As the industry prepares to comply with the January implementation of new rules from the Consumer Financial Protection Bureau (CFPB), Fannie Mae and Freddie Macupdated their servicing guides to ensure compliance.
In keeping with the Servicing Alignment Initiative, the two agencies worked with their regulator, the Federal Housing Finance Agency to ensure their guidelines are in sync. The new guidelines address loss mitigation, foreclosure procedures, and the borrower appeal process.
Under the new rules a servicer is prohibited from mentioning foreclosure earlier than 121 days into a delinquency situation. At the 121-day mark, a servicer has five business days to refer a loan to foreclosure.
At that point, the servicer must take legal action to foreclose. However, if a borrower submits a “First Complete Borrower Response Package” more than 37 days before the scheduled foreclosure sale, the servicer must delay legal action.
Additionally, a servicer must always provide written receipt of a borrower response package within five days of receiving the package.
The GSEs will allow servicers up to 15 days to complete pre-referrals for foreclosures. “Servicers must now perform a pre-referral to foreclosure review within 15 days prior to the date by which the servicer is required to refer the mortgage loan to foreclosure,” Fannie Mae said in itsannouncement.
In cases of natural disaster, borrowers must complete a borrower response package in order to apply for forbearance longer than six months.
When a servicer denies a loan modification, it must let the borrower know the reason for the denial, and the borrower has the right to appeal the denial within 14 days.
The servicer must then respond to the appeal within 30 days. The servicer must also ensure the appeal review is completed by a different individual or set of individuals than those who originally denied the borrower loss mitigation.
Fannie Mae also addressed the single point of contact requirement saying, servicers must “develop an approach to managing delinquent borrowers that provides continuity of contact with the borrower and allows a borrower to contact one individual or a dedicated team of individuals in the servicer’s organization.”
Freddie Mac’s notice also reminds servicers that their “compliance with Freddie Mac’s requirements does not ensure that the servicer is in compliance with the CFPBfinal rule or any other applicable laws.”
Most of the new rules will be implemented January 10, 2014, according to the GSEs, the same implantation date for the CFPB’s new rules.