Guide Bulletin 2014-1 Announces Step-Rate Mortgage Updates, New EDR Codes, and More
January 24, 2014
In Single-Family Seller/Servicer Guide (Guide) Bulletin 2014-1, we’re announcing the following updates and revisions that will improve several servicing processes:
- New requirements to notify borrowers of interest rate and related payment adjustments for Step-Rate Mortgages
Effective April 1, 2014, Servicers must send borrowers two separate written notifications of upcoming interest rate changes and related payment adjustments and must be prepared to answer borrowers’ questions. These requirements will help borrowers prepare for scheduled payment changes on mortgages modified under the Home Affordable Modification Program agreements.
- Revised Electronic Default Reporting (EDR) requirements, including:
- New EDR codes. Servicers must notify Freddie Mac when a borrower has exercised his or her right to appeal a loan modification denial under Guide Section 63.3 and the Consumer Financial Protection Bureau’s final mortgage servicing rules. To help streamline the reporting process, Servicers must use the new EDR codes updated in Guide Exhibit 82, EDR Transmission Code List, starting May 1, 2014.
- To improve reporting accuracy, Auto-Reinstate has been discontinued for loans beginning with the April 2014 EDR reporting cycle.
- Revisions to full reinstatements. Servicers must now notify Freddie Mac when accepting a mortgage reinstatement when that mortgage has been reported as 31 or more days delinquent or in foreclosure in the prior month.
- Changes to State foreclosure time line allowable delays
As a result of the borrower right to appeal requirements announced in Guide Bulletin 2013-21, we have adopted new State foreclosure time line allowable delays. Additionally, we are giving Servicers additional time to process foreclosures if the delay is due to the borrower failing to comply with the terms of a Freddie Mac Streamlined Modification Trial Period Plan.
- Allowing third-party use of Workout Prospector® and BPOdirect®
In response to Servicer feedback and to help improve managing loss mitigation processes, Servicers may now request user access to Workout Prospector and BPOdirect for employees of their authorized third-party service providers that are conducting servicing activities on Freddie Mac-owned mortgages.
- Updated reimbursement requirements associated with posting and publication of foreclosure notices, including:
- Removing the posting and publication expense limits in California.
- Advising Servicers that other service charges or publication fees are not allowable costs – the foreclosure attorney fee in Guide Exhibit 57A covers fees for acquiring publications.
- Providing additional requirements and guidance for expediting Freddie Mac Default Legal Matters:
- Servicers can use their discretion, without obtaining Freddie Mac’s prior approval, to extend foreclosure sale dates to resolve litigation or expedite final judgment for foreclosure.
- Updated reimbursement requirements for Servicers who opt to pay a relocation incentive to a borrower in Illinois who consents to judgment.
Please refer to Guide Bulletin 2014-1 for full details on these updated Servicing requirements and important effective dates.