FHFA Final Rule Brings Welcome News for Non-Bank Servicers

Writing on Paper BHThe Federal Housing Finance Agency (FHFA) announced today the issuance of the Acquired Member Assets (AMA) Final Rule to reorganize and relocate the current regulation governing the Federal Home Loan Banks’ AMA programs.

“I think the main outcome is first to address something we had to because of Dodd-Frank,” said Fred Graham, Deputy Director for Federal Home Loan Bank Regulation. “This was taking the references to NRSRO ratings out of the rule.”

The FHFA says that as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, this final rule removes and replaces references in the current regulation to, and requirements based on, ratings issued by a Nationally Recognized Statistical Ratings Organization (NRSRO).

“We also made a couple of changes that bring the rule more in line with what is going on in the mortgage market. This includes taking into account the fact that a lot of servicing is done by non-banks,” said Graham. “At one time, the servicing from AMA had to be done by members and that is not practical given the change in the landscape of the mortgage market. The rule addresses that as well.”

Further, according to the announcement, the AMA final rule provides a Federal Home Loan Bank greater flexibility in choosing the model it can use to estimate the credit enhancement required for AMA loans. According to FHFA, the final rule also adds a provision allowing a Federal Home Loan Bank to authorize the transfer of mortgage servicing rights on AMA loans to any institution, including a nonmember of the Federal Home Loan Bank System.

Another key feature of the final rule is the allowance of the Federal Home Loan Banks to acquire mortgage loans that exceed the conforming loan limits if they are guaranteed or insured by a department or agency of the U.S. government.

“The final rule excludes a proposed provision that would have eliminated the use of private, loan-level, supplemental mortgage insurance (SMI) in the member credit enhancement structure required by the AMA regulation, but does require Banks to establish financial and operational standards that insurers must meet to be qualified to provide insurance on AMA loans,” adds the FHFA.

Finally, the final rule deletes some obsolete provisions from the current regulation, and clarifies certain other provisions, says the FHFA and it will become effective January 18, 2017.

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