Here is an interesting question for anyone who sells a loan to an investor/servicer: If the loan is modified, are you, as the seller, still “on the hook” for the reps and warranties you gave when you sold the original loan? Servicers use the Home Affordable Modification Program (HAMP) and other non-HAMP modification efforts to avoid foreclosure whenever possible and keep the borrowers in their homes. Some servicers, such as Wells Fargo, may have a policy that states “we consider loan modification activities intended to keep borrowers in their homes, and pursuit of remedies for a breach of Representations and Warranties under the Loan Purchase agreement, to be distinct and independent events.” So if a loan undergoes loss mitigation (like a modification of unpaid principal balance, interest rate, etc.), the servicer treats that process as a separate issue then when a defect is identified in a loan which results in a contract remedy. So check with your servicer – you may not be “off the hook” for your obligations.
One of the best statements that I have heard regarding the RESPA changes in 9 days came from a top mortgage banker, who simply said,“We don’t know how much we don’t know.” Broadly speaking, on 1/1 companies should know about a new Good Faith Estimate, new HUD-1/HUD-1A Settlement Statement, tolerance limits, and changes to the disclosure of Yield Spread Premium. Franklin American Mortgage Company told clients that they will adhere to the new requirements and will purchase loans that are in compliance with the requirements of the RESPA Act, and will enforce the requirements of the new RESPA regulations effective with January 1st applications.
Who says deals aren’t done during the week leading up to Christmas? Mason Dixon Funding, out of Maryland, was purchased by Embrace Home Loans.