GSEs tweak guidelines after government grinds to a halt
Fannie Mae and Freddie Mac are easing some regulations for lenders during the US government shutdown, issuing new procedures for mortgage companies to follow if that impasse affects aspects of their business.
The government-sponsored enterprises (GSEs) released guidance Wednesday for lenders to follow if they face challenges gathering standard employment or income verification, while temporary measures for flood insurance verification were also introduced.
The new rules, which are effective immediately, will automatically end when lawmakers strike a deal to get the government back up and running.
Freddie Mac said it would allow year-to-date paystubs to be dated over 30 days before the Application Received Date as long as the paystub is from the pay period immediately before the shutdown-related interruption to payroll.
Meanwhile, if a seller can’t obtain a 10-day PCVs (pre-closing verifications) solely because of the shutdown, they’re not required to do so before the delivery date – “provided that the Mortgage file contains a written statement from the Seller documenting the steps the Seller took to meet the requirement and that the requirement could not be met as a direct result of the shutdown,” Freddie said.
“The Seller warrants that the Borrower is employed at the time the Mortgage is delivered to Freddie Mac.”
If the shutdown is continuing on or after November 3, sellers must verify the greater of two months reserves, or the minimum reserves required by Loan Product Advisor (for those mortgage types) and the minimum reserves required in Section 5501.2(b) (for manually underwritten mortgages).
The GSE said its requirements for flood insurance remain unchanged if the National Flood Insurance Program’s (NFIP) authority to issue policies and increase coverage on existing policies expires.
Sellers and servicers originating mortgages for sale to Freddie must continue to perform flood zone determinations to meet requirements for flood insurance during a lapse in the NFIP’s authority, while properties located in special flood hazard areas securing mortgages owned by and delivered to Freddie must have either flood insurance coverage or acceptable evidence of pending issuance.
The GSE’s full guidance to lenders can be viewed here.
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