Home / News / Foreclosure / GSEs Issue New Servicing Guidelines for Delinquent Mortgages
Print This Post Print This Post

GSEs Issue New Servicing Guidelines for Delinquent Mortgages

""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com are issuing new guidelines to servicers in order to align their procedures for handling past-due mortgages.

[IMAGE]

The objective is to ensure consistent servicing requirements for loans handled on behalf of the GSEs across four key areas: borrower contact, delinquency management practices, loan modifications, and foreclosure timelines.

The new approach provides monetary incentives for servicers that perform well and imposes fines on those that do not.

Edward DeMarco, acting director of the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) says the new directive should result in earlier servicer engagement to identify the best solution available for homeowners, given their individual circumstances.

""Once fully implemented by the servicing industry, the enterprises' aligned policies should give homeowners a greater understanding of the process and faster resolution by requiring earlier contact, more frequent communication, and prompt decisions,"" DeMarco said. ""Equally important, the newly aligned policies will minimize taxpayer losses by ensuring that enterprise loans are serviced efficiently and fairly.""

[COLUMN_BREAK]

The updated guidelines specifically address the so-called ""dual track"" issue by requiring servicers to contact borrowers as soon as they become delinquent and focus solely on remediating that delinquency. The foreclosure process may not commence if the borrower and servicer are engaged in a ""good-faith effort"" to resolve the delinquency.

The servicer must conduct a formal review of each case to ensure a borrower has been considered for foreclosure alternatives before the loan is referred for foreclosure. Even after foreclosure processing begins, financial incentives are provided to encourage servicers to continue to help borrowers pursue a foreclosure alternative.

Consistent with statements recently issued by federal and state regulators, DeMarco says this initiative is intended to deal with identified problems in mortgage servicing. The updated framework will:

* Streamline and expedite borrower outreach;
* Mandate the adoption of a new, uniform _Borrower Assistance Form_ as part of a standard _Borrower Solicitation Package_;
* Align mortgage modification terms and requirements, including a required trial period for all borrowers before a permanent modification;
* Ensure foreclosure processing timelines are consistent between the GSEs, from referrals through date of sale; and
* Establish a consistent schedule of performance-based incentive payments and penalties.

Fannie Mae anticipates providing its servicers with full guidelines on the updated requirements during the second quarter. Fannie's fact sheet detailing what's to be expected can be ""accessed here"":https://www.efanniemae.com/sf/servicing/pdf/saioverview.pdf.

Freddie Mac says it will be implementing the changes with phased effective dates for the majority of the components throughout the summer of 2011. Freddie's fact sheet can also be ""found online"":http://www.freddiemac.com/service/factsheets/pdf/servicing_alignment.pdf.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
x

Check Also

Senate Hearing Tackles National Flood Insurance Program Reauthorization

Senate Banking Committee Chair Sharrod Brown recently held a hearing to discuss the future of the National Flood Insurance Program, featuring a panel of experts highlighting the many repercussions of an expiration in the program.