Breaking News: Fannie Mae/Freddie Mac Delay Announced New Adverse Market Refinance Fee to December 1, Texas Finance and Credit Union Commissions Propose Home Equity Rule Changes and more!

Yesterday, August 25, 2020, the Federal Housing Financing Agency (FHFA) issued a News Release stating that it had directed Fannie Mae and Freddie Mac to delay the implementation of their Adverse Market Refinance Fee until December 1, 2020. The fee was scheduled to take effect on September 1, 2020. The FHFA also announced that Fannie Mae and Freddie Mac will exempt refinance loans with balances below $125,000.

On, August 12, 2020, Fannie Mae and Freddie Mac announced the imposition of a new loan level pricing adjustment (LLPA) on refinance loans called an “Adverse Market Refinance Fee”. This LLPA will impose a 50 basis point fee on refinance loans sold to Fannie Mae and Freddie Mac, in addition to any other LLPAs that may apply to a particular transaction.

The Adverse Market Refinance Fee will apply to the following transaction types:

• FNMA Limited Cash Out Refinance & Cash Out Refinance
• FHLMC Cash Out Refinance & No Cash Out Refinance

Fannie Mae is exempting single close construction-to-permanent loans that are processed and delivered as a refinance with Special Feature Code 151 from this LLPA. Freddie Mac is exempting Construction Conversion Mortgages that qualify for single-closing interim construction financing and permanent financing as described in the FHLMC Seller/Servicer Guide Sections 4602.3 and 4206.5 from this LLPA.

Before the delay to December 1, Freddie Mac was applying the Adverse Market Refinance Fee LLPA to refinance mortgages with a settlement date on or after September 1, 2020, and Fannie Mae was applying the LLPA to whole loans purchased on or after September 1, 2020 and loans delivered into MBS pools with issue dates on or after September 1, 2020. If FHFA had not delayed the LLPA, consumers set to close on or after September 1—who had not secured rate locks—would have had their fees increased within days of closing.

Below are links to the original announcements from FNMA and FHLMC. We recommend you review these announcements closely.

Fannie Mae: https://singlefamily.fanniemae.com/media/23726/display

Freddie Mac: https://guide.freddiemac.com/app/guide/bulletin/2020-32

On August 14, 2020, the Texas Bankers Association and the Texas Mortgage Bankers Association sent a joint letter communicating their disapproval of the new LLPA to the director of the FHFA.

At the Credit Union Commission meeting on Friday, August 7, 2020, and the Texas Finance Commission meeting on Friday, August 21, 2020, the Commissions voted to propose joint amendments to the Texas home equity lending interpretations in the Texas Administrative Code. In the past, the Commissions have adopted the proposed rule changes with no changes or with non-substantive changes. If the past is any indicator, the Commissions should adopt the changes at their meetings later this year and finalize the rule changes in late 2020 or early 2021. Click here to view the minutes from the Credit Union Commission’s meeting (the proposal begins on page 8). The minutes from the Finance Commission’s meeting are not posted as of this newsletter publication.

The text of the proposed changes can be found beginning at page 43 of the PDF meeting packet on the Finance Commission website and at page 93 of the PDF meeting packet on the Credit Union Commission website. Here is a summary of the substantive changes proposed:

• Proposed new Section 153.11 (1):

  New §153.11(1) would explain that the constitutional repayment schedule requirements apply at closing and thus do not prohibit a lender from agreeing with the borrower to certain modifications and would explain that a modification may include a deferment of the original obligation. This proposal is based on the Texas Supreme Court decision in Sims v. Carrington Mortg. Servs., LLC, 440 S.W.3d 10 (2014). The court in Sims held that when a borrower and a lender agree to capitalize past-due interest, fees, property taxes, and insurance premiums into the principal without satisfying or replacing the original note, advancing new funds or increasing the obligations created by the original note, the resulting debt is not a new extension of credit.

• Proposed amendments to Section 153.11(2):

  The amendment to §153.11(2) would explain that a modification does not affect the requirement that payments must begin no later than two months from the date the extension of credit is made. (This is a proposed amendment to current §153.11(1), which will become §153.11(2) if new §153.11(1) is adopted.)

• Proposed amendments to §153.14:

  The Texas Constitution prohibits a home equity loan from being closed within one year after another home equity loan on the same property but includes an exception for a state of emergency declared by the President or Governor. Proposed amendments to 153.14 would explain that a state of emergency as set forth in the Texas Constitution includes a national state of emergency declared by the President or a state of disaster declared by the governor.

• Proposed amendments to §153.15:

  To facilitate social distancing, the proposed amendments to §153.15 would explain that a closing may occur in any area located at the permanent physical address of the lender, attorney, or title company.

• Proposed new §153.22:

  Proposed new §153.22 would explain that the lender may provide documents electronically in accordance with state and federal law governing electronic signatures and delivery of electronic documents.

• Proposed new §153.26:

  Proposed new §153.26 would explain that a lender may sign the written acknowledgement of fair market value before or at closing, and that an authorized agent may sign the written acknowledgement on behalf of the lender.

July 17, 2020. The Consumer Financial Protection Bureau issued a final rule amending the regulation text and official interpretations for Regulation Z. The CFPB is required to calculate annually the dollar amounts for several provisions in Regulation Z; this final rule revises, as applicable, the dollar amounts for provisions implementing the Truth in Lending Act (TILA) and amendments to TILA, including under the Credit Card Accountability Responsibility and Disclosure Act of 2009, the Home Ownership and Equity Protection Act of 1994 (HOEPA), and the Dodd-Frank Act. The CFPB adjusted these amounts, where appropriate, based on the annual percentage change reflected in the Consumer Price Index in effect on June 1, 2020.

• For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2021 will be $22,052.
• The adjusted points-and-fees dollar trigger for high-cost mortgages in 2021 will be $1,103.
• For qualified mortgages, which provide creditors with certain protections from liability under the Ability-to-Repay Rule, the maximum thresholds for total points and fees in 2021 will be:
• • 3 percent of the total loan amount for a loan greater than or equal to $110,260;
  • $3,308 for a loan amount greater than or equal to $66,156 but less than $110,260;
  • 5 percent of the total loan amount for a loan greater than or equal to $22,052 but less than $66,156;
  • $1,103 for a loan amount greater than or equal to $13,783 but less than $22,052; and
  • 8 percent of the total loan amount for a loan amount less than $13,783.

On July 28, 2020, the Bureau issued FAQs that cover reporting requirements for certain data points, and specifically discuss reporting when the information is not the dispositive factor in a credit decision.

• Are financial institutions required to report the credit, DTI and CLTV relied on in making a credit decision when such data is not dispositive factor?
• When income and property value are factors in the credit decision, though not the dispositive factor, should such data points be reported?

August Frequently Asked Question