Our Servicing Process
Freddie Mac Multifamily is focused on the borrower’s experience throughout the life of the loan. We’ve launched our Freddie Mac servicing standard to help ensure that borrower needs are addressed in a responsive, proactive way throughout the servicing process and across all involved parties. We understand that a borrower’s experience during the servicing process determines who they choose to partner and do business with on an ongoing basis.
The Borrower Experience
Providing a unique approach to the borrower experience
A borrower’s experience during the servicing process determines who they choose to partner and do business with on an ongoing basis. Borrowers can expect more comprehensive service when we buy and securitize a loan because our servicing standard makes them a priority.
Meeting borrower needs for the life of the loan
We’ve addressed the main concerns of borrowers post securitization, including:
- Responsiveness by all servicing and transaction parties
- Timeliness of decision-making and communication
- Flexibility in evaluating and responding to borrower needs
Developed guidelines and benchmarks for all Freddie Mac loans
Our processes and credit philosophy are aligned regardless of the loan execution path. All transactions which meet Freddie Mac credit guidelines outlined in the Freddie Mac Multifamily Guide Seller/Servicer Guide (Guide), should be quickly reviewed and approved by the Primary, Master and Special Servicers. Servicers are instructed by the applicable Pooling and Servicing Agreements (PSA) to follow the "servicing standard". Beginning in 2013, the PSAs refer to our Guide as the applicable servicing standard to be used in making decisions.
Servicing Standard Elements
Developed with feedback of our Servicer Advisory Committee
- The Freddie Mac Multifamily Guide Seller/Servicer Guide (Guide) is the basis of our servicing standard.
- Before securitization, the loan documents for each mortgage, the Guide and Freddie Mac credit policies govern the decision-making process and requirements.
- After securitization, Servicers refer to the applicable the Pooling and Servicing Agreements (PSA) to determine their servicing steps and procedures.
- Our tools and processes enable Primary, Master and Special Servicers involved with a borrower consent request of any type to track and manage their steps in the review process.
- Our Asset Management and Production departments work closely with all of the parties involved with a loan post-securitization. To ensure a positive of the borrower experience post-securitization, we monitor the consent request process through proactive relationship management and the use of our Asset Management technology systems.
Designed our systems and tools to support the servicing standard
- We use a suite of applications to effectively manage our servicing process, ensuring the effective collection and analysis of servicing data.
- Our applications support the following functions:
- Submission of timely and accurate financial statements and inspections.
- Managing insurance coverage data for all loans and evaluating insurance waiver requests
- Monitoring the status of borrower consent requests via a shared tracking platform for Primary, Master and Special Servicers
Ensuring that our servicing standard is met
- Communicate regularly with all key parties including Primary, Master, Special Servicers and investors.
- Make regular updates to the Freddie Mac Multifamily Guide (Guide) and ensure the Guide and the Pooling and Servicing Agreements (PSA) are in synch.
- Identify important issues early in any transactions.
- Facilitate information sharing and communication among all servicers and investors.
- Improve the Supplemental Loan Process for seasoned mortgages.
- Have a defined evaluation and feedback process with our Servicers.
- Gather and coordinate information to partner with Servicers post-securitization.
Parallel Servicing Process
To efficiently meet borrower needs, we’ve developed a parallel process for our Primary, Master and Special Servicers to execute concurrent processing of borrower consent requests. Our tools, processes and documents enable Servicers and, in instances of securitized transactions, the Directing Certificateholders (DCHs), to share information about borrower requests early in the process. We have clarified the roles of all parties to the transaction to ensure consistent and timely processing.
Primary or Sub Servicers
- Under contract with Master Servicer
- Duties may include:
- Loan administration
- On-going inspections
- Financial reporting
- Not required to be rated for monthly remittance and escrow management of Freddie Mac K-Deals
- Rated and non-rated servicers can perform cashiering and non-cashiering duties
- Service the mortgages on behalf of the Trust
- Collect mortgage payments
- Pass funds to the Trustee/Certificate Administrator
- Advance late payments to Trustee/Certificate Administrator
- Provide monthly mortgage performance reports to investors
- Transfer nonperforming loans to Special Servicer
- Must be rated by the rating agencies
- Monitors Sub Servicers
- Manage defaulted loans through the workout, foreclosure, liquidation process
- Loans are transferred from Master Servicers at 60 days late and for other events
- Earn revenue through fees
- Not affiliated with B-piece investor
- Issues securities
- Holds mortgage collateral documents
- Monitors Trust
- Enforces trust documents – Pooling and Servicing Agreement (PSA) and Mortgage Loan Purchase Agreement (MLPA)
- No discretion on issues beyond the loan-level and pool-level documents
- Passes funds from Master Servicer to bondholder
- Distributes monthly statements
- Ability to appoint a replacement Servicer
- Has final approval rights on loan workouts in special servicing and other matters affecting all loans.
Standardization of Multifamily Mortgage Assumptions:
Freddie Mac Multifamily recognizes that across the industry, mortgage assumption requirements and procedures used by lenders and investors vary widely. We’ve observed that servicers also differ in their procedures for collecting the necessary documents and coordinating the assumption process. It can be time consuming and cumbersome for servicers and borrowers to put together an assumption request package. To address these issues and provide borrowers with a better experience, the Freddie Mac Servicing Standard clarifies and guides Seller/Servicers through successful management of the mortgage assumption process.
Examples of the Freddie Mac Servicing Standard facilitating a smooth assumption process:
- Sandpiper Apartments – Holladay, Utah
- Student Housing Portfolio – Kayne Anderson Real Estate Advisors/ American Campus Communities
Freddie Mac Multifamily has a commercial mortgage-backed securities (CMBS) special servicer rating of 'CSS2-' from Fitch Ratings. The rating reflects the ability of the Freddie Mac Multifamily business to work out loans backed by apartment buildings with five or more units and acquired from its Seller/Servicer network. Additional details are in the Fitch Ratings Servicer Report.
Freddie Mac has received a commercial loan master servicer ranking of Above Average from Standard & Poor’s. The high ranking reflects the quality of the Freddie Mac Multifamily operations, technology and staff, and the business' ability to monitor the information provided by its Seller/Servicers. Additional details are in our related press release.
- Freddie Mac is currently the special servicer for approximately 8,800 loans totaling $94.4 billion and held in its Multifamily portfolio as of the end of 1Q13.
- Freddie Mac currently is not the special servicer on securitized multifamily mortgages, except K-Deals in its P Series, which are fully wrapped by Freddie Mac and backed by seasoned assets.
Asset Management News
- Asset Management and Operations Department Milestones Positively Impact the Borrower Experience
- The Asset Management Surveillance Process Drives Better Decision Making
- Freddie Mac Multifamily Guide Bulletins Released
Looking Ahead at the Asset Management and Operations Roadmap
Michael Lipson, Senior Vice President of Multifamily Asset Management and Operations, explains his department's accomplishments and expectations for 2013. Learn More.
Our Partnership with You: Service for the Life of Your Loan
John Cannon and Michael Lipson discuss how their teams are making it easier to do business with Freddie Mac. Watch Video