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GSEs Update Servicing Policies

Fannie Mae and Freddie Mac are updating their policies on delinquency management and default prevention in response to a servicing rule issued earlier this month.

Finals rules implementing mortgage servicing provisions of the Real Estate Settlement Procedures Act and the Truth in Lending Act were issued earlier this year by the Consumer Financial Protection Bureau.

The final Mortgage Servicing Rule was the result of amendments to RESPA and TILA by the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010.

In Servicing Guide Announcement SVC-2013-20, Fannie outlined new policies that apply to loans in its portfolio, that it acquired and securitized or that it acquired in exchange for mortgage-backed securities.

Fannie said it is eliminating all the requirements for escalated cases in its servicing guide.

Fannie outlined the information that servicers must provide borrowers when they make inquiries to determine the owner or assignee of their loans. Requirements vary depending on whether or not Fannie holds the loans in its portfolio.

Servicers need to develop approaches to delinquent borrower management that provides continuity of contact through one person, according to Fannie.

Servicers of adjustable-rate mortgages are bound by notification time frames and must abide by the Payment Change Notification Guidelines for all payment changes.

When Fannie borrowers are 31 days past due, servicers must mail Form 731 between 31 and 35 days of delinquency, regardless of the result of a Behavioral Model Tool if one is used. Form 761 must be sent to borrowers who are 61 days delinquent within 61 and 65 days of delinquency.

Verbal acknowledgements of the borrower response package are no longer allowed, and servicers need to provide written acknowledgements within five business days of receipt, Fannie said. An incomplete information notice can be combined with the acknowledgement if the borrower’s package is missing items.

Fannie noted that evaluation notices must include a denial reason when a loan modification trial period plan isn’t offered and let the borrower know about the right to appeal within 14 days of the evaluation notice if a foreclosure is scheduled within 90 days. Servicers must develop appeals processes, and an employee not involved with the initial evaluation must review the appeal within 30 days. Appeals received after 14 days can be treated as a new borrower response package. If the servicer determines that a borrower who appealed is eligible for a modification, the borrower has 14 calendar days to accept an offer.

More details about the appeal process are outlined in Fannie’s letter, as are forbearance requirements, foreclosure reviews and delays in legal action.

In Bulletin No. 2013-21, Freddie outlined servicing requirements on primary residences, including the required appeals process.

Freddie said it issued new and updated servicing requirements on foreclosure referrals and new foreclosure suspension obligations.

Freddie also discussed new requirements applicable on all loans.

Changes at both companies become effective on Jan. 10, 2014.

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