February 23, 2021
PPDocs addresses newly redesigned URLA, CFPB Finalizes HPML Escrow Exemptions and more!
Read more below!
PPDocs addresses newly redesigned URLA
The newly redesigned Uniform Residential Loan Application from Fannie Mae and Freddie Mac (FNMA Form 1003) is now available through PPDocs. Click here to link to a guide on completing the appropriate screens in PPDocs to generate the redesigned URLA.
While we are providing the ability to generate a redesigned URLA for our clients’ benefit, clients will need to consult the applicable FNMA and FHMLC requirements for proper completion of the revised fields. Below are links to Fannie Mae’s URLA page (which includes instructions for completing the URLA) and an FAQ for the URLA on FNMA’s website.
https://singlefamily.fanniemae.com/delivering/uniform-mortgage-data-program/uniform-residential-loan-application (includes a link to the new 1003 instructions from FNMA).
CFPB Finalizes HPML Escrow Exemptions
On Tuesday, January 19, 2021, the Consumer Financial Protection Bureau (CFPB) issued a final rule exempting certain insured depository institutions and insured credit unions from the requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs).
The final rule took effect immediately upon publication in the Federal Register on February 17, 2021, and exempts from the HPML escrow requirement any loan made by an insured depository institution or insured credit union and secured by a first lien on the principal dwelling of a consumer if:
- the institution has assets of $10 billion or less;
- the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year; and
- certain of the existing HPML escrow exemption criteria are met.
Fannie Mae and Freddie Mac retirement of CMT-Indexed ARMs
Fannie Mae and Freddie Mac will no longer purchase Adjustable-Rate Mortgage (ARM) loans that use an index based on constant maturity treasury securities (CMT) and will retire all related CMT ARM plans. Here are the details from Fannie Mae and Freddie Mac:
FANNIE MAE: On February 3, 2021, Fannie Mae issued Lender Letter LL-2021-05 stating:
- In Lender Letter LL-2020-01, Important Updates to Adjustable-Rate Mortgage (ARM) Products, Fannie Mae provided advance notice that they would cease purchasing CMT-indexed ARMs later this year. While the CMT index is not going away, Fannie Mae will no longer acquire loans based on this index. As a reminder, Fannie Mae previously announced several new ARM plans tied to the Secured Overnight Financing Rate (SOFR) and began accepting delivery of loans last year. Refer to the Standard ARM Plan Matrix for a complete list of all standard ARM plans that are eligible for delivery. Fannie Mae will update the ARM Plan Matrix and the Selling Guide as the Sep. 2021 delivery deadlines approach as noted below.
- Effective: To be eligible for delivery to Fannie Mae, all CMT ARMs must have application dates on or before Jun. 30, 2021. In addition, all CMT ARMs must be purchased as whole loans on or before Sep. 30, 2021 or delivered into MBS pools with issue dates on or before Sep. 1, 2021.
This applies to all CMT ARM plans including plan numbers 57, 649 – 652, 659 – 661, 710, 720 – 721, 750 – 751, 861, 1423, 1437, 1677, and 3846.
Impact on Loan Servicing
Servicers who currently service ARM loans based on the CMT index should continue to do so in accordance with existing requirements.
FREDDIE MAC: On February 3, 2021, Freddie Mac issued Bulletin 2021-4 providing: In Bulletin 2020-1, under FHFA guidance, Freddie Mac announced that it would cease purchasing CMT-indexed ARMs in 2021. Freddie Mac has now announced that they will not purchase any CMT-indexed ARM that has an Application Received Date of July 1, 2021 or later. In addition, Freddie Mac will no longer purchase CMT-indexed ARMs on and after October 1, 2021, regardless of the Application Received Date or Note Date.
Note: In the PPDocs order form, selecting a Fannie Mae or Freddie Mac CMT-indexed ARM loan program will result in the following audit warning:
- You have selected a Fannie Mae or Freddie Mac CMT-indexed ARM loan program. Per Fannie Mae Lender Letter LL-2021-05, Fannie Mae has announced that they will be discontinuing the loan program you selected later this year. Likewise, per Bulletin 2021-4, Freddie Mac has also announced the discontinuation of their CMT-indexed ARM loan programs. Any ARM loan using a CMT index for delivery to Fannie Mae must have an application date of on or before June 30, 2021, and must be purchase by Fannie Mae as a whole loan by September 30, 2021, or delivered in MB pools with an issue date on or before September 1, 2021. Any ARM loan using a CMT index for delivery to Freddie Mac must have an application received date prior to July 1, 2021. In addition, Freddie Mac will not purchase any CMT-indexed ARM loans on or after October 1, 2021, regardless of the application received date.
February's Frequently Asked Question
Question: I know that when a married person purchases a lot, their spouse doesn’t have to be a borrower or vested in title. But I have a married person purchasing a homestead who wants to be the sole borrower and solely vested in title. The borrower’s spouse will live in the home. Because Texas is a community property state, I was wondering whether the borrower’s spouse must be vested in title and on the sales contract?
Answer: A married person may purchase real property without the joinder of their spouse—even property that is intended to be the spouses’ homestead. Additionally, a non-vested spouse generally is not required to sign the Deed of Trust on a purchase money transaction in Texas. Some title companies may require spousal joinder on the Deed of Trust to insure, but most title underwriters accept Skelton v. Washington Mutual Bank, F.A as reason to insure a Texas vendor’s lien purchase money transaction without joinder of the non-vested spouse.
In Leach v. First Fin Resolution Partners, an unpublished memorandum opinion, the US District Court for the Northern District of Texas held that the signatures of both spouses are not required to create a valid purchase money vendor’s lien in Texas. Unpublished opinions are of limited precedential value, but Leach provides a good discussion that is consistent with other Texas court opinions on this issue.
If both spouses appear on the purchase contract, title companies will typically require both spouses to also vest in title. Joinder on the Deed of Trust is required of all parties who will vest in title.
I have also attached a firm memo that addresses spousal joinder requirements.