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Guide Bulletin 2014-4 Announces Revised Modification Requirements

March 28, 2014

Today's Single-Family Seller/Servicer Guide (Guide) Bulletin 2014-4 announces revised requirements for Freddie Mac Standard and Streamlined Modifications.

Updated requirements for mortgages with pre-modification mark-to-market
loan-to-value (MTMLTV) ratios less than 80 percent

Here's what you need to know:

  • Requirements are effective July 1, 2014, but you may implement them sooner.

  • You must offer eligible borrowers the following three modification options in their Trial Period Plan Notice:
    • A 480-month payment term, if the estimated modified principal and interest (P&I) payment is less than or equal to the current contractual P&I payment.

    • A 360-month payment term, if the estimated modified P&I payment is at least 20 percent less than the current contractual P&I payment.

    • A 240-month payment term, if the estimated modified P&I payment is at least 20 percent less than the current contractual P&I payment

  • Working with customers:
    • Borrowers no longer have the option to request a different payment term or change the payment term after the first Trial Period payment is made.

    • The borrower's modification term is determined by their first Trial Period payment. Their payment term will be equal to the shortest term that's covered by their first payment.

  • Reminders:
    • As announced in Guide Bulletin 2014-3, the requirements included in Guide Bulletin 2013-27 for Standard and Streamlined Modifications for mortgages with pre-modification MTMLTV ratios less than 80 percent are now optional.

    • You must include both the estimated modified P&I payment and required monthly escrow amounts in Trial Period payments. There are certain exceptions where escrow amounts are not required in Trial Period payments. See Guide Sections B65.12.1(g), B65.12.2, and B65.21(d) for more information.

We'll notify you in future communications when Workout Prospector® is able to process pre-modification options for MTMLTV ratios less than 80 percent.

Freddie Mac Standard Modification Interest Rate

Effective July 8, 2014, Freddie Mac will evaluate market rates on a monthly basis to determine whether a change to the Standard Modification interest rate is necessary. If the interest rate changes, the new rate will be posted on the Freddie Mac Standard Modification Interest Rate Web page by the fifth business day of each month. You must implement the new rate for Trial Period Plan evaluations conducted on or after the tenth business day of the same month, but no sooner. Evaluating the rate on a monthly basis ensures that we provide appropriate payment relief for qualified borrowers who need mortgage assistance in the form of a home retention option.

Please refer to Guide Bulletin 2014-4 for details on these servicing requirements.

Important Reminders

  • EarlyIndicator® retired – As of March 29, 2014, Freddie Mac will no longer offer our EarlyIndicator software as announced in our April 5, 2013 Single-Family News Center article.

  • New Quick Reference: Borrower Notification Requirements for Step-Rate Mortgages – Review our quick reference for guidance on notifying borrowers of interest rate and related payment adjustments for step-rate mortgages. Beginning April 1, 2014, Servicers are required to provide borrowers with two notifications prior to the first scheduled payment at the new rate as well as a notification prior to subsequent interest rate and related payment adjustments. We announced these requirements in Guide Bulletin 2014-1.

  • Online self-service password reset – We've implemented a new online password reset capability for Single-Family business applications that require a user ID and password. Click here for more information.

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