Written By: Frankie Lacy, Op-Ed Writer
As of January 12, 2014 Freddie Mac Loan Prospector will issue new recommendations in response to the final CFPB’s Ability to Repay and Qualified Mortgage rules. The feedback messages will address the following loan types:
• Higher Priced Mortgage Loans, specifically ARM’s with initial periods of 7 or 10 years
• Higher Priced mortgage Loans in relief refinance programs
• Home Possible loans with terms exceeding 30 years
Below are the actual messages that will return on the LP findings when any of the above mentioned scenarios apply:
Message Code Feedback Messages
LB The Seller must determine if the Relief Refi Mortgage-Open Access is a higher priced covered transaction as defined in Reg Z, 12 C.F.R. 1026.43(b) (HPCT). If the Relief Refi Mortgage-Open Access is a HPCT with an Application Received Date on or after 1/10/2014 the maximum DTI ratio is 45% and the minimum Indicator Score is 620, regardless of the Debt Ratio and Indicator Score on the LP Feedback Certificate. The Seller must manually apply these requirements.
LC The Seller must determine if an ARM with an Initial Period of 7 or 10 years is a higher priced covered transaction as defined in Regulation Z, 12 C.F.R. 1026.43(b)(HPCT). If the ARM is an HPCT with an Application Received Date on or after 1/10/14 the Borrower must be qualified at the greater of the Note Rate or the fully-indexed rate; the greater of the Note Rate or the fully-indexed rate must be entered in the "Qualifying Rate" field.
LD Mortgages with original maturities over 30 years must have Application Received Date prior to January 10, 2014 and Settlement Date on or before July 31, 2014.
Freddie Mac has also made adjustments to their AllRegs single-family seller/servicer guide. They have added an inline revision history feature. This will allow more visibility of all the changes made throughout the year directly in line with each topic in the guide. Recent guideline additions will be color coded green. There is also a quick access feature to guide bulletins for changes announced in 2013 and beyond.
On Freddie Mac’s website, they have added a historical guide snapshot section which offers the previous year’s guide in one singe pdf document. In addition, there is now a guide update spreadsheet page which displays affected guideline provisions by subject in a customizable Excel spreadsheet.
In light of these updates, Freddie Mac recommends lenders visit their website FreddieMac.com frequently to review their latest announcements. Explore the new features in AllRegs and on the site to get familiar with all the available guideline formats. Finally, you can subscribe to an email update list on the Single-Family Business News Subscription Center.
About The Author
Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.