Loss Mitigation Updates Enhance Already Robust Resources for Servicers and Borrowers
June 13, 2012
Loss mitigation updates featured in our June 13, 2012 Single-Family Seller/Servicer Guide (Guide) Bulletin add to an already robust slate of resources for Freddie Mac Servicers. Our loss mitigation toolkit helps you assist struggling homeowners with forbearance plans, modifications, or transitioning into more affordable housing.
By continuing to evolve the loss mitigation solutions that assist homeowners and address your operational processes, we are strengthening our mutual goal of helping as many borrowers as possible avoid foreclosure.
Helping Borrowers Avoid Foreclosure Through Unemployment Forbearance
In response to your requests to provide further clarification on how to determine the length of a borrower’s short-term unemployment forbearance, we are updating the Guide to specify that a borrower’s delinquency status is not a factor when considering a borrower for a short-term unemployment forbearance plan. However, if the borrower remains unemployed at the end of the six-month forbearance period, you must verify that any extended forbearance granted does not cause the borrower’s delinquency status to become greater than 12 months. Learn more about unemployment forbearance options.
A Continual Effort to Help Homeowners Avoid Foreclosure
The following recent changes and updates are part of a number of loss mitigation toolkit enhancements that have been announced over the past few months that refine and expand options available to help borrowers avoid foreclosure whenever possible. Recent changes include:
- Creating communication time lines for short sales, announced in April, to facilitate efficient short sale transactions and help expedite struggling homeowners’ transition into more affordable housing. Maximum time frames are provided in the HAFA short sales process for acknowledging Borrower Response Packages, responding to purchase offers, and offering and receiving counteroffers. These new time frames are required for all new borrower evaluations conducted on or after June 15, 2012. Learn more.
- Adjusting the Standard Modification interest rate, also announced in April, so the rate you use to evaluate a borrower aligns more closely with market conditions. On June 1, we published the new interest rate of 4.625 percent, down from 5 percent, and it is effective for new trial period plan evaluations conducted on or after July 1, 2012. You will find the new rate on the Standard Modification Interest Rate Web page and are encouraged to begin using the new rate immediately. Learn more.
- Expanding the state Housing Finance Agency (HFA) mortgage assistance programs in which you must participate. These programs are funded through the U.S. Department of the Treasury’s Hardest Hit Fund to help struggling homeowners in states hardest hit by the housing and economic downturn avoid foreclosure. In April, we expanded your participation to include transition assistance programs, which help at-risk eligible borrowers transition into more affordable housing by receiving funds to complete a short sale or deed-in-lieu or assist with relocation expenses. Learn more.
Your Loss Mitigation Toolkit
Your toolkit continues to expand and now includes:
- The Freddie Mac Standard Modification, a solution that provides at-risk borrowers who are not eligible for HAMP with an option to achieve affordable mortgage payments. And, in conjunction with our focus on earlier and more frequent borrower contact, the modification’s underwriting requirements enable you to evaluate financially distressed homeowners more quickly.
- Unemployment forbearance, with two solutions to help unemployed borrowers keep their homes:
- Short-term unemployment forbearance, which suspends or reduces an eligible borrower’s mortgage payment for a period of six months.
- Extended unemployment forbearance, which offers a forbearance period of up to an additional six months, provided it does not extend beyond a date that would cause the delinquency to exceed 12 months of the borrower’s payments.
- State HFA mortgage assistance programs, which require you to participate in the:
- Unemployment mortgage assistance program, which provides eligible borrowers mortgage payment relief through funds to help pay for part or all of the borrower’s monthly payment.
- Mortgage reinstatement program, which provides a one-time payment to bring a borrower’s delinquent mortgage current.
- Modification assistance programs, which provide eligible borrowers funds to assist with qualifying for a modification.
Aiding Your Operational ProcessesOver the last few months, you have implemented many default management servicing requirements that impact your reporting and incentives. To further support your implementation efforts, we are reminding you to:
- Access the HAMP Mod Trial Tracking Report to assist you in monitoring your electronic default reporting (EDR) for HAMP trial period plans. This report will help you identify issues or challenge areas within your servicing operations.
- Report borrowers who have entered into a Standard Modification trial period by:
- Reporting default action code BF – Standard Modification Trial Period.
- Indicating the trial period effective date as the first day of the month and establish it in accordance with Guide Section B65.19 (a). You must report this date each month the borrower is in the trial period.
- Submitting this data by the third business day of the month for the previous month’s activity and continuing to report it each month the borrower is in the trial period.