Freddie Mac Standard Deed-in-Lieu Announced in Guide Bulletin 2012-27
November 15, 2012
Today, we are announcing the Freddie Mac Standard Deed-in-Lieu (Deed-in-Lieu) in Single-Family Seller/Servicer Guide (Guide) Bulletin 2012-27. This alternative to foreclosure adds to other workout enhancements such as the Freddie Mac Standard Modification, Freddie Mac Standard Short Sale, and the recently announced Mortgage Insurers delegation, giving you a workout option to proactively help struggling borrowers. The Deed-in-Lieu was developed as part of the joint-GSE Servicing Alignment Initiative and completed under the direction of the Federal Housing Finance Agency. The new Deed-in-Lieu is designed to serve as a workout option for borrowers for whom neither a home retention alternative to foreclosure nor a Standard Short Sale are workable solutions.
Deed-in-Lieu additions and refinements include:
- An increased incentive: Your incentive for completing a Deed-in-Lieu in accordance with the Guide will increase from $275 to $1,500 for a Deed-in-Lieu resulting from evaluations conducted on or after March 1, 2013.
- Servicer approval authority: You will have delegated authority to approve a Deed-in-Lieu that meets all Guide requirements for eligible borrowers who:
- Are 90 or more days delinquent.
- Are current or less than 90 days delinquent if the borrower's eligible hardship is death of a borrower or primary or secondary wage earner in the household; or long-term or permanent disability or serious illness of a borrower/co-borrower or dependent family member.
- Do not have an eligible hardship but were previously discharged from the debt obligations in a Chapter 7 bankruptcy.
- Required documentation and Servicer evaluation: As a reminder, you are no longer required to obtain a Borrower Response Package, verify an eligible hardship, or request a contribution if a borrower is 90+ days delinquent and has a credit score less than 620. As part of your evaluation, you are required to examine occupancy, any new mortgages, debt-to-income ratio, and cash reserves in accordance with requirements in the Guide.
- Property inspection and Servicer responsibility: You must conduct an interior inspection no more than 48 hours prior to the execution of the Deed-in-Lieu. Additionally, you must take all necessary actions to protect the property from waste, damage and vandalism, and you are responsible for the condition of the property at the time of conveyance to Freddie Mac.
- Borrower contributions and relocation assistance: As with the Standard Short Sale, borrowers who are not required to make a financial contribution toward the deficiency may be eligible to receive up to $3,000 relocation assistance provided that the borrower occupies the mortgaged premises as his or her primary residence.
- Servicer Performance: In the event of a foreclosure, your performance will be measured against Freddie Mac's State foreclosure time lines without consideration given to your postponement of a foreclosure sale with a Deed-in-Lieu or other loss mitigation method. Requirements state that Servicers must ensure there is sufficient time allowed for the Deed-in-Lieu process – at least 30 days – prior to the foreclosure date.
- Unified Program: With the expiration of Home Affordable Foreclosure Alternatives (HAFA) evaluations as of December 31, 2012, the Deed-in-Lieu will provide Servicers a unified deed-in-lieu foreclosure alternative for both GSEs.
To more quickly postpone foreclosure sales and manage foreclosure time lines, effective immediately, you have the authority to postpone any foreclosure sale for mortgages that are more than 12 months delinquent without obtaining Freddie Mac's prior approval.