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Freddie Mac Details New Default Servicing Requirements

""Freddie Mac"":http://www.freddiemac.com has ""issued a bulletin"":http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1111.pdf to servicers announcing changes to the company's default management requirements.

The move is part of the _Servicing Alignment Initiative_ announced by the GSEs' regulator, the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA), in late April to bring both Fannie Mae's and Freddie Mac's procedures for handling past-due mortgages ""in line with one another"":http://dsnews.comarticles/gses-issue-new-servicing-guidelines-for-delinquent-mortgages-2011-04-28.

""These changes reinforce Freddie Mac's ongoing commitment to work with servicers on sustainable homeownership opportunities while promoting responsible servicing and robust performance management practices,"" Freddie said. ""This continued focus will help establish greater quality, consistency, and efficiency for servicing Freddie Mac-owned or guaranteed mortgages.""

The new servicing requirements address solicitation of delinquent borrowers and evaluation of all borrowers for each of the alternatives to foreclosure that Freddie Mac offers.

New borrower communications and evaluation requirements apply to all alternatives to foreclosure, including the Home Affordable Modification Program (HAMP) and the Home Affordable Foreclosure Alternatives (HAFA) initiative.

Freddie Mac says servicers must implement processes and procedures that will assist them in their efforts to complete relief or workout options more expeditiously, and work to reduce the number of mortgages that will ultimately result in foreclosure.

Additionally, as part of the _Servicing Alignment Initiative_, in a future bulletin, Freddie Mac will announce a new modification solution, the Freddie Mac Standard Modification.


This new mod offering will include a three-month trial period, and eligibility and underwriting requirements that target borrowers who are ineligible for HAMP or borrowers who defaulted on previous HAMP or non-HAMP modifications.

Among the new directives outlined in the GSE’s servicing bulletin related to borrower communication, servicers must initiate telephone contact with each delinquent borrower between the third and 36th day of delinquency to attempt to establish arrangements to cure the delinquency.

Telephone calls must continue at least every third day until the servicer determines that the borrower does not intend to pursue an alternative to foreclosure, the delinquency is cured, complete borrower response package is received to evaluate the borrower for an alternative to foreclosure, or the borrower enters into a repayment or forbearance agreement with the servicer.

To simplify the solicitation process, Freddie is also introducing a new financial information, hardship, and borrower certification form.

Servicers that meet the GSEs’ performance benchmarks will receive an incentive in the amount of $500 for each complete borrower response package received. On the other hand, servicers that fail to meet the minimum target for borrower response packages collected will be assessed a $500 fee for each package lacking beneath the benchmark level.

Servicers are restricted from initiating foreclosure on a mortgage if a complete borrower response package has been submitted for evaluation.

Prior to a foreclosure sale, the servicer must review the mortgage account to verify that all borrower outreach and solicitation requirements have been met before proceeding to complete the foreclosure.

Freddie Mac has also revised its state foreclosure timelines. If a servicer exceeds the specified timeframes, compensatory fees will be assessed in addition to any actual damages caused by the servicer’s failure to comply.

The changes related to the _Servicing Alignment Initiative_ are effective on October 1.

Additional details on Freddie Mac's new requirements can be ""accessed online"":http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1111.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.

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