New Servicing Remedies and Compensatory Fees
October 3, 2012
With Single-Family Seller/Servicer Guide (Guide) Bulletin 2012-20 issued on October 3, you will see a more consistent approach for identifying and handling servicing related violations that enforce our contractual remedies with Servicers. You are familiar with many of these remedies, including continuing to assess compensatory fees and other remedies, such as repurchases, for Servicers who do not service Freddie Mac-owned or guaranteed mortgages in accordance with the Guide.
In Guide Bulletin 2012-20, we are updating our requirements so that in addition to any other remedy available, Freddie Mac may require you as a Freddie Mac Servicer to:
- Pay a compensatory fee;
- Repurchase Freddie Mac’s interest in a mortgage, or;
- Indemnify or otherwise make Freddie Mac whole for any losses, expenses, including court costs and reasonable attorney fees, or other damages.
We have added, revised and deleted certain compensatory fees as we move towards a more consistent approach for handling servicing related violations. We are setting standards for quality servicing for Freddie Mac mortgages and ensuring that Servicers are adhering to these standards. In order to ensure you are adhering to such standards, we will act as responsible stewards of taxpayer dollars and monitor for compliance resulting in a possible increase in file and remedy requests. But there are processes in place that will help your servicing organization avoid such instances where funds must be collected, including monitoring servicing performance through various measurement categories. With a clear set of common performance standards in your Servicer Success Scorecard, you can easily identify whether your servicing performance meets our expectations.
New compensatory fees include:
- Unauthorized Transfers of Servicing: Up to one percent of the unpaid principal balance for the mortgages transferred without Freddie Mac’s approval
- Unreported transactions loan simulation: $100 per loan
Revised Compensatory fees include:
- REO rollback
- Reporting noncompliance (all loans)
- Electronic Default Reporting (EDR) noncompliance, previously reporting noncompliance compensatory fee – Effective April 1, 2013
- Aged data errors
- Contract noncompliance and contract change
- Cash remittance noncompliance, previously late remittance interest reimbursement
- Late execution of REO repurchase
- Expense reimbursement curtailment: If Freddie Mac does not receive the Servicer’s expense reimbursement request within the required time frames we reserve the right to curtail the reimbursement.
Compensatory fees no longer in effect:
- Three Balloon/Reset fees:
- Late disposition
- Late document delivery
- Late reset
- Referral to non-retained attorneys
- Research and reconstruction
Repurchase Freddie Mac’s Interest In A Mortgage
In the event that you, as a Freddie Mac Servicer, are asked to repurchase Freddie Mac’s interest in a mortgage, this must be done within 60 days of the date of the request or within such other time frame as specified by Freddie Mac. If you would like to appeal Freddie Mac’s repurchase request, it must be in accordance with the requirements of Guide Section 72.6.1.
Repurchase Alternatives Or Cure
In lieu of repurchase, Freddie Mac may permit you to pay an amount determined by Freddie Mac to indemnify or otherwise make us whole for any losses, expenses (including court costs and reasonable attorney fees) or other damages. You will have 60 days to remit payment or appeal, in accordance with the requirements of Guide Section 72.6.1. If you do not timely appeal, or remit payment in accordance with Freddie Mac’s request, Freddie Mac may then require repurchase. If Freddie Mac determines that your violation of a servicing requirement may be cured, there may be an opportunity for you to cure such a violation within a specified time period. In such a situation, you will be provided with written notification of the violation and the time period to cure such a violation.
Our servicing relationship with you is important and we recognize that you are working to incorporate a significant amount of change into your mortgage servicing. We are focused on assisting you through these changes, through a variety of resources and training opportunities:
- Learn more by reading Guide Bulletin 2012-20.
- Read the FAQs on Remedies for Servicer-Related Violations Announced in Guide Bulletin 2012-20.
- 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.
- Direct questions to your Freddie Mac representative.