Freddie Mac Updates Servicing Requirements
by: Anna DeSimone
Freddie Mac recently issued two updates to its servicing guidelines: Bulletin 2013-3 on February 13, 2012 and Bulletin 2013-6: on April 15, 2013. Outlined below are the key points to the two bulletins:
Bulletin 2013-3 (2/13/13)
Effective on the date of the bulletin, Freddie Mae published the following updates and revisions to the agency’s Servicing requirements:
Mortgage Assumptions and Modifications for Non-Borrowers. Freddie Mac recognizes that the death of a Borrower could result in the unnecessary displacement of a person with a legal or beneficial interest in the Mortgaged Premises, such as a surviving spouse, unless the Servicer undertakes prompt loss mitigation activities. With the Bulletin, Freddie Mac informed Servicers of their obligations with regard to various transfers of property that may arise and are updating the Guide to reflect these requirements. Please refer to the Bulletin for additional information.
State foreclosure time lines. Effective for all foreclosure sales completed on or after April 1, 2013, Freddie Mac revised its State foreclosure time lines.
State foreclosure time line compensatory fees calculation. Effective for all foreclosure sales completed on or after July 1, 2013, foreclosure sales that result in a third-party sale will now be included in the State foreclosure time line compensatory fee calculation. The date the Mortgage was referred to foreclosure will not have an impact on the effective date of this requirement.
Reimbursement of property inspections. Freddie Mac currently limits the reimbursable amount of property inspections to the total number of monthly inspections that can be completed within the State standard foreclosure time lines. With this Bulletin Freddie Mac notified Servicers that property inspection claims will be reimbursed using required forms and the agency will be announcing a revised structure for requesting reimbursement for property inspections.
Preserving Deficiency Rights. Effective for Mortgages that become delinquent as of June 1, 2013, due to rapidly changing State laws, Freddie Mac will no longer provide a list of States in which its Servicers are required to preserve its right to pursue a deficiency. Instead, in all instances where additional attorney fees/costs will not be incurred above the approved expense limits set forth in the Guide.
Servicer Attorney Tracking System (SATS). Effective June 1, 2013, all new referrals for Freddie Mac Default Legal Matters must be sent to law firms that Servicers have selected and engaged in accordance with the requirements of Chapter 69, Selection, Retention and Management of Law Firms for Freddie Mac Default Legal Matters. Additional information and resources are available on the SATS web site, https://freddiemacsats.com.
Hardest Hit Fund Modification Assistance Updates. Bulletin 2012-17 provided requirements for Servicer participation in HFA modification assistance programs that offer HHF funds to be applied to curtail principal. In that Bulletin, Freddie Mac required that the approved modification include partial principal forbearance in order to participate in modification assistance programs that include principal curtailment.
Reinstating Mortgages in Foreclosure Status. Freddie Mac updated the Guide to provide further guidance on reporting payments received during the Trial Period and the activities a Servicer must undertake after determining a Borrower has not successfully completed a Trial Period Plan, such as under the Home Affordable Modification Program (HAMP) modification or for a Freddie Mac Standard Modification.
Revisions To Form 710 And Medical Hardship Documentation Requirements. Freddie Mac revised Form 710 to reflect that detailed medical information is not required to support the hardship category “Long-term or permanent disability; serious illness of a Borrower/co-Borrower or dependent family member.” The list of acceptable documentation to support this hardship has been reordered and now includes an additional option of “Written statement or other documentation verifying disability or illness.”
Revisions To Borrower Income Verification Requirements. Freddie Mac revised Section 65.18, Borrower Income Documentation, to eliminate the requirement that the Servicer determine that alimony, child support or separate maintenance will continue for the next three years in order for the income to be considered in calculating the terms of the modification.
Obtaining a Property Value For a Standard Short Sale When Borrower Is Current Or Less Than 31 Days Delinquent. In Bulletin 2012-16, Freddie Mac introduced a new process for obtaining a property value and minimum net proceeds via the Service Loans application for a Standard Short Sale when the Borrower is 31 days or more delinquent. With this Bulletin, Freddie Mac updated the Guide to require Servicers to follow this same Service Loans application process for Servicers when the Borrower is current or less than 31 days delinquent. As a result of this change, Servicers may no longer obtain a property value via BPOdirect® if the Borrower is current or less than 31 days delinquent and is being considered for a Standard Short Sale. Likewise Servicers must no longer send an e-mail request to shortsales@freddiemac.com to obtain the minimum net proceeds for these Borrowers.
Home Affordable Foreclosure Alternatives (HAFA) Expiration. In Bulletin 2012-16, Freddie Mac announced the expiration of the HAFA initiative. In order for a Borrower to be eligible for HAFA, the Servicer must have received a fully executed Short Sale Agreement (“SSA”) or Deed-in-Lieu Agreement (“DIL Agreement”) from the Borrower by December 31, 2012. Chapter D65 remains available for Servicer reference to review HAFA Short Sale and HAFA Deed-in-Lieu eligibility and evaluation requirements and utilize the HAFA settlement requirements to close out their final HAFA files.
Reduced, Suspended Or Denied Mortgage Insurance Claims. Effective January 1, 2013, in Bulletin 2012-20, Freddie Mac announced certain changes that included permitting Servicers 60 days to remit payment or appeal if offered a repurchase alternative in lieu of requiring immediate repurchase. The agency has updated Section 70.10 to provide that effective January 1, 2013, Freddie Mac will notify Servicers by letter of reduced, suspended or denied claims, and the letter will include the remedy requested.
Bulletin 2013-6: Servicing (04/15/13)
Effective on the date of the bulletin, Freddie Mae published the following updates and revisions to the agency’s Servicing requirements:
Updating the Guide to reflect the retirement of the Freddie Mac Home Affordable Foreclosure Alternatives (HAFA) Default-Related Legal Services. Effective June 1, 2013, unless otherwise noted, as a follow up to Bulletin 2012-25, Freddie Mac is updating the allowable amounts for attorney fees related to foreclosure, DIL and bankruptcy, and announcing changes to the reimbursement process due to the new requirements of Guide Chapter 69, Selection, Retention, and Management of Law Firms for Freddie Mac Default Legal Matters,which also go into effect on June 1, 2013.
Attorney fee reimbursement limits. Freddie Mac is updating the maximum allowable amounts it will reimburse Servicers for attorney fees related to foreclosure and DIL in certain jurisdictions. Additionally, for bankruptcy fees, Freddie Mac is updating the current structure from a baseline attorney fee model to a “Menu Billing” fee model nationwide. “Menu Billing” allows firms to be paid when they have achieved certain milestones during the bankruptcy proceeding.
Changes to the reimbursement process. Freddie Mac is also announcing changes to the Reimbursement System to align with the requirements of Chapter 69. These changes will support and enhance new or existing processes, and retire expiring processes. The Reimbursement System will continue to process all 104DC claims created and submitted to Freddie Mac prior to June 1, 2013. All claims that are submitted on or after June 1, 2013, including Servicer reimbursement claims for fees paid to designated counsel firms, must be submitted using the expense codes on the 104SF claim. Please refer to the Bulletin for additional information.
Seller/Servicer and Mortgage Insurance Company Information Disclosure Requirements. Effective July 31, 2013, Freddie Mac, at times, may need to verify directly with MIs the presence and nature of mortgage insurance coverage on Mortgages sold to and serviced for Freddie Mac. In order to expedite this verification process and facilitate the completion of other day-to-day activities, Freddie Mac is updating the Guide to require that its Seller/Servicers direct MIs in writing to release data to Freddie Mac at Freddie Mac’s request. Seller/Servicers must instruct each MI that currently provides, or that in the future may provide, coverage on Mortgages it sold to and/or services for Freddie Mac to comply with any Freddie Mac request for information, data and materials relating to Freddie Mac Mortgages.
Trial Period Plans – Interim month reporting. The Guide has been updated to provide Servicers with requirements for reporting the optional interim month during a Trial Period Plan via Electronic Default Reporting (EDR). These requirements apply to Home Affordable Modification Program (HAMP), Freddie Mac Standard Modification (“Standard Modification”) and Freddie Mac Streamlined Modification (“Streamlined Modification”) Trial Period Plans. Per the existing Guide requirements, Servicers may, at their option, elect to use the interim month in the event that a Borrower does not pay the final Trial Period payment on or before the due date set forth in a Trial Period Plan Notice. When Servicers elect to use this option, they must prepare the modification agreement such that the Modification Effective Date and the first modified payment due date is the first day of the second month following the final Trial Period month.
Bankruptcy during the Trial Period. In addition, Servicers are reminded that Borrowers who are in a HAMP modification, Standard Modification or Streamlined Modification Trial Period Plan and subsequently file for bankruptcy may not be denied a modification on the basis of the bankruptcy filing. Servicers should extend the Trial Period Plan as necessary to accommodate any delays in obtaining court approval or receiving a full remittance of the Borrower’s Trial Period payments when they are made to a trustee, but the Trial Period must not be extended beyond two months, resulting in a total five-month Trial Period. Borrowers must make a Trial Period payment for each month of the Trial Period, including any extension month(s), in order to remain eligible for a HAMP modification, Standard Modification or a Streamlined Modification.
Servicing Success Program Changes – File Review documentation. To provide general consistency with other file request time lines, we have increased the time frame for Freddie Mac’s receipt of the requested Servicer Success File Review documentation from 10 calendar days to 30 calendar days from the date of the letter requesting the documentation, or such other time frame Freddie Mac specifies in the request. The Guide has been amended to clarify that any response or appeal to the File Review findings must be predicated on previously submitted documentation. Freddie Mac will not accept any documentation with the appeal that the Servicer failed to submit in response to the File Review request.
About the Author:
Anna DeSimone is President and Founder of Bankers Advisory, Inc. She can be reached at anna@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
Comments are closed.