Freddie Mac Multifamily Guide Bulletin Released
November 30, 2011
Today, Freddie Mac is posting a Guide Bulletin for the Freddie Mac Multifamily Seller/Servicer Guide on AllRegs. The latest Guide Bulletin includes the following changes:
- Reorganizing underwriting checklist information to improve the efficiency of our early rate-lock process for you and your borrower.
- Revising requirements for Seller/Servicer's fidelity and errors & omissions (E&O) insurance based on your feedback and industry changes.
- Adding requirements for conducting and documenting property inspections in support of a new streamlined underwriting checklist.
- Including the list of title companies from whom we will accept electronically issued title policies without requiring a letter for each policy.
Consolidating Checklist Requirements
In order to deliver efficiency, flexibility, and speed in our service delivery, we have consolidated requirements to one checklist for all conventional products. The new checklist is to be used for the following transactions:
- Capital Markets ExecutionSM (CME)
- Seniors Housing
- Cash transactions, regardless of whether a transaction utilizes the standard delivery or the early rate-lock delivery option
The new checklist is available on the Originate and Underwrite web page. You will notice that we have eliminated the preliminary underwriting checklist for transactions using the standard delivery option. The new checklist also categorizes the documentation based on whether underwriting information is required for all transactions or is required only in the event of special circumstances or for properties with certain characteristics. This was done by creating a single checklist, which includes Part A, Part B, and addenda identifying additional documents that may be required for your transaction.
- Part A – the preliminary underwriting checklist for early rate-lock.
- Part B – the full underwriting checklist for early rate-lock.
- Part A and Part B – the full underwriting checklist for the standard delivery option.
In addition, we revised the requirements for certain items found on the consolidated underwriting checklist and have added items that we typically have required as "additional documentation" for properties with special features. You'll find more details about these changes in the Guide Bulletin Cover Letter.
Revising Fidelity and E&O Insurance Requirements
It has been approximately four years since we updated fidelity and E&O insurance requirements. During this time, there are have been many changes in the insurance market. You will find that we have adjusted ratings for A.M. Best and S&P. We have added ratings for Fitch and Moody's, as well as deleted references to Lloyd's of London. Overall, we have changed the base used to calculate required coverage.
We also now require that you have separate insurance coverage for fidelity and E&O. Due to the separate coverage, we replaced the deductible for both fidelity and E&O insurance with a deductible, SIR (self-insured retention), or combined deductible and SIR. Freddie Mac must also be named as "sole loss payee" for fidelity and E&O insurance, and must be notified when the insurance is provided by a captive insurance company or is purchased in a blended policy.
For fidelity insurance, you are required to use a Discovery Policy Form. We also added a single loss limit for fidelity insurance.
New E&O requirements include using a Claims Made Policy Form or an Occurrence-based Policy Form. We also added a per occurrence limit for E&O insurance.
Updating Property Inspections for Early Rate-Lock Enhancements
With the recent enhancements to our early rate-lock delivery process, we are adding requirements for property inspections prior to early rate-lock and at full underwriting. Inspection requirements must be completed within 120 days of our receipt of your underwriting package.
The new requirements for fidelity and E&O insurance go into effect on January 2, 2012. You should use the new underwriting checklist for any new deals for which the first underwriting package is submitted to Freddie Mac on or after December 1. All other Guide Bulletin changes are effective immediately.
For a full overview of all the changes, you can review the Guide Bulletin Cover Letter. Please contact your Freddie Mac regional representative or relationship manager if you have any questions.