Changes to Reporting and Remitting Requirements for Short Sales
August 21, 2012
You exhausted all workout options working hard to keep an eligible borrower in their home. When that was not an achievable solution, you attempted a short sale transaction, but the process was lengthy and time consuming. The new Freddie Mac Standard Short Sale announced in Single-Family Seller/Servicer Guide (Guide) Bulletin 2012-16, effective for new borrower evaluations conducted on or after November 1, 2012, will offer an easier, quicker transaction and operational process.
Guide Bulletin 2012-16 announced updated requirements for closing a short sale, and reporting and remitting information to Freddie Mac. These requirements can be found in Guide Section B65.41, Closing, Reporting and Remittance Requirements for Short Sales and Make-Whole Preforeclosure Sales, with key points highlighted below.
Standard Short Sale Closing Documentation
A critical part of the short sale transaction process is keeping accurate records of all your short sale closing documentation. Below is an overview of the documentation you need to close the short sale. You must:
- Maintain the original short sale affidavit in the mortgage file and provide Freddie Mac with a copy of the short sale affidavit upon request.
- Review the HUD-1 Settlement Statement prior to closing to ensure proper transfer of title directly from the borrower to the buyer.
- Review the HUD-1 Settlement Statement and deed within five business days after closing to validate compliance with our requirements and your approval instructions.
Reporting the Transaction and Remitting the Proceeds
Although our existing reporting and remitting guidance remain largely unchanged, we did make a few revisions that you must be aware of. We updated our requirements so only a copy of the HUD-1 Settlement Statement, copies of the sales contract, and any addenda to the sales contract need to be sent to Freddie Mac. Additionally, you must send the original negotiated promissory note(s), if applicable, to:
Attention: Special Assets – Recovery
8100 Jones Branch Dr.
McLean, VA 22102
Please remember to include the Freddie Mac loan number on all documentation.
Notifying Us of a Make-Whole Preforeclosure Sale
For make-whole preforeclosure sales, Servicers must submit the following information to Freddie Mac:
- Completed and signed Form 710, Uniform Borrower Assistance Form, or other documentation as permitted in Guide Section B65.37.
- A copy of the executed sales contract and Mortgage Insurer's (MI) approval letter, if applicable and if not previously delegated by the MI.
- A breakdown of the transaction to show how the property sale plus any other proceeds will result in a total satisfaction of the debt.
The majority of the remaining requirements for closing a short sale, and reporting and remitting information to Freddie Mac remain unchanged, including requirements regarding:
- Charging off the deficiency
- Remitting additional proceeds
- Releasing the deficiency
- Requesting reimbursement
Accurate document submission and reporting are critical components of achieving quicker short sale transactions. Servicers must thoroughly review all the requirements in Guide Section B65.41 for more detailed information.