Servicing Alignment Initiative: Borrower Contact and Delinquency Management Practices
May 16, 2011
This is the first article in a four-part series explaining the major components of the joint GSE Servicing Alignment Initiative announced on April 28, 2011.
The Servicing Alignment Initiative supports our mutual goal of quality and responsible servicing by placing a strong emphasis on earlier and more frequent borrower contact after delinquency. With a focus on delinquency management practices, we want to make certain eligible borrowers are assessed for all available workout solutions as early as possible.
For borrower contact and delinquency management practices, the aligned requirements focus on:
- Accelerating collection calls and call center activity.
- Establishing Quality Right Party Contact.
- Providing consistent borrower communications.
- Developing a process for case escalation activities.
We recognize that these changes may significantly impact your servicing organization, and we are working to finalize our requirements and support your implementation of this critical effort for the mortgage industry. We will provide requirements for all components of the Servicing Alignment Initiative in upcoming Single-Family Seller/Servicer Guide Bulletins.
Accelerating Collection Calls and Call Center Activity
To accelerate outreach to borrowers who are delinquent on their mortgage payments, Freddie Mac will require collection calls to begin between day three and day 36 after the first missed payment. If you maintain a call center, the uniform standards and service levels are as follows:
- Minimum average speed to answer < 60 seconds
- Average minimum abandonment rate < 5 percent
- Monthly call blockage rate < 1 percent
- Live chats < 5 minutes between chats
- Email response < 48 hours or less after receipt
Once started, you will be required to continue call campaigns as frequently as every third day until Quality Right Party Contact is established, the delinquency is cured, a borrower response is received, or the borrower enters a forbearance or repayment plan.
Establishing Quality Right Party Contact
Establishing Quality Right Party Contact is designed to facilitate borrower resolution on a foreclosure alternative. You will be required to identify and discuss with a borrower, co-borrower, or trusted adviser the most appropriate options for delinquency resolution. Phone calls, email, Web, hard-copy mail, or face-to-face communication may be used to establish Quality Right Party Contact that includes successfully:
- Establishing rapport with the borrower, expressing empathy and a desire to help.
- Determining the reason for the delinquency and whether it is temporary or permanent.
- Determining whether the borrower has vacated or plans to vacate the property.
- Determining the borrower’s current perception of their financial circumstances and ability to repay the debt.
- Setting payment expectations and educating the borrower on the availability of foreclosure alternative solutions.
- Obtaining a commitment from the borrower to either resolve the delinquency through traditional methods (paying the total delinquent amount) or engaging in a foreclosure alternative solution.
You will be required to achieve at least a 60 percent Quality Right Party Contact rate on the 120-day delinquent portfolio.
Providing Consistent Borrower Communications
To support consistent borrower communications throughout delinquency, a new standard GSE Borrower Solicitation Package will be used to evaluate borrowers for all workout options, including the Home Affordable Modification Program and all available Freddie Mac workout solutions. Contents for the Borrower Solicitation Package will include:
- New Uniform Borrower Assistance Form
- Borrower checklist
- Solicitation letter
- FAQ document
- Important notices
- IRS Form 4506-T (available through the Internal Revenue Service)
All communications to borrowers during each stage of delinquency from late notices to breach letters and foreclosure referral will have uniform content requirements and timelines. Sample forms, notices and disclosures are being finalized and will be available when we publish our full requirements in a future Guide Bulletin.
Freddie Mac strongly encourages and fully supports Servicers who have or will implement single point of contact models for achieving contact continuity throughout the delinquency process.
Developing a Process for Case Escalation Activity
You will be required to implement a process for reviewing and responding to borrower complaints in order to ensure borrowers are appropriately evaluated for all foreclosure alternatives. Consistent with the aligned GSE requirements, Freddie Mac will require you to have a process in place to escalate cases for borrower complaints and disputes that include, but are not limited to:
- Initiation or continuation of foreclosure actions in violation of the Freddie Mac Guide.
- Allegations of fraudulent servicing practices.
- Complaints that the borrower was not appropriately evaluated or inappropriately denied for a foreclosure alternative.
- Complaints threatening litigation.
- Violation of the Freddie Mac Guide policy time frames for borrower outreach, evaluation, or permitted time for borrower response.
Staff managing escalated cases must be independent from the staff that handled the initial evaluation decisions on the borrower’s request for assistance. Additionally, Freddie Mac will require monthly reporting for escalated case activity.
While the GSEs are aligned in their requirements for borrower contact and delinquency management, there will be some differences in implementation. We will provide complete details on our requirements through our GuideBulletin(s) in the near future. For additional details on the Servicing Alignment Initiative:
- Look for the next article in the Servicing Alignment Initiative series focused on loan modifications and workouts.