FANNIE MAE LENDS A HAND TO ARM LENDERS AND BORROWERS
Fannie Mae recently revised its Servicing Guide to give lenders more flexibility in dealing with delinquent borrowers. Lenders are now permitted to modify existing adjustable rate mortgages, in addition to fixed-rate mortgages.
Fannie Mae still requires its prior approval, plus the approval of any mortgage insurer, before it will permit any modifications. Lenders should keep in mind that the purpose of the modification should be to permit the borrower to bring a delinquent mortgage current and keep it that way. Any mortgages in an MBS pool must first be removed from the pool before it can be modified.
Available Modifications
Permissible modifications include extending the term of the mortgage, reamortizing the outstanding debt, changing adjustable rate mortgages to fixed-rate mortgages, capitalizing delinquent interest and escrow items, or reducing the interest rate below market rates. Contact Fannie Mae directly to determine what options are available and to obtain approval for a modification.
What Forms Do You Need?
Fannie Mae has enhanced its form offerings for modifications.
- The VMP-852 series (Loan Modification Agreement) can now be used to modify either a fixed-rate mortgage, or an adjustable rate mortgage that the borrower has agreed to change to a fixed-rate mortgage.
- The VMP-898 series (Loan Modification Agreement, Adjustable Interest Rate) is a new form for modifying adjustable rate mortgages, which will retain their adjustable rate features.
- The VMP-854 series (Loan Modification Agreement, Step Interest Rate) is another new form. It is used for modifying either fixed-rate or adjustable rate mortgages where the interest rate changes over a period of time—either from a lower fixed interest rate to the original interest rate, or from an adjustable interest rate to a fixed interest rate.
It is anticipated that all of these forms will be available through Wolters Kluwer Financial Services by January of 2007. Please contact your Account Executive for more details.
FEDERAL AGENCIES PROVIDE BOOKLET ON NONTRADITIONAL MORTGAGES
The Federal Reserve Board, in conjunction with other federal financial regulatory agencies, created a new booklet for consumers entitled, Interest-Only Mortgage Payments and Payment-Option ARMs—Are They for You?
The booklet is intended to explain the key terms and standards that a consumer would need to understand in order to make an informed decision before entering into a nontraditional loan transaction. It focuses on interest-only mortgages and adjustable rate mortgages with minimum payment options.
Featuring a glossary, a worksheet for comparing loans, and additional resources for consumers, the booklet also explains some of the risks and dangers involved in entering into a nontraditional mortgage.
Federal agencies feel this booklet is necessary right now because nontraditional mortgages have become increasingly popular. The loans are being offered to many borrowers who would not be able to qualify for other mortgages, or who might not understand the implications and risks of nontraditional mortgages, which may include future increased monthly payments.
The booklet is not a mandatory disclosure, so lenders have the option of providing it to nontraditional mortgage customers. Wolters Kluwer Financial Services will be offering the booklet to customers in electronic and preprint forms (VMP-12), along with the new e-Forms versions of the CHARM booklet (VMP-20) and the HUD Settlement Costs Disclosure (VMP-18). Please check with your Account Executive for availability.
FREDDIE MAC TO MAKE CONSTRUCTION LENDING EASIER
Freddie Mac recently announced changes to its Selling/Servicer Guide that will make new home construction mortgages more attractive to lenders. Among the changes is Freddie’s plan to streamline the lending process by removing the separate time lines for origination, construction or renovation, and sale. Freddie also plans to extend the time period between the earliest credit documentation and sale of the permanent mortgage—from 6 months to 18 months.
These changes would not only accommodate unexpected changes in construction schedules, but will also assist homeowners affected by Hurricanes Katrina, Rita, and Wilma. Construction and renovation in these areas have been especially slow, so the extra time will assist those borrowers waiting for grants or insurance proceeds to begin repairs.
Wolters Kluwer Financial Services recently conducted a survey of its customers, inquiring about their construction loan products. Due to pending Freddie Mac changes, we would welcome any input you have regarding your current construction loan offerings, as well as suggestions on your ideal construction loan product offering.
Please contact your Account Executive to share your thoughts, so that we may continue providing you with the most complete mortgage solutions available.
CAN ENTERPRISE-WIDE COMPLIANCE GIVE YOU AN EDGE?
In today’s competitive business environment, financial institutions across the country are turning to enterprise-wide compliance strategies for a more streamlined process and a competitive advantage.
Free On-Line Executive Briefing From TowerGroup and Wolters Kluwer Financial Services
Enterprise Compliance: Today’s Payoff, Tomorrow’s Preparation discusses how to keep your organization competitive and realize timely gains, while taking steps that are extensible across your entire enterprise.
In particular, this free On-Line Executive Briefing focuses on how you can incrementally implement an enterprise approach to compliance, so you can take advantage of growth opportunities and gains today and pave the way for even more success in the future.
Register today!
Enterprise Compliance: Today’s Payoff, Tomorrow’s Preparation
Presented by TowerGroup and Wolters Kluwer Financial Services
Tuesday, December 12, 2006
2 p.m. - 2:30 p.m. (Eastern Time)
You’ll learn about key benefits and best practices, including:
- What it means to take an enterprise approach to compliance
- Business imperatives that make this both an opportunity and a necessity
- The enterprise roadmap—including what you can do to take advantage of today while preparing for tomorrow
- Examples of how enterprise compliance is used in mortgage and consumer arenas
- The top five most important technical requirements for implementing an enterprise compliance strategy
To learn more and to register, please go to our On-Line Executive Briefings web page.
