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Freddie Mac Mandates Servicer Participation in State Mortgage Programs

""Freddie Mac"":http://www.freddiemac.com has notified servicers that they are required to take part in mortgage assistance programs offered by state Housing Finance Agencies (HFAs) in connection with the federal government's Hardest Hit Fund initiative.


""[E]ffective immediately, you must begin accepting modification assistance program funds from participating HFAs on behalf of eligible borrowers with Freddie Mac-owned or guaranteed mortgages,"" the McLean, Virginia-based GSE wrote ""in a bulletin update"":http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1124.pdf sent to its mortgage servicers on Tuesday.

Freddie says collaboration with state HFAs will provide additional support for servicers' efforts and ""our mutual commitment"" to help at-risk borrowers avoid foreclosure.

To help borrowers qualify for a modification, HFA programs provide funds to servicers which may be applied


to assist borrowers in meeting housing expense-to-income ratio parameters or loan-to-value (LTV) ratio requirements, or to ensure a more positive net present value (NPV) result, Freddie Mac explained.

The GSE has placed certain limitations on which HFA programs are acceptable. Servicers are required to participate in HFA Hardest Hit Fund programs as long as:

* The servicer or Freddie Mac is not required to make a financial contribution or match any assistance provided by the HFA;
* Program participation and parameters for receiving assistance do not conflict with Freddie Mac’s own modification requirements;
* Receipt of funds does not impair the first-lien priority of the mortgage; and
* Funds are remitted to the servicer from the HFA in a one-time lump sum payment.

The GSE also reminded servicers that they must suspend the scheduled foreclosure sale or foreclosure referral for 45 days when the HFA notifies them that a borrower is conditionally approved for assistance. Any foreclosure action must be suspended for a longer period of time if required by state law.

Freddie Mac says it will allow servicers to suspend the foreclosure action past 45 days if it is needed to facilitate the processing of mortgage assistance and receipt of funds, as long as the servicer follows up with the state HFA on a regular basis to determine whether the borrower is still eligible for assistance and when the funds are expected.

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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