Updates to Freddie Mac’s guidelines for handling distressed loans impact foreclosures, loan modifications and short sales.
Trial-period payments made through the Home Affordable Modification Program need to be placed into suspense and credited towards the oldest delinquent payment due when the aggregate equals or exceeds the note payment amount. Servicers must reinstate an inactive mortgage upon posting the oldest delinquent payment due.
The McLean, Va.-based company reminded servicers that both HAMP and non-HAMP modifications don’t change reporting and remittance obligations to Freddie.
The updates were discussed in Bulletin No. 2013-3.
Partial principal forbearance will no longer be required in order to participate in HFA modification assistance programs that offer funds from the Hardest Hit Fund to be applied to curtail principal. In addition, the amount of HFA assistance provided to a borrower is now specified online at www.freddiemac.com/singlefamily/service/hfa_relief.
Freddie said that the updates are immediately effective.
Servicers will no longer be required to determine whether alimony, child support or separate maintenance will continue for the next three when calculating the terms of the modification.
If a borrower is current or delinquent less than 31 days, servicers need to follow the same process when considering a borrower for a short sale for obtaining a property value and minimum net proceeds as they do for borrowers who are more than 30 days past due. This means that servicers can no longer obtain a property value through BPOdirect.
Freddie previously announced the expiration of the Home Affordable Foreclosure Alternatives initiative, and servicers need to have received a fully executed short-sale agreement or deed-in-lieu agreement by Dec. 31, 2012, in order to be eligible for HAFA. Servicers now must now consider borrowers for standard short sales or standard deed-in-lieu of foreclosure.
The secondary lender noted that its state foreclosure timelines have been updated in Exhibit 83 on foreclosures completed on or after April 1.
On foreclosures completed on or after July 1, foreclosure sales to third parties will be included in the state foreclosure time line compensatory fee. calculation.
While Freddie currently limits the reimbursable amount of property inspections based on time lines outlined in Exhibit 83, claims for property inspections will now be reimbursed using the version of Exhibit 83 dated Jan. 01, 2012. A revised reimbursement structure will be announced later.
As a result of “rapidly changing state laws,” Freddie will stop providing a list of states where servicers need to preserve Freddie’s right to pursue a deficiency for loans that become delinquent as of June 1. Instead, when additional attorney expenses won’t be incurred beyond approved expense limits, Freddie will direct when deficiency rights must be preserved after the foreclosure sale on a case-by-case basis — though a servicer can recommend preservation when it is in Freddie’s best interest even though doing so would result in additional time line delays, fees or costs.
The bulletin reminded servicers that when they learn that all borrowers on a delinquent note have died, they need to find the right-party contact. If a transferee has been confirmed to have a legal or beneficial interest in the loan, then loan information needs to be provided to allow the transferee to continue making payments or process an assumption request. Servicers need to comply with applicable laws and Freddie’s guide when it comes to disclosure of non-public personal information and any restrictions on exercising note acceleration under the due-on-transfer clause. If a servicer isn’t sure about whether a purported transferee that wants to assume the loan has a legal or beneficial interest in the property, then the case needs to be submitted to Freddie.
On delinquent loans or loans with deceased borrowers where the due-on-transfer clause has been triggered, servicers need to explore all available relief options. When non-borrowers meet workout assumption requirements, servicers need to submit a recommendation to Freddie for approval to proceed. If a non-borrower is ineligible to assume the loan, the servicer can obtain necessary documents from non-borrowers to determine if they qualify for an assumption through a loan modification.
Form 710 has been revised 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.” A list of acceptable documentation has been reordered and now includes an additional option, “Written statement or other documentation verifying disability or illness.”
Three specific questions for service members have been added to Form 710.
The revised Form 710 is required on all borrower solicitation packages sent on or after April 1, though additional information must not be requested before than from the borrower if all of the revised form’s requirements are met.
Freddie said its Servicer Attorney Tracking System website at will become available to servicers on March 1. Servicers will need to use the new system to complete and submit servicer selection forms for all law firms that will handle default legal matters and to respond to requests for additional information. Web-based training for the system will be available beginning in March.
