New Disaster Relief Options and Requirements Announced in Guide Bulletin 2013-15
August 15, 2013
When a disaster occurs, Freddie Mac provides Servicers with options to proactively offer temporary relief to impacted borrowers.
The following disaster relief updates from Single-Family Seller/Servicer Guide (Guide) Bulletin 2013-15, offer expanded relief and workout options, including a new modification, to assist eligible borrowers with resolved hardships, who are able to resume making their pre-disaster mortgage payments.
Disaster Relief Modification Offers New, More Flexible Option
The Capitalization and Extension Modification for Disaster Relief (Disaster Relief Modification) helps eligible borrowers, who were current, or less than 31 days delinquent at the time of the disaster, and whose disaster-related hardships have been resolved, by adding payments to the end of their loans in order to bring the mortgages current and resolve the delinquencies. For many borrowers, this is preferable to other modification options as it does not require the borrower to submit a Borrower Response Package, nor does the Disaster Relief Modification include terms that may be required in other types of modifications, such as a 40-year mortgage term extension or, under most circumstances, a final balloon payment.
To be eligible for the Disaster Relief Modification, borrowers must meet the requirements included in new Guide Section B65.12.2, Capitalization and Extension Modification for Disaster Relief. Before being offered a permanent modification, eligible borrowers will be required to complete a Trial Period Plan in accordance with Guide Section B65.19, Trial Period Plan Requirements.
This new modification is effective November 1, 2013, but Servicers are encouraged to begin evaluating borrowers for the Disaster Relief Modification immediately.
Freddie Mac Streamlined Modification Helps Resolve Borrower Hardship
Freddie Mac Streamlined Modification (Streamlined Modification) requirements have been expanded for borrowers who were current or less than 31 days delinquent at the time of an Eligible Disaster. We have created special Streamlined Modification eligibility requirements in Guide Section B65.12.1, Freddie Mac Streamlined Modification, for eligible borrowers impacted by an Eligible Disaster.
The Streamlined Modification’s eligibility criteria are less restrictive, which gives Servicers more flexibility to help as many borrowers as possible stay in their homes. Borrowers must first be considered for a Disaster Relief Modification. If the borrower is not eligible for or declines a Disaster Relief Modification, the Servicer must consider the borrower for a Streamlined Modification if the borrower becomes 90 or more days delinquent. Borrowers are also eligible for a Streamlined Modification if the Servicer is unable to achieve quality right party contact (QRPC) at the end of the disaster-related forbearance period to determine financial status and eligibility for a Disaster Relief Modification, provided the mortgage is 90 days or more delinquent.
Steps to Take Following a Disaster
We’ve updated Guide Chapter 68, Servicing Mortgages Impacted by a Disaster, to provide that, in the event that a disaster occurs, Servicers must work to obtain QRPC with impacted borrowers as soon as possible.
- If unable to achieve QRPC and the mortgage is 31 or more days delinquent, Servicers must place the borrower on a short-term forbearance plan.
- If able to achieve QRPC, the Servicer must work with the borrower to determine whether forbearance relief is needed.
Steps to Take Following a Disaster-Related Forbearance
We’ve updated Guide Chapter 68 to also include requirements for evaluating a borrower who is transitioning from a disaster-related forbearance plan. Servicers must contact the borrower prior to the end of the forbearance period to determine the appropriate relief or workout option.
Please refer to Guide Section 68.6, Transition Following Disaster-Related Forbearance, for full requirements on offering assistance to transition borrowers impacted by an Eligible Disaster from forbearance.
Temporary Hurricane Sandy Policies Are Now Permanent
We’ve permanently implemented the following requirements that were put into place temporarily following Hurricane Sandy:
- Trial Period Plans. For borrowers whose mortgaged premises or places of employment are located in an Eligible Disaster Area and who were performing under the terms of their previous Trial Period Plans, Servicers must evaluate borrowers for another Trial Period Plan within 30 days prior to the end of the disaster-related forbearance period.
- Insurance Loss Settlements after an Eligible Disaster. Servicers are required to release insurance funds in accordance with the requirements of Guide Section 68.3 to borrowers who are less than 31 days delinquent at the time of a disaster, to help expedite property repairs.
Training and Resources
We encourage you to register for the Freddie Mac Bulletin 2013-15 Overview webinar.
Please visit the Freddie Mac Learning Center for additional information on our training programs and references tools.
For More Information
Freddie Mac is committed to assisting at-risk borrowers in unique circumstances. Our updated disaster relief policies and new Disaster Relief Modification can be leveraged to help optimize borrower outcomes, based on the borrower's circumstances, when the borrower has been impacted by an Eligible Disaster. For more information: