Fannie Mae and Freddie Mac should rescind three bulletins issued earlier this year revising both enterprises’ property verification requirements as they have created numerous compliance difficulties, the American Bankers Association, Mortgage Bankers Association and Home Policy Council said today in a joint letter to the Federal Housing Finance Agency. The groups also urged FHFA to recall a related survey of lenders and servicers.
In February, at the direction of FHFA but without prior notice to or engagement with banking or insurance stakeholders, Fannie and Freddie issued bulletins “clarifying” lenders’ and servicers’ responsibilities with respect to the valuation and verification of property insurance requirements. The bulletins state that lenders and servicers are required to verify that homes securing a mortgage purchased by the enterprises are insured at Replacement Cost Value (RCV) and that Actual Cash Value (ACV) coverage is unacceptable.
In their letter, the associations said the revised requirements instead created significant operational, legal and consumer protection questions and challenges. They requested that Fannie and Freddie rescind the bulletins “and affirmatively state that the current industry practice of verifying that an insurance policy pays claims on a replacement cost basis meets [government-sponsored enterprise] requirements.”
The associations also said that while they appreciate agency efforts to engage with the property and casualty insurance sector, the survey currently underway is being conducted “through a non-transparent and non-public process is premature and likely violates the Paperwork Reduction Act.”
“Instead of proceeding with the surveys, we urge FHFA and the GSEs to continue their policy dialogue with the property and casualty insurance sector,” the associations said. “If, after this engagement, FHFA and the GSEs determine that additional information is necessary, they should initiate a transparent and public request for information.”
