100 Days of COVID-19
The mortgage industry is fast approaching day 100 since the first COVID-19 guidance was offered by the Government-Sponsored Enterprises (GSEs) on March 18, 2020. It’s been nearly three months since the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law, and yet we continue to see changes to COVID-19 origination guidance and flexibilities since our last blog was published in mid-May.
Recent updates to GSE COVID-19 requirements, or temporary flexibilities, persist in an effort to assist homeowners in need of relief. Announcements made on or near May 19 introduced refinance and home purchase options for borrowers currently in COVID-19 forbearance, and May 28 updates offered requirements to qualify self-employed income under these programs. So far in the month of June, notifications announced the extension of GSE flexibilities through the end of July 2020.
Analyzing and executing on agency guidance remains a bit of a puzzle as the GSEs have differing approaches to the compilation of updates to COVID-19 temporary flexibilities. Fannie Mae has opted to continuously update their original three COVID-19 Lender Letters. The letters pertaining to originations and appraisals where both issued on March 31 and there have been four updates to these same letters since that time. Freddie Mac has issued a total of 14 COVID-19 Bulletins, with eight referencing some form of origination or appraisal selling guidance. The delineation between servicing and origination guidance can also be a bit nuanced as some requirements clearly fall into the respective areas and some do not. For example, the new refinance and purchase programs for borrowers in COVID forbearance could be managed out of either loss mitigation or origination, depending upon on how the lender is currently conducting business and resource availability. Either way, due diligence and quality control efforts will need to be solidly in place to ensure temporary flexibilities are documented and adhered to.
Highlights from the more recent GSE updates:
Fannie Mae continues to add temporary guidance to their original COVID-19 Lender Letters, LL 2020-03 (originations), LL 2020-04 (appraisals) and LL 2020-06 (forbearance), as well as their COVID-19 FAQ.
Originations (LL 2020-03 updates):
May 19….Temporary eligibility requirements for purchase and refinance transactions –
If a borrower resolves previously missed payments through reinstatement or a loss mitigation solution, then they meet eligibility parameters for the new purchase or refinance mortgage.
If missed payments remain outstanding, but the borrower has made three or more on-time payments as of the new transaction note date, then the borrower meets new mortgage eligibility.
Borrower credit reports must be reviewed and documented in order to confirm all mortgage loans are “current”, regardless of whether they are tied to the current application.
To be considered “current” a borrower must make all mortgage payments that are due in the month preceding the new transaction note date.
May 28…. Requirements for borrowers using self-employed income to qualify –
Additional documentation is required to qualify this income, including an audited profit and loss statement reporting year-to-date business revenue, expenses and net income including the month preceding the new application date; P&L must be signed by the borrower,
-OR- Unaudited P&L for reporting year-to-date business revenue, expenses and net income including the month preceding the new application date, signed by the borrower, -PLUS- two current depository account statements that coincide with the last two months of the P&L in both timing and content.
Verbal verification of employment guidance has been updated several times, most recently to restate/clarify documentation requirements including furloughed borrower eligibility, income continuity, DU employment validation, and aging of documentation and new originations.
Power of Attorney and Market-based asset requirements were also updated.
June 11…. Extension of Effective Date –
…. Fannie Mae expects to resume rep and warrant relief for validation of employment after June 30, 2020.
Appraisals (LL 2020-04 update):
June 11…. Updates to HomeStyle Renovation loan requirements in addition to the extension of applicable temporary flexibilities until July 31, 2020.
Freddie Mac has issued several Bulletins since our last blog that address or clarify origination requirements under COVID-19, to include updating their COVID-19 FAQ.
May 22…. Bulletin 2020-17
Bulletin introduces purchase/refinance eligibility similar to Fannie Mae’s eligibility except borrower may not have missed any payments under the current plan, in addition to having made the most recent three payments.
The proceeds from no cash-out or cash out refinances may be used to pay outstanding payments under repayment plans, payment deferrals, trial modifications, or loss mitigation programs.
Lenders are asked to thoroughly review and document payments made on all existing mortgages held by the borrower. If proper documentation requirements are met, then the mortgage should be eligible for rep and warrant relief even though in forbearance.
May 28…. Bulletin 2020-19
This Bulletin looks at qualifying self-employment income, as well as flexibilities in no cash-out refinance scenarios and CHOICERenovation mortgages.
The self-employment guidance introduces P&L requirements similar to that of Fannie Mae; audited year-to-date P&L statement OR unaudited with at least two months bank statements that support/document revenue, expenses and net income.
extends temporary COVID-19 requirements from earlier Bulletins through July.
Quality Mortgage Services is committed to providing the quality control and audit support that your team needs during these unprecedented times.Managing to change and nuanced guidance during a rapidly evolving pandemic work environment is no simple matter.At QMS, we are uniquely positioned to assist your organization in the identification, oversight, and reporting of COVID-19 compliance with Fannie Mae and Freddie Mac temporary flexibilities.Whether you need assistance in mitigating risk associated with COVID-19 flexibilities and CARES Act compliance, or in meeting the daily challenges of ensuring organizational quality control, QMS is your answer to mortgage quality control and audit technology solutions. As a veteran-owned company and a dedicated member of the Mortgage Bankers Association (MBA), QMS is committed to both the industry and our valued customer base in meeting today’s industry challenges. Visit us at www.qcmortgage.com today and find out how our team can help you navigate the current maze of COVID-19 guidance.