Operational Information on State Foreclosure Time Line Changes and Associated Compensatory Fee Assessment
June 13, 2012
State foreclosure time line requirements and compensatory fee calculations have been revised with respect to foreclosure sales completed on and after January 1, 2012. The impact of these revisions depends on whether the loan was referred to foreclosure prior to October 1, 2011, or on or after that date. As outlined in our June 13, 2012 Single-Family Seller/Servicer Guide (Guide) Bulletin 2012-13, these changes also affect the expense reimbursement process for property inspections.
State Foreclosure Time Line Expansions and Allowable Delays
We have expanded certain state foreclosure time lines for foreclosure sales that occurred on or after January 1, 2012:
- We have expanded the time lines in 34 states for mortgages referred to foreclosure before October 1, 2011, for which we assess compensatory fees for exceeding time lines on an annual basis. These 34 revised time lines match the time lines for loans referred to foreclosure on or after October 1, 2011.
- We have expanded the time lines in 12 states for mortgages referred to foreclosure on or after October 1, 2011, for which we assess compensatory fees for exceeding time lines on a monthly basis.
The foreclosure time line expansions are in response to changes in foreclosure processing requirements that impact actual time frames in these states today. The expansions allow you additional time to complete required work and may help reduce your foreclosure time line compensatory fee assessments. In addition, we added new time frames and expanded some of the existing time frames for certain allowable delays in completing a foreclosure to provide you with more time to assess all available workout options with the borrower during the foreclosure process. Changes to the allowable delays include when the borrower:
- Entered into a Standard Modification trial period plan, but failed to comply with the terms of the plan, up to a maximum 120 days.
- Entered into an unemployment forbearance plan, up to a maximum 180 days.
- Filed for Chapter 11 bankruptcy, up to a maximum 125 days.
- Qualifies for military indulgence under the Servicemembers’ Civil Relief Act of 2003 or similar state law providing relief to active-duty military service members, up to a maximum 365 days.
- Is in probate, up to a maximum of 120 days.
- Is involved in a contested foreclosure, up to a maximum 90 days.
To avoid unnecessary compensatory fee assessment, you must follow the instructions for calculating the additional allowable delay time and report these occurrences accurately and timely through electronic default reporting (EDR) using the correct EDR action and reason codes. The calculations and EDR codes are listed in Guide Exhibit 83A, Determining State Foreclosure Time Line Performance Compensatory Fees.
Compensatory Fee Assessments
We changed the calculation for state foreclosure time line compensatory fees and the billing process for mortgages referred to foreclosure on or after October 1, 2011, when the foreclosure sale occurred on or after January 1, 2012. Under the revised compensatory fee assessment, we will no longer include deed-in-lieu transactions in the compensatory fee calculation. Under the revised compensatory fee assessment, we will calculate foreclosure time line compensatory fees using an intra-state netting methodology. The amounts calculated on an individual foreclosure sale basis will be negative for those foreclosure sales that are under that state’s foreclosure time line and positive for those foreclosure sales that are over that state’s foreclosure time line.
- In September, several of Servicer A’s foreclosure sales in Florida resulted in $1,000 in combined negative compensatory fees for Florida (“intra-state monthly credits”) because the foreclosures were completed in less time than our foreclosure time line for Florida.
- In the same month, Servicer A’s other foreclosure sales in Florida took longer to complete and exceeded our state time line for Florida, resulting in combined positive compensatory fees for Florida totaling $910.
- Servicer A would not be assessed any compensatory fees for Florida in September because their combined intra-state monthly credits offset their combined positive fees. (We subtract the combined positive compensatory fees of $910 from the combined intra-state monthly credits of $1,000.)
- Note that if Servicer A’s aggregate foreclosure sales in Florida in September had exceeded the foreclosure time line for Florida (i.e., the intra-state monthly credits were less than the combined positive compensatory fees), then a compensatory fee would have been assessed for Florida for September sales.
- Freddie Mac will then combine the amounts of compensatory fees that were assessed for each state for September. If that aggregate amount exceeds the de minimis $1,000 threshold, then Servicer A would be billed in October for the aggregate compensatory fees for September.
Refer to Guide Exhibit 83A, Determining State Foreclosure Time Line Performance Compensatory Fees, for specific the time frame for each allowable state foreclosure time line delay and examples of calculating the compensatory fee on an intra-state netting basis.
Compensatory Fee Billing and Appeals
To accommodate necessary systems and operational work, we are temporarily suspending the monthly state foreclosure time line compensatory fee assessments on your Non-Performing Loans Invoice, beginning with your July invoice for June activity. We will notify you when we will resume billing this assessment. In the meantime, you should:
- Continue to review and reconcile against the Monthly Compensatory Fee Analysis Report accessible in Default Reporting Manager®. We will continue to publish this report on the fifth business day of each month.
- Submit appeals for the prior month’s foreclosure time line compensatory fees within 30 days from the Monthly Compensatory Fee Analysis Report publication date. (See Directory 5.) If you believe a compensatory fee listed on a report is incorrect, you may submit an appeal by sending an email to NPL_Invoices@FreddieMac.com.
- Submit data that was not previously reported, or inaccurately reported, according to the new requirements included in Guide Bulletin 2012-13. We will use this information to recalculate a Servicer’s compensatory fee amount.
- Servicers must submit in their original appeal a description of all delays, along with all related documentation. Any information that is received after the original appeal is submitted will not be considered.
Expense Reimbursement for Property Inspections
We will reimburse exterior property inspections conducted on or after January 1, 2012, if the inspection occurred within the newly expanded state foreclosure time lines.
The Freddie Mac Reimbursement System will be updated to process property inspection fee reimbursement requests submitted on or after November 1, 2012, for property inspections completed on or after September 16, 2012, even if those property inspections occurred during the newly extended portion of a time line. We will explain the process for claiming property inspection fees conducted during the newly extended portion of a time line before November 1, 2012, in an upcoming communication.
As a reminder:
- Each exterior property inspection reimbursement is $10.
- You must perform monthly inspections.
- New property inspection fee limits and reimbursement amounts will become effective with claim submissions as of November 1, 2012.
- Claim submission requirements and time frames remain unchanged as indicated in Guide Section 71.13.
For More Information
- Review Guide Bulletin 2012-13.
- Refer to revised Guide:
- Exhibit 83, Freddie Mac State Foreclosure Time Lines.
- Exhibit 83A, Determining State Foreclosure Time Line Performance Compensatory Fees.
- Attend the Guide Bulletin 2012-13 Overview: Foreclosure Time Line Updates Webinar.