau in reported delinquency. At this juncture, it is difficult to predict duration, severity and velocity of forthcoming relief needs. Thankfully, the Federal Housing Finance Agency (FHFA) continues to ensure that Fannie Mae and Freddie Mac are not only extending timeframes for requirement flexibilities but are also providing continued clarification. Focusing on four areas for the Government Sponsored Enterprises (GSEs) to buy loans that are in COVID-19 forbearance, or fall under COVID-19 loan processing flexibilities, FHFA wants to be certain appropriate assistance is available to homeowners with mortgages that fall under their oversight. At a high level, they have extended the availability of certain COVID-19 flexibilities that are categorized by policy as follows:
Buying qualified loans in forbearance.
Alternative appraisals on purchase and rate term refinance loans.
Alternative methods for documenting income and verifying employment before loan closing.
Expanding the use of power of attorney to assist with loan closings.
During the past several months, the GSEs have issued several extensions to the majority of requirements, or temporary flexibilities, created in response to the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The most recent November extensions published by the FHFA came in two news releases. The first issued on November 12 extends the policy tied to qualified loans in forbearance through yearend. The second was issued on November 13 and extends the remaining three policies (above) through December 31, 2020. Fannie Mae and Freddie Mac subsequently issued updated Lender Letters and Guide Bulletins respectively, and included further clarification on requirements and documentation as well. A summary of requirements is provided below. For full detail on requirements and documentation, please refer to the corresponding Lender Letters or Guide Bulletins.
Fannie Mae – updated their three designated COVID-19 Lender Letters on November 13. Fannie Mae also updated the COVID-19 payment deferral Lender Letter on November 18.
Lender Letter (LL-2020-03) – Impact COVID-19 Originations
Verbal VOEs and POA flexibilities have been extended to apply to applications through December 31, 2020.
Self-employment income qualification requirements for unaudited P&L statements have been expanded to include 3 months of deposit account statements versus 2 months.
Lender Letter (LL-2020-04) – Impact COVID-19 Appraisals
Appraisal temporary flexibilities applied during COVID-19 have been extended for applications through December 31, 2020.
Purchase loans and limited cash-out refinances that are in COVID-19 forbearance with note dates between February 1, 2020 and December 31, 2020 are eligible for delivery.
Lender Letter (LL-2020-07) – COVID-19 Payment Deferral
If a mortgage loan is brought current off of a COVID-19 payment deferral program, then the delinquency status requirement is eliminated.
Freddie Mac – first issued Bulletin 2020-44 on November 13 with a revision issued on November 14. Freddie Mac also updated post-funding QC flexibility in Bulletin 2020-43, issued on November 4.
Verify businesses have been open and operating for current 20 business days (erroneously reflected as 10 business days on first issue of this bulletin).
If YTD P&L statements are unaudited, then business account statements must be obtained for 3 months (previously 2).
On unaudited YTD P&L, documented business revenue must support revenue on business account statements.
Temporary flexibilities previously extended in Bulletin 2020-40 have been further extended through December 31, 2020.
Temporary requirements pertaining to the purchase of mortgages in COVID-19 forbearance have been extended for note dates between February 1 and December 31, 2020.
Other selling requirements and guidance extended in Bulletin 2020-35 and issued in Bulletin 2020-14 remain in effect.
Post-Funding QC flexibilities published in 2020-11 will be made a permanent part of the Guide: QC must be completed on a specific risk-based sample that meets requirements for sold mortgages that became 60+ days past due in the first 6 months (previously all such loans had to be in the QC sample).
Additional Selling updates included Loan Product Advisor® flexibilities, further clarification on condo hotels and transient housing ineligibility, cooperative share loan eligibility, and consolidation under the Home Possible® program.
Originators continue to be stretched as production business accelerates amidst pandemic anxiety and distress. During these trying times, Quality Mortgage Services (QMS) continues to work closely with our clients. We are here to provide our industry knowledge, quality control expertise and genuine support to your business. As a boutique provider of quality control and audit solutions, we are uniquely positioned to help you meet and understand the challenges of compliance and risk management under COVID-19 and record interest rate levels. QMS values partnership above all other benefits, and we encourage you to connect with us to learn how our approach to meeting your compliance needs is uniquely designed to assist your organization in excelling in today’s volatile landscape. QMS is a dedicated member of the Mortgage Bankers Association (MBA), committed to both the industry and our valued customer base in meeting the challenges of COVID-19.