Updates to Performance Measurements, Violations, and Remedies
October 3, 2012
Over the past year, Servicers and Freddie Mac have worked together within the Freddie Mac Servicing Success Program and Servicer Success Scorecard to monitor and measure servicing performance. While we continue to see progress, we need to continue to raise industry standards for effective servicing. This is the basis for our new alignment of servicing performance measurements, working jointly with Fannie Mae and at the direction of the Federal Housing Finance Agency (FHFA). With Single-Family Seller/Servicer Guide (Guide) Bulletin 2012-20, issued today, we are instituting a new set of consistent and clearly defined measurements and remedies for Servicing-related violations that will help you institute servicing practices that meet our expectations for quality servicing.
Servicer Success Scorecard Criteria
Effective January 1, 2013, and visible on the Servicer Performance Profile on March 7, 2013, we are instituting new and revised criteria in the following areas:
- Investor Reporting: We are modifying criteria in the Cash Management and Data Integrity and Operational Management categories. In cash management, we are eliminating the Custodial Account Review measurement, as this will be measured outside of the Scorecard. Within the Data Integrity and Operational Management category, we expanded the three existing categories into six measurement criteria that focus on system reporting, the age of reporting errors not cleared, and the average number of days to report payoffs. These revisions focus on providing more information to you so you can successfully monitor and correct errors when reporting to Freddie Mac.
- Default Management: We are adding a new measurement category called Workout Effectiveness that will help you monitor and measure workout effectiveness performance in three categories. In addition, we are changing the Loss Mitigation criteria and Default Timeline Management criteria with new measurements that provide more detail on your performance in these categories. Data Integrity criteria continue to focus on your accuracy and effectiveness in data and edits when reporting through electronic default reporting (EDR) and reporting foreclosure sales. With more information, you can focus your staff resources on areas of improvement when assisting homeowners with a workout or other foreclosure avoidance options. In addition, we will modify the BRP Monthly Progress Report to exclude completed repurchases from the Borrower Response Package (BRP).
Though Freddie Mac and Fannie Mae aligned on measurement categories and performance criteria, the weights, targets, and evaluation thresholds may be different based on unique portfolio composition and other characteristics of each Government Sponsored Enterprise’s (Enterprise) servicing book of business. Definitions and calculations for your Freddie Mac servicing portfolio are detailed in Appendix A of today's Guide Bulletin. Get more information about upcoming changes to the Servicer Success Scorecard, changes to the Servicer Performance Profile, and more in our Single-Family News Center article.
When you do not service in accordance with our requirements, we will continue to assess compensatory fees or deploy other remedies as necessary. See today’s Guide Bulletin for the effective dates for each compensatory fee.
- Increases: We are increasing compensatory fees for contract noncompliance, REO rollback, and aged data errors.
- Assessment Method and Revised Fees: We are revising the assessment calculation and fees for the reporting noncompliance, EDR reporting noncompliance, and cash remittance interest reimbursement compensatory fees.
- New Compensatory Fees: We are adding Unauthorized Transfers of Servicing and Unreported Transactions and Loan Simulation as new compensatory fees.
- Fees Eliminated: We are no longer assessing the compensatory fees for Balloon/Reset, Referral to Non-retained Attorneys, and Research and Reconstruction.
It is important that you thoroughly review today's Guide Bulletin for specific information. You can also find more overview information in our Single-Family News Center article.
We will enforce our contractual right to collect funds owed to us as responsible stewards of taxpayer dollars. You must read today's Guide Bulletin for effective dates and more information on:
- Processes related to repurchase and alternatives to repurchase, such as indemnification, for servicing contract violations.
- Possible cures for certain types of defects.
- Servicer repurchase and alternative to repurchase appeal timing and process.
Additional overview information is in our Single-Family News Center article.
Portfolio Actions for Sellers and Servicers
Freddie Mac Sellers and Servicers should be mindful of the information in today’s Guide Bulletin related to portfolio actions that Freddie Mac may take, at its discretion, including Seller or Servicer disqualification and suspension and could be deployed by Freddie Mac. We updated existing triggers for disqualifications and suspensions, and amended terms related to termination of servicing with or without cause and automatic transfers of servicing.
Aligned and Consistent Requirements
The aligned changes announced today are part of the FHFA's direction for the Enterprises to generally align on a set of principles and standards that include servicing performance standards. These aligned standards and a consistent servicing performance methodology among your Freddie Mac and Fannie Mae servicing portfolio should yield a higher level of servicing performance for servicers and the industry.
Get More Information
- Read Guide Bulletin 2012-20.
- Read the FAQs on Remedies for Servicer-Related Violations Announced in Single Family Seller/Servicer Guide Bulletin 2012-20.
- Read more about the new servicing remedies and compensatory fees.
- Read an overview of changes to the Servicing Success Program and Servicer Success Scorecard.
- Learn more about upcoming training opportunities specifically designed to address key information regarding these changes.