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Guide Bulletin 2012-17 Updates State HFA Modification Assistance Program Requirements

September 10, 2012

You have enhanced ability to support positive outcomes for financially distressed borrowers with updates we are making to our servicing requirements. As announced in Single-Family Seller/Servicer Guide (Guide) Bulletin 2012-17, issued today, we are updating our guidance on Servicer participation with state Housing Finance Agencies’ (HFAs) modification assistance programs so you can help distressed borrowers seeking mortgage assistance. We also are providing additional time for allowable delays due to military indulgence under the Servicemember’s Civil Relief Act (SCRA) or similar state law.

Updated Guidance on HFA Modification Assistance Programs

Effective immediately, you should participate in state HFA modification assistance programs that permit you to apply funds as a partial principal curtailment for homeowners with Freddie Mac-owned or guaranteed mortgages. With this change, you have an additional way to help borrowers achieve a more affordable payment and reduce their loan-to-value ratio. Read Guide Bulletin 2012-17 to learn about new requirements, including how you must:

  • Apply the funds received by paying arrearages and any other past due amounts advanced, including expenses (if applicable), and curtailing principal so the mortgage is recast or re-amortized, with no other changes to mortgage terms. Servicers should follow the guidance in Guide Section 59.2 for current borrowers. There are specific instructions for applying funds for borrowers who are 31 days or more delinquent on their mortgage payment or have partial principal forbearance.
  • Work with the HFA to ensure that funds applied to an interest-bearing balance for borrowers who have partial principal forbearance do not pay off the interest-bearing balance, thereby causing the deferred principal balance to become due.
  • Apply HFA funds toward arrearages and any other past due amounts advanced, including expenses (if applicable), then to curtail principal on mortgages for borrowers who are approved for principal curtailment to be used in conjunction with the Home Affordable Modification program or Freddie Mac Standard Modification.

HFA Mortgage Assistance Program Flyer

As a reminder, the HFA mortgage assistance program flyer is a resource available to you that can aid your work with struggling homeowners who reside in states hardest hit by the housing crisis. The flyer, which you can customize with your contact information and logo, explains the HFA mortgage assistance programs that may be available to the borrower and the role you play as they seek assistance from their state HFA. You are encouraged to include the flyer in your Borrower Solicitation Packages for borrowers who reside in participating states to ensure they contact their HFA to determine whether they are eligible for assistance. Learn more ideas on how to use the flyer.

Allowable Delays in Completing a Foreclosure

You now have up to a maximum of 450 allowable delay days to complete a foreclosure for active duty service members when the delay is due to military indulgence under the SCRA or similar state law. With the additional 85 days, you will have more time to work with the service member to avoid foreclosure. This is effective for foreclosure sales conducted on or after November 1, 2012.

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