WASHINGTON – Fannie Mae and Freddie Mac said they are temporarily relaxing certain requirements for lenders in an effort to minimize disruptions in loan approvals during the shutdown of the federal government.
Fannie and Freddie have issued guidance proposing alternative procedures for mortgage lenders to follow if the shutdown hinders their ability to gather standard employment or income verification, as well as temporary measures for the National Flood Insurance Program.
“We appreciate the understanding and consideration that Seller/Servicers extend to Borrowers coping with the hardships imposed by the shutdown,” Freddie Mac Senior Vice President of Single-Family Seller Engagement Kevin Kauffman stated in a note to lenders.
Although Fannie and Freddie are effectively owned by the U.S. Treasury, their operations are not affected by the government shutdown, because they are self-funded and do not rely on congressional appropriations.
The new guidelines for mortgage lenders are effective immediately and will expire automatically when the federal government resumes full operations, the organizations said.
Temporary Rules for Flood Insurance
In addition, until Congress passes a new spending bill, the National Flood Insurance Program (NFIP) is unable to write new policies, although existing policies remain in force and the program will continue to pay claims.
NFIP provides more than 90% of flood insurance policies sold across the country.
The new guidance issued by Freddie Mac still requires flood insurance for at-risk homes, but will allow mortgage borrowers to submit proof that they have applied for an NFIP policy, even if the policy hasn’t been issued yet.
When the shutdown ends, lenders will be required to verify that the borrower actually obtained flood coverage that meets standard requirements, the GSEs said.
Waivers for Federal Employees
Fannie and Freddie’s new guidance also states that for federal employees, lenders can waive verification of employment if they document the steps taken to verify employment and certify that the shutdown prevented them from obtaining verification.
For federal workers, the temporary rules also waive the requirement that their pay stubs be dated no earlier than 30 days before the initial loan application, according to the two companies.
