Federally Related Transactions

[TerryRohrer]

It is commonly believed that loans intended to be insured by GSEs and Federal agencies are not classified as Federally Related Transactions. The notion is stated as fact in older AF posts, but I have been unable to find a definitive, authoritative source that supports that belief. Anyone know of such a source?

 

[Joe Flacco]

I don't think I have never heard anyone claim that loans delivered to the GSEs are not FRT, but I have heard FRT used to describe loans that are not for delivery to the GSEs.

 

[Mike Ault]

Are mortgage loans handled by Fannie Mae or Freddie Mac classified as federally related transactions?

No, mortgage loans handled by Fannie Mae or Freddie Mac are not classified as federally related transactions (FRTs). The EGRPRA report concludes that transactions by these government-sponsored enterprises (GSEs) are excluded from FRTs:

• Fannie Mae and Freddie Mac: These private companies are sponsored by the US government. They purchase mortgages from lenders, package them into securities, and sell them to investors. They guarantee the timely payment of those securities.
  
  
• Other GSEs: The USDA, the VA, and FHA are also excluded from FRTs.

Here are some other facts about Fannie Mae and Freddie Mac:

• They are regulated by the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA).
  
  
• They are exempt from state and local taxes.
  
  
• They provide liquidity, stability, and affordability to the mortgage market.
  
  
• They have been under government control since September 7, 2008, at the height of the financial crisis.
  
  
• They have required roughly $150 billion in taxpayer support to stay solvent.
  
  
• They are responsible for a combined $5 trillion in mortgage assets.

Are mortgage loans handled by Fannie Mae or Freddie Mac classified as federally related transactions? - Google Search

The EGRPRA report

https://www.FDIC.gov/laws-and-regul...h-and-regulatory-paperwork-reduction-act-1996

 

[TerryRohrer]

Just a few random examples from over the years. I have seen the claim many times, but never bothered to verify:

Post in thread 'I'm Conflicted - Should I Do These Reports?'

Oct 31, 2017

USPAP
Being Competent
1. the ability to properly identify the problem to be addressed; and
2. the knowledge and experience to complete the assignment competently; and
3. recognition of, and compliance with, laws and regulations that apply to the appraiser or to the
assignment.

IAEG
An institution should obtain an appraisal that is appropriate for the particular federally related transaction, considering the risk and complexity of the transaction. The level of detail should be sufficient for the institution to understand the appraiser's...

• timd354

Post in thread 'Freddie Mac Oks Appraisal Alternative For Some Mortgages'

Sep 1, 2017

Of course, if they were privatized then they may be forced to follow the IAG appraisal requirements.

Not unless the existing regs are re-written. The IAEG (and the way it is interpreted) has always exempted GSE transaction form the definition of federally related transactions that require an appraisal, going all the way back to original IAEG proulgated in 1992 (or was it 1994?), well before the GSE's were placed in conservatorship.

• timd354

• 

Post in thread 'Value Definition For Set Price Site In Co-housing Development'

May 23, 2016

I'd guess anything transacted in US dollars is a Federal transaction as its a federal currency.

And you would be wrong. Federally related transactions are specifically defined and DO NOT include Fannie Mae, Freddie Mac FHA or VA transactions

• Howard Klahr

Post in thread 'redesigning the 1004'

Jun 12, 2013

Do away with Fannie , Freddie and their soon to be replacement FMIC designing the appraisal forms and actually let the appraisers design them.
Why is it that appraisers can write the USPAP but can't be trusted to create an appraisal form for Federally related loan transactions?
Just let the design be done by appraisers already!

SAY GOODBYE TO CERT #23!

Maybe we could start with getting appraisers to understand that Fannie Mae, Freddie Mac, FHA, USDA, etc are in fact NOT federally related transactions.

• Howard Klahr

 

[TerryRohrer]

Are mortgage loans handled by Fannie Mae or Freddie Mac classified as federally related transactions?

No, mortgage loans handled by Fannie Mae or Freddie Mac are not classified as federally related transactions (FRTs). The EGRPRA report concludes that transactions by these government-sponsored enterprises (GSEs) are excluded from FRTs:

• Fannie Mae and Freddie Mac: These private companies are sponsored by the US government. They purchase mortgages from lenders, package them into securities, and sell them to investors. They guarantee the timely payment of those securities.
  
  
• Other GSEs: The USDA, the VA, and FHA are also excluded from FRTs.

Here are some other facts about Fannie Mae and Freddie Mac:

• They are regulated by the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA).
  
  
• They are exempt from state and local taxes.
  
  
• They provide liquidity, stability, and affordability to the mortgage market.
  
  
• They have been under government control since September 7, 2008, at the height of the financial crisis.
  
  
• They have required roughly $150 billion in taxpayer support to stay solvent.
  
  
• They are responsible for a combined $5 trillion in mortgage assets.

Are mortgage loans handled by Fannie Mae or Freddie Mac classified as federally related transactions? - Google Search

The EGRPRA report

https://www.FDIC.gov/laws-and-regul...h-and-regulatory-paperwork-reduction-act-1996

Thank you, sir! I appreciate it. I couldn't get google to reveal anything but garbage!

 

[Mike Ault]

Thank you, sir! I appreciate it. I couldn't get google to reveal anything but garbage!

I glanced through "the EGRPRA Report" at that second link but soon determined that I would conserve the effort unless/until it was really needed to keep me out of appraiser jail.

 

[TerryRohrer]

I glanced through "the EGRPRA Report" at that second link but soon determined that I would conserve the effort unless/until it was really needed to keep me out of appraiser jail.

Yikes! That was enough for me, as well. Apparently, "paperwork reduction" means to exclude paper copies and multiply the total pile of crap by 100 fold and dump it on the internet!

 

[sputnam]

Many lenders are federally chartered. All of them are subject to federal regulations. I suspect that if it ever came up in a legal situation, the court might stretch to say that all of those are FRTs. Stay safe out there.

However, I'd bet that if you enter 'federally related transactions real estate' in your favorite search engine, you'd find a definitive answer.

 

[Dale Floyd]

I realize I’m not the sharpest pencil in the box, and that more astute thinkers believe differently, but has anybody ever thought about the logic behind the phrase “Federally Related Transaction”?

We all know “Federally” references government. We all know “Related” means there is some kinship tying the issue to the government. We all know “Transaction” points a finger to the exchange taking place, which is the debt in this case.

Why can’t a lender loan 3000% of a property’s value in a standard mortgage origination? Because there are non-negotiable rules either from the state (if state chartered) or the OCC (if federally chartered) that prohibits it. If the lender is a bank or a depository, they must have FDIC insurance which is government backed and mandated. FDIC also requires a set of parameters involving lending practices, including mortgages, to prevent the depository from risking the deposits the insure. They routinely audit to enforce compliance.

In that vein - How can any loan or mortgage originated by a depository of any kind NOT be a Federally Related Transaction since there are lending rules from the government that are regulated and audited for compliance?

 

[BRCJR]

The Interagency Appraisal and Evaluation Guidelines exempt loans sold to GSE's from following the IAEG.
So, are those appraisals for a FRT?