The Federal Housing Finance Agency (FHFA) this week proposed new minimum financial eligibility requirements for non-bank seller/servicers doing business with Fannie Mae and Freddie Mac.
The FHFA is proposing setting the minimum net worth requirement for non-banks to $2.5 million, plus 25 basis points of unpaid principal balance (UPB) for total loans serviced. This is the net worth a non-bank seller/servicer must have in order to do business with Fannie Mae and Freddie Mac.
In addition, the FHFA – conservator of Fannie Mae and Freddie Mac – is proposing to set the minimum capital ratio for all non-depository seller/servicers to tangible net worth/total assets of 6%. Depository institutions should continue to comply with the regulatory standard.
What's more, the agency is setting the minimum liquidity requirement for all non-depository seller/servicers to 3.5 basis points of total agency servicing (Fannie Mae, Freddie Mac, Ginnie Mae), plus an incremental 200 basis points of total nonperforming agency servicing in excess of 6% of the total agency servicing UPB.
Allowable assets for liquidity may include cash and cash equivalents (unrestricted); available for sale or held for trading investment-grade securities, including agency mortgage-backed securities, obligations of the government-sponsored enterprises and U.S. Treasury obligations; and any unused/available portion of committed servicing advance lines (a quarterly chief financial officer certification of this information will be required).
The FHFA says the proposed minimum financial requirements are designed to ensure the safe and sound operation of the GSEs and to further FHFA's goal of fostering liquid, efficient, competitive and resilient national housing finance markets.
The FHFA anticipates that the proposed minimum financial requirements will be finalized in the second quarter. They will become effective six months after they are finalized.
Servicers engaged in servicing transfers are required to be in immediate compliance with the new minimum requirements after the effective date.
In a statement, Mark J. O'Brien, chairman and CEO of non-bank mortgage servicer Walter Investment Corp., applauded the FHFA's ‘thoughtful and deliberate approach to developing these requirements.’
‘We have reviewed the proposed standards for our seller/servicer entities that are the entities contractually obligated to the enterprises,’ O'Brien says. ‘Based on our review of the requirements and our preliminary discussions with our counterparties, we expect that our seller/servicers would currently be in compliance with the new requirements as proposed if the proposed rules were in effect today, positioning us to operate and grow our businesses for the foreseeable future. These are proposed requirements that are subject to further development and interpretation and we look forward to engaging with FHFA and the Enterprises as these rules are finalized.’
