Fannie Mae and Freddie Mac Update Origination and Appraisal Guidance Based on COVID-19 and Suspend Bulk Purchases
On May 5, 2020 Fannie Mae updated Lender Letter 2020-03 and Lender Letter 2020-04 and Freddie Mac issued Bulletin 2020-14, to update and extend temporary origination and appraisal guidance based on COVID-19. The Freddie Mac Bulletin addresses the temporary guidance in Bulletins 2020-11, 2020-8, and 2020-5.
We previously addressed the original guidance and prior updates in alerts on April 15, April 2, and April 1.
Temporary policies previously announced in the guidance that apply to loans with application dates on or before May 17, 2020, are now extended to loans with application dates on or before June 30, 2020.
The agencies also address unemployment benefits and furloughed employees. The agencies advise that unemployment benefits may be used to qualify a borrower only when associated with seasonal employment in accordance with the requirements set forth in their guides. The agencies also advise that furloughed employees do not qualify under their guidelines for temporary leave income policy, with Fannie Mae noting that such employees are not able to provide evidence of a stable and reliable flow of employment-related income.
The agencies announce that they are temporarily suspending bulk purchases of loans, and are requiring that all loans sold to them be no more than six months old at the time of sale. The agencies provide details on how the age of loans will be calculated.
Fannie Mae advises that for new Desktop Underwriter® (DU®) loan casefiles created on or after May 4, 2020 through June 30, 2020, it is suspending representation and warranty relief for employment verification within the Desktop Underwriter® (DU®) validation service. Previously, Fannie Mae announced the temporary suspension of employment validation within the Desktop Underwriter® (DU®) validation service “in response to COVID-19’s unprecedented impact on employment.”
Freddie Mac advises that if a seller discovers that a loan it sold to Freddie Mac was in forbearance prior to its eligibility for purchase, or has delivered such a loan to Freddie Mac without a required data point, the seller must report such finding to Freddie Mac within 30 days of discovery. Previously, Fannie Mae and Freddie Mac announced the temporary eligibility for sale of mortgage loans in a COVID-19 forbearance, subject to conditions.
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