Guide Bulletin 2013-5 Announces Requirements for the Streamlined Modification and Updates to Standard Modification Requirements
March 27, 2013
As part of the Servicing Alignment Initiative, Freddie Mac and Fannie Mae aligned on a streamlined modification, a temporary initiative that will increase your loss mitigation options for assisting a financially distressed borrower to retain the property. Today's Single-Family Seller/Servicer Guide (Guide) Bulletin 2013-5 introduces the Freddie Mac Streamlined Modification and provides updates to the Freddie Mac Standard Modification initiative.
Freddie Mac Streamlined Modification
The new Streamlined Modification is effective for borrower evaluations beginning July 1, 2013. Servicers must evaluate any borrower who is at least 90 days delinquent but not more than 720 days delinquent for a Streamlined Modification according to the requirements in new Guide Section B65.12.1, Freddie Mac Streamlined Modification Initiative.
The Streamlined Modification offers the same terms as the Standard Modification, which enables Servicers to adjust interest rates, extend payment terms to 40 years, and provide principal forbearance for certain underwater borrowers. The Streamlined Modification also requires that the estimated modified principal and interest (P&I) payment is less than or equal to the pre-modification P&I payment at the time Servicers determine eligibility for a trial period plan.
Additionally, the Streamlined Modification:
- Offers a no-documentation alternative to foreclosure that will expedite your evaluation of financially distressed borrowers.
- Includes a trial period plan to ensure borrowers can meet the new modified terms. Borrowers who successfully complete a trial period plan will enter into a permanent modification.
- Provides incentives to you for successfully settling Streamlined Modifications when you comply with all eligibility, underwriting, documentation, closing, and reporting requirements. These requirements include submitting accurate closing data to Freddie Mac within two months after the trial period ends.
Effective July 1, 2013, Servicers must evaluate any borrower who is at least 90 days delinquent, but not more than 720 days delinquent for a streamlined modification. A trial period plan can start once the borrower responds with a trial period plan payment. The trial period plan start date is determined by requirements Guide Section B65.19.
We are updating our Workout Prospector® technology with the Streamlined Modification offering and will let you know when the enhancements are complete. In the interim you may begin evaluating borrowers for a Streamlined Modification Trial Period Plan on or after July 1, 2013, and generate the terms of the trial period plan using your proprietary systems. Servicers must still report the Streamlined Modification Trial Period Plan to Freddie Mac via Electronic Default Reporting (EDR) even if they processed the mortgage using their own proprietary systems.
Freddie Mac Standard Modification Updates
We have revised our servicing requirements for all new evaluations for a Standard Modification resulting in a trial period plan effective date on or after August 1, 2013.
Changes to those requirements include:
- Eliminating the requirement that the Standard Modification must result in a P&I payment reduction of at least 10 percent. Instead, the new requirement is that the Standard Modification must result in a P&I payment that is less than or equal to the pre-modification P&I at the time the Servicers determine eligibility for a trial period plan. This update modifies the ineligibility requirements in Guide Section B65.14.