Fannie Mae, CFPB in Sync on Servicer Rules

A recent article for Fannie Mae’s Housing Industry Forum makes the pointrnthat when it comes to the new servicing rules which go into effect today,rnFannie and the Consumer Financial Protection Bureau (CFPB) are on the samernpage.  The new rules were promulgated andrnwill be enforced by CFPB and Jeff Bounds, writing for Fannie Mae, says it can’trngive servicers advice on how to comply with them.  However, the company’s own servicingrnstandards are being updated to more or less mirror those of CFPB.</p

In June 2011, even before CFPB was up and running, FanniernMae and Freddie Mac (the GSEs) issued new standards for their own servicers.  These standards specifically dealt with servicingrnthe GSEs’ delinquent loans, managing them, helping to prevent defaults, andrnsetting timeframes for handling foreclosures.  The standards require more consistency in howrnservicers communicaternwith homeowners, modify loans, offer other workouts, and handle foreclosures.  Servicers who do not comply with the GSE guidelinesrncan face penalties.</p

Boundsrnsaid that the GSEs had published announcements for servicers to get theirrnpolicies in line with those of CFPB in October and November of last year andrnthose updates also go into effect this month.</p

The changes that Fannie Mae and thernCFPB are making are with the aim of helping struggling homeowners avoidrnforeclosure Bounds said.  CFPB hasrnexpressed dissatisfaction with the servicing industry’s practices andrnrecord-keeping even before the mortgage crisis and has said that many servicersrnwere not prepared for the influx of delinquencies when times got rough.</p

Improving the servicers’rncommunications with borrowers is central to many of the changes from both thernGSEs and CFPB, with an emphasis on earlier and more frequent contact. Bounds saidrnthat Fannie Mae will keep in place many of its existing delinquency managementrnstandards, however, because they already meet or exceed the CFPB’s minimumrnrequirements.</p

Fannie Mae, for instance, requiresrnits servicers to attempt to establish live contact when a borrower misses arnmonthly payment.  A solicitation letterrnincluding a package of information relating to Fannie Mae’s workout options andrnrequesting that the borrower supply financial information must be sent betweenrnthe 31^st and 35^th day of delinquency with a follow-up ifrnnecessary between days 61 and 65.</p

Fannie Mae’s new guidelines requirernthat servicers acknowledge in writing receipt of the borrowers response packagernwithin five business days.  Previouslyrnthey could give a verbal acknowledgement within three days of receiving thernpackage. Servicers of Fannie Mae’s loans were also given updated guidelines onrnhandling incoming borrower contact and notifying borrowers of payment changes.</p

The new rules do not allow servicesrnto refer a delinquent loan for foreclosure before the 121^st day ofrndelinquency in order to allow borrowers whose loans are secured by theirrnprincipal residence adequate time to submit their response package and have it reviewedrnfor a workout option.  </p

Also under both new Fannie Mae andrnCFPB rules, loans that are secured by a primary residence cannot be referredrnfor foreclosure if:  </p<ul type="disc"<liThe borrower has submitted arncompleted response package and the servicer has yet to extinguish the 30-dayrnperiod for evaluating it.</li<liThe servicer has extended a workoutrnoption, and the borrower has remaining time in which to respond.</li