We will be making the following changes to two COVID-19 Pandemic related documents:
Explanation of Loan Terms (POA) (Cx23852)
Under FNMA’s and FHLMC’s temporary requirements imposed due to the COVID-19 Pandemic, in connection with certain transactions where an attorney-in-fact exists, the settlement agent or an employee of the lender must, after the Closing Disclosure is provided to the borrower, discuss with the borrower the terms of the transaction. Such a discussion must be memorialized by an acknowledgment (which may include a written acknowledgment) under which the borrower acknowledges his or her understanding of the loan terms (see https://compliance.docutech.com/2020/04/09/new-document-explanation-of-loan-terms-poa-cx23852/ for further details).
Recently, both FNMA and FHLMC announced that these temporary requirements would not be extended past April 30, 2021 (see https://compliance.docutech.com/2021/03/15/compliance-news-fnma-and-fhlmc-to-end-temporary-poa-flexibilities/ for details). For loans with Application Dates of or after May 1, 2021 the temporary requirements will no longer apply and the permanent requirements set forth in FNMA 2021 Selling Guide B8-5-05 and FHLMC Single-Family Seller/Servicer Guide § 6301.4 must be adhered to.
FHLMC requires the following:
“After the finalized Closing Disclosure has been delivered to the Borrower but prior to closing, an employee of the originating lender or settlement agent must explain and discuss the terms of the Mortgage and use of the POA with the Borrower to confirm that the Borrower understands them. This discussion must take place in person, telephonically or using a video conference system and must be memorialized in an acknowledgment by the Borrower of his or her understanding of the terms of the Mortgage. The acknowledgment (i) may be in writing or in a recording of the telephonic or video discussion, (ii) must be retained in the Mortgage file, and (ii) must be made available to Freddie Mac upon request. If the discussion is done using a telephonic or video system, a transcript of the recording or the Borrower’s written acknowledgment of the content of the discussion may substitute for a copy of the recording itself in the Mortgage file.” (Ibid.)
FNMA, however, requires the following:
“In a recorded, interactive session conducted via the Internet, and to the satisfaction of the agent, the borrower must
- confirm their identity;
- after reviewing the required loan documents, reaffirm their agreement to the terms and conditions of the note and security instrument evidencing the transaction; and
- Reaffirm their agreement to the execution of the loan documents by the agent.
At Fannie Mae’s request the lender must produce a recording and other documentary media memorializing the entirety of the interactive session. Such request may be at any time during the term of the related loan. The lender must comply within a commercially reasonable time following such request and without additional expense to Fannie Mae.” (Supra)
A key difference between these requirements is that, while FHLMC holds that a written acknowledgment can be satisfactory for memorializing that the required discussion took place, FNMA does not; they only permit a recording or “other documentary media” to be used for such memorialization.
Since a written acknowledgment does not advance compliance with Supra, we will be configuring Cx23852 so that it will only print for loans intended to be sold to FHLMC (and not to FNMA), with application dates on or after May 1st.
To do this, we have created a new field “Application Date On or After 05/01/2021” (FI 143937) and added it to Conditions 1 and 3 of Cx23852’s print configurations. Effectively, if this field is set to “Yes” (indicating an Application Date equal to or greater than 05/01/2021), only Condition 2 will cause the document to print:
- Base Type = Conventional
- Document Package Type = Closing
- Documents To Use = Freddie Mac
- Power of Attorney (POA) on Loan = Yes
In addition to this change, we will be using FI 143937 to dynamically alter the text within the document. If the Field is set to “Yes”, the only citation referenced will be to “FHLMC Single-Family Seller/Servicer Guide § 6301.4” and the narrative of the document will change from first person to third person.
Borrower’s Income Verification COVID-19 Declaration (Cx23858)
Part of Cx23858 was created to inform borrowers of the forbearance provisions of the Federal CARES Act (see https://compliance.docutech.com/2020/04/17/document-updates-borrowers-income-verification-covid-19-declaration-cx23858/ for details). Under 15 U.S.C.A. § 9056(b), a borrower may request a forbearance due to the COVID-19 emergency, but only during the “covered period.”
Unlike other parts of the CARES Act, “covered period” under Ibid. is not defined, which has led to some ambiguity as to whether the “covered period” is still in effect or not. For example, in a “CARES Act Exam Procedures” publication of the Federal Reserve Board (dated July 7, 2020), the FRB stated the following:
“The provision of the CARES Act is in effect during the covered period, which means the period:
- Beginning on March 27, 2020 (the date of the enactment of the CARES Act), and
- Ending on the sooner of:
- The termination date of the COVID-19 emergency or
- December 31, 2020. . . .” (p. 5; available at: https://www.federalreserve.gov/supervisionreg/caletters/caltr2011.htm)
“Although the single family mortgage provisions in Section 4022 of the CARES Act do not provide a definition for the ‘covered period,’ the Board of Governors of the Federal Reserve (Board) generally regards the definition of the ‘covered period’ in the multifamily mortgage provisions in Section 4023 of the CARES Act [15 U.S.C.A. § 9057] as applicable to Section 4022.” (p. 5, Footnote 15)
This is just one interpretation. The CFPB continues to provide forbearance information to consumers, which information mimics the CARES Act’s forbearance provisions (e.g., see https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/help-for-homeowners/). Overall, there is nothing definitive about whether the “covered period” is still in effect or not.
Due to this ambiguity, we will be slightly modifying the following text in Cx23858 from this:
“. . . the Federal CARES Act (specifically 15 U.S.C.A. § 9056) permits the Borrower(s) to request . . .”
“. . . the Federal CARES Act (specifically 15 U.S.C.A. § 9056 may permit the Borrower(s) to request . . .”
These changes will take effect on April 10, 2021. Note that the changes for Cx23852 hinging on new field “Application Date On or After 05/01/2021” (FI 143937) will be in place on April 10th, but the changes will only be implemented if the Application Date (FI 147) is on or after 05/01/2021. Questions or concerns about these changes may be directed towards Client Support at 1.800.497.3584.
DRs 340870 and 341236