This month’s Regulatory Compliance Change Management conference call will take place on Thursday, September 3rd at 3pm EST.To register for the monthly call, please email firstname.lastname@example.org. For your convenience, the call will be recorded and made available to clients who are unable to attend. If you have already registered for a previous call there is no need to request registration again. Please submit any questions related to the regulatory change management to mailbox prior to the call.
Any questions related to the monthly summary, overview process, or specific regulatory change items can be sent directly email@example.com. The Compliance Department will respond within 2 business days of receipt (excluding weekends and holidays).
Out of Compliance
For our July report, three items, listed below, are showing as “Out of Compliance” (effective date has passed and we are beyond our standard implementation timeframe). The rational for the risk rating is included and these items continue to be implemented.
Q6598 VA VALERI Servicer Newsflash (Effective 4/16/2020). VA has issued a bulletin to communicate updates to servicers: D-Record – After either the Loan Paid in Full or the Servicing Transfer Transferring event has been submitted successfully in the nightly file, a subsequent D (Delete) record must be submitted to prevent any further loan data from being transmitted and reported in VALERI. Default Reporting is working with BKFS to create the MSP Delete Record Field and have that field added to nightly reporting. This item has been downgraded to low risk as it has been identified that loans no longer report once transferred or sold so there is no risk of duplicate reporting with Valeri. This item will be moving to compliant not yet in validation while we await the update from BKFS to fully comply with the requirement. Since the reporting is not yet available, Cenlar is not reporting in accordance with the requirement when a loan is paid in full or servicing has been transferred.
Q6854 VA Circ. 26-19-17 Change 2 Funding Fee Guidance to Lenders and Servicers (Effective 5/22/2020). This update to the VA Circular provides guidance regarding funding fee refunds. The funding fee refunds must be paid to the Veteran by the VA through FFPS. The servicer must change the refund destination from “Lender/Vendor” to “Primary Veteran” in the refund setting section. If the loan is in default, the Veteran will be advised that he or she may wish to use the refund to help bring the loan current. This change item has been deemed to be a low risk because our Special Products Department has identified this change and is finalizing minor updates to those procedures regarding the VA funding fee and pre-discharge claims for assuming loans.
Q6718 RHS PN 536 Changes to HB-1-3555 (Effective 4/30/2020). USDA Rural Development has issued a Procedure Notice announcing revisions to the SFH Guaranteed Loan Program Technical Handbook. This change item has been deemed to be low risk because the business units have identified the necessary changes and are finalizing minor updates to procedures. Claims is finalizing the minor update to procedures to include the control reporting and Loss Mitigation is finalizing minor updates to procedures regarding delivering recorded documents within 6 months of execution.
Q6764 Maryland HB 93 – (Effective 10/01/2020). Maryland has provided additional guidance when repossessing a mobile home. This process includes an option for situations where the mobile home is vacant and abandoned. See Repossession of a Mobile Home (MD Code Commercial Law 12-115 (c) and (d) and MD Code Commercial Law 12-921(c) and (d)) for the relevant statutory language.
A lender must provide the borrower with a written notice of the lender’s intention to repossess a mobile home at least 30 days before the lender repossesses the mobile home. The mobile home must be primarily for personal, family, or household use.
This notice may be served by the lender with less than 30 days before repossession if the mobile home is vacant and abandoned or has been voluntarily surrendered by the borrower to the lender. The lender must already have determined that at least three of the circumstances required by the statute for foreclosure of a vacant and abandoned residential property exist for the property to qualify as vacant and abandoned.
If the property is vacant and abandoned, the notice must be accompanied by a certification from the lender identifying the circumstances demonstrating that the mobile home is vacant and abandoned or that the mobile home has been surrendered.
The notice shall include the default and the period at the end of which the mobile home will be repossessed and provide the borrower information regarding their rights. Notice may be delivered to the borrower personally or sent to the borrower’s last known address by registered or certified mail.
Cenlar is aware of this measure from the Maryland House Bill and its requirements. While Cenlar is not responsible for repossessions, Clients who use vendors for this function should be aware of the requirements above that are effective 10/01/2020.
Q7145.3 FHLMC Bulletin 2020-29 (Effective 11/01/20). FHLMC has issued guidance regarding the handing of Lost Note Affidavits (LNA’S):
FHLMC is updating their Guide to include policies related to LNAs due in part to certain State case law that has made it difficult to enforce Notes represented by LNAs. This addition clarifies and makes explicit Servicers’ responsibilities to:
Obtain Freddie Mac’s approval to submit an LNA to Freddie Mac as a replacement for an original Note and to transfer Servicing of a Mortgage represented by an LNA.
Create and deliver LNAs that meet Freddie Mac and State requirements
Maintain records regarding LNAs in the Servicer’s portfolio
Inform Transferee Servicers and Document Custodians regarding Mortgages represented by LNAs
Act in support of the LNAs they created when such support is required in State foreclosure actions or otherwise
Addition of these standards and procedures will strengthen foreclosure cases, support Transferee Servicers, and clearly establish Freddie Mac’s expectations related to LNAs. The Guide change also sets forth Document Custodians’ responsibilities relating to LNAs. Finally, the update clarifies certain Guide language.
Cenlar is aware of this change to the requirements in this guidance regarding LNA’s. Cenlar, in the capacity of the subservicer, is not responsible for these duties and as such is providing this information to the servicer (client).
Q7145.2 FHLMC Bulletin 2020-29 Servicing (Effective 8/05/20). FHLMC has issued guidance regarding updates to document custody when an item is stored electronically:
In response to Seller/Servicers feedback, we are updating Section 3302.2(b) to remove the requirement that, when a Security Instrument is stored as an Electronic document, the Servicer represents and warrants to, and covenants with, Freddie Mac that all Security Instruments that have been recorded have been delivered to the Document Custodian as original paper documents showing their recording information.
Cenlar is aware of this removal of requirements in this guidance regarding document custodians. Cenlar, in the capacity of the subservicer, is not responsible for the duties related to document custodianship and as such is providing this information to the servicer (client).
Q7196 FHA ML 2020-23: COVID-19 (Effective 7/28/2020). FHA has issued a Mortgagee Letter to communicate the modification of certain requirements for Single Family loans due to the COVID-19 pandemic. FHA has made modifications to self-employment income requirements, rental income requirements, and the approval of extension requests and release of funds under the FHA 203(k) Rehabilitation Mortgage Insurance Program. Please note that FHA issued Mortgagee Letter 2020-24 (Q7202) to revise the effective dates for verification of self-employment and receipt of rental income for cases with note dates on or after August 12, 2020 through November 30, 2020.
Verification of Self-Employment for Forward Mortgage and HECM (For cases with note dates on or after July 28, 2020 through November 30, 2020; revised to August 12, 2020 through November 30, 2020. In addition to the requirements in the Single Family Handbook, the mortgagee must verify the existence of the borrower’s business within 10 calendar days prior to the date of the note to confirm that the borrower’s business is open and operating by obtaining one of the following:
Evidence of current work;
Evidence of current business receipts within 10 days of the note date;
Lender certification that the business is open and operating; or
Business website demonstrating activity supporting current business operations
Rental Income (For cases with note dates on or after July 28, 2020 through November 30, 2020; revised to August 12, 2020 through November 30, 2020.) In addition to the requirements in the Single Family Handbook, if a borrower is qualifying utilizing rental income, then for each property generating rental income, the mortgagee must either:
Reduce the effective income associated with the calculation of rental income by 25%; or
Verify 6 months PITI reserves (this option is applicable to Forward only); or
Verify the borrower has received the previous 2 months rental payments as evidenced by borrower’s bank statements showing the deposit.
203(k) Rehabilitation Escrow Account (Effective immediately for open escrow accounts through November 30, 2020.) The mortgagee may grant an extension at its discretion only if the mortgage payments are current. FHA is providing a temporary flexibility allowing mortgagees to continue administering the Rehabilitation Escrow Account, including the approval of extension requests and release of funds, which will allow the project to continue for mortgages where the borrower is in forbearance due to the impacts of COVID-19. The mortgagee is still required to obtain the following information:
An explanation for the delay from the borrower, contractor, or consultant when reviewing extension requests; and
A new estimated completion date.
Cenlar is aware of this temporary guidance regarding Verification of Self-Employment for Forward Mortgages and HECM, Rental Income, and 203(k) Rehabilitation loans and its requirements. While Cenlar is not responsible for granting approvals for extensions of time or release of funds to allow a project to continue for borrowers in a COVID-19 forbearance, Clients who provide these extensions and approvals should be aware of the temporary flexibility FHA is allowing for mortgagees to continue administering the Rehabilitation Escrow Accounts through November 30, 2020.