Market Analysis: Taking On A New GSE Rule

*Taking On A New GSE Rule*
**By Tony Garritano**

***First off, welcome back from your Memorial Day vacation. I hope you enjoyed it! Now, back to business. You guessed it, I’m going to talk about even more new regulation coming out of the GSEs. When is enough enough? Today servicers are struggling to meet Fannie Mae’s requirement that homeowners association (HOA) claims be satisfied in order to preserve the GSE’s first lien position. The requirement, specified in Servicing Guide Announcement SVC-2012-05 ( was published on April 11th and is slated to take effect on July 1, 2012. PROGRESS has gotten the scoop on one way that you can comply with this new rule. Here’s the story:

****Sperlonga Data and Analytics of Arlington, Virginia, a recipient of our Innovations Award and a subsidiary of national real estate asset firm MMREM, announces that it is immediately able to assist lenders and servicers. According to the GSE’s announcement, “Fannie Mae requires servicers to protect the priority of the mortgage lien and to clear all liens for delinquent homeowners’ association (HOA) dues and condo assessments on properties acquired through foreclosure or deed-in-lieu of foreclosure.” The GSE requires that servicers advance payments to HOAs when borrowers are 60 days delinquent on assessments if the lender’s first position status is at risk. In the case of foreclosures or deeds-in-lieu of foreclosure, such liens must be cleared no later than 30 days after the foreclosure sale or deed-in-lieu acceptance.

****“The first problem,” says Brent Stokes, Sperlonga Data & Analytics’ senior vice president, “is that most servicers have not maintained a database or tracked the primary or secondary HOAs associated with a property after loan origination. HOAs don’t typically know how and where to present claims for unpaid accounts, so neither can easily find the other.” This is where Sperlonga comes in, Stokes explains. “We have built the industry’s only broad database of the nation’s HOAs, presently consisting of about 225,000 associations of the estimated 350,000 out there, and it is growing daily,” he says. “We find the HOAs, establish contact, and use our cloud-based technology platform to deploy our Delinquency Checkservice to vet HOA demands for accuracy and prevent servicers from overpaying amounts inconsistent with the GSE’s reimbursement guidelines.”

****Another problem servicers have in complying with the new requirement is knowing precisely when their borrowers are 60 days behind on their HOA payments. “There is simply no way for them to have knowledge of when HOA payments ceased,” says Stokes.  “So we created LOLAS, Sperlonga’s Life of Loan Association Surveillance product. LOLAS tracks HOA assessments and provides servicers with a mechanism that makes it easier to comply with the new guideline,” he says. “At the same time, servicers receive early warning of impending loan defaults because HOA payments always stop before loan payments do.”

****He adds that Sperlonga’s service couldn’t come at a better time. “In the 16 ‘super-lien’ states and the District of Columbia HOA liens can take precedence over first mortgages, so Fannie Mae and other investors are understandably concerned,” Stokes notes. “They are not saying how the lien-clearing and delinquency tracking process can be accomplished, but that’s not their job. Servicers can turn to Sperlonga for assistance well within the time constraints that the GSE is requiring,” he says. “We make this a remarkably simple process despite the daunting challenge it presents to servicers and lenders.”

****Sperlonga was established in 2011 by Matt Martin, CEO of MMREM, a real estate asset management firm that remarkets thousands of properties across the country for HUD and other parties. He constantly found that HOA claims cropped up at the last moment to derail transactions and often included inflated amounts that were not the responsibility of his clients. “It was a huge problem and one that was growing rapidly,” Martin says. “I was very surprised to learn that data and contact information on HOAs was not available anywhere. So we decided to develop our own database and services to make sure all parties could quickly satisfy rightful claims for the benefit of all concerned,” he recounts. “We built the technology, started to assemble the data, and intend to have most of the nation’s HOAs in Sperlonga’s database by the end of the year.”

****Stokes, who has worked with Martin on Sperlonga from its earliest conceptual stages, says the looming prospects of potentially expensive HOA problems were evident right from the beginning. “HOA ownership includes more than 25 million homes and that number is increasing,” he says. “The associations and their management companies badly need their monthly revenues to maintain community standards and preserve property values.  Fannie Mae has given their claims priority with the new rules,” he notes. “Sperlonga was designed specifically to address the HOA challenges that servicers face, and now we can help them comply and protect the GSE’s first lien positions,” he adds.