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From Banking and Finance Law Daily, February 2, 2015

FHFA proposes minimum financial eligibility requirements for GSE servicers

By Stephanie K. Mann, J.D.

The Federal Housing Finance Agency has proposed new minimum financial eligibility requirements for Fannie Mae and Freddie Mac Seller/Servicers. According to FHFA, these newly proposed eligibility requirements align the minimum financial requirements for mortgage Seller/Servicers to do business with Fannie Mae and Freddie Mac. The proposed minimum financial requirements include net worth, capital ratio, and liquidity criteria for the Enterprises’ Seller/Servicers.

The proposed minimum financial requirements would ensure the safe and sound operation of the Enterprises and further FHFA’s goal of fostering liquid, efficient, competitive, and resilient national housing finance markets. FHFA is releasing the proposed criteria to provide greater transparency, clarity, and consistency to industry participants and other stakeholders. FHFA and the Enterprises will engage with servicing industry participants, regulators, and other stakeholders to obtain their feedback and improve their understanding.

After reviewing industry and stakeholder feedback, FHFA anticipates finalizing these requirements in the second quarter of 2015, and anticipates that the requirements will be effective six months after they are finalized.

According to the Frequently Asked Questions, any Seller/Servicer that does not meet the new minimum financial requirements must take steps to be in compliance as of the effective date. If a Seller/Servicer is not in compliance with the new minimum financial requirements as of the effective date, the Enterprises will have the discretion to take appropriate action, including termination of the Seller/Servicer.

Waters support. Following the announcement by FHFA, Rep. Maxine Waters (D-Calif) commended the agency saying, “I commend Director Watt and the FHFA for proposing robust standards for non-bank servicers. After the explosive growth of nonbank servicing following the crisis, not to mention the litany of consumer complaints against them, strong requirements are important to ensure that taxpayers are being protected and that our nation’s homeowners are no longer falling victim to harm.”

Companies: Fannie Mae; Freddie Mac

MainStory: TopStory GovernmentSponsoredEnterprises Mortgages

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