October 19 Guide Bulletin supports your business processes every step of the way

With our October 19 Single-Family Seller/Servicer Guide (Guide) Bulletin [PDF 191K], we implemented important changes that reinforce our commitment to bringing stability, liquidity, and affordability to the nation's mortgage market. With this Bulletin, we are supporting your business processes every step of the way by providing new guidance on using area median income (AMI) limits – helping you realize more possibilities to maintain and enhance your business for first-time homebuyers and low- to moderate-income borrowers. Additionally, we're integrating into the Guide the changes we recently announced regarding the sale of short-term ARMs with high margins, and providing several new servicing requirements to make it easier for you to work with Freddie Mac.

New guidance on 2007 area median income changes

Earlier this year, the U.S. Department of Housing and Urban Development (HUD) provided its 2007 AMI estimates. Because of a change in HUD's methodology for calculating the AMI, many AMI estimates for 2007 are lower than the AMI estimates for 2006.

In our June 14 Guide Bulletin [PDF 184K], we provided guidance regarding use of 2006 and 2007 AMI limits to underwrite our affordable lending offerings. To minimize the impact of transitioning to HUD's new methodology, we have updated Loan Prospector® to use the higher of the two AMIs (2006 or 2007) for each applicable geographic area.

With this Guide change, you'll have additional opportunities to expand your reach and realize more business possibilities in today's mortgage environment. Read more about the benefits of this Guide change in a related Loan Prospector article.

We no longer purchase short-term ARMs with margins of 400 basis points or more through flow purchase paths

On September 7, we issued a Single-Family Advisory e-mail message to all Single-Family Sellers and Servicers announcing changes to our requirements for purchases of short-term ARMs consistent with the federal banking agencies' interagency Statement on Subprime Mortgage Lending.

While we historically have not purchased mortgages that could be considered short-term subprime ARMs, with this Bulletin we are updating the Guide to reflect that ARMs with application dates on or after September 13, 2007 that have initial fixed-rate periods of three years or less and margins of 400 basis points or more will not be eligible for sale to Freddie Mac through flow purchase paths.

Effective October 20, 2007, we no longer purchase the following ARMs with loan application dates on and after September 13, 2007, and margins of 400 basis points or more through flow purchase contracts:

6-month ARMs
3/6-month ARMs
1-year ARMs
3/1 ARMs
3-year ARMs

For additional details, review our September 7 Single-Family Advisory customer e-mail.

Uniform Master Form and Short Form Security Instruments and authorized changes incorporated into the Guide

In July, we announced availability of the Freddie Mac/Fannie Mae Uniform Master Form and Short Form Security Instruments in states that allow the use of these forms. You may use these instruments instead of the standard "long form" Uniform Security Instruments in those states.

We've updated the Guide to incorporate these new instruments, and the authorized changes applicable to these instruments, to help guide you in using these forms. With these state-specific Uniform Security Instruments you'll have new opportunities to reduce costs for borrowers in states where recording fees are based on the number of pages. You may download these state-specific forms from FreddieMac.com.

Changes to our requirements for document custody

We've made changes to our requirements for document tracking and reporting that will streamline your processes and enhance your tracking capabilities. We are requiring that the custodian's tracking system cross-reference the Freddie Mac loan number with the Servicer loan number assigned to the related mortgage. As a result of this change:

Custodians no longer have to segregate Freddie Mac Notes from those they hold for other investors.
Sellers (or Custodians acting at a Seller's request) no longer have to affix the Freddie Mac loan number to the Note in most circumstances.

Changes in the default management section of the Servicer Performance Profile

To maintain the Servicer Performance Profile as a meaningful measurement and basis for continual improvement of servicing performance, we are adjusting the profiles to better reflect the critical role quality default management plays in today's market.

The Default Management metrics will change effective January 1 for your 2008 performance measurements.

Visit our Investor Reporting and Default Management web page to learn more about the changes we are making and the rationale behind these changes.

Payment of mortgage insurance premiums and remittance of refunds

To ensure mortgage insurance (MI) coverage remains current for a delinquent mortgage that is reinstated, we've updated the Guide to emphasize that MI premiums must be paid through to the later of the foreclosure sale date or the confirmation/ratification date.

Beginning January 1, if you receive a refund of MI premiums paid after the Due Date of Last Paid Installment directly from a mortgage insurer, you must submit a refund credit to Freddie Mac via Form 104SF, Statement of Loan, workout and REO Expenses and Income.

Other Guide changes announced in the October 19 Bulletin

As you continue to implement Freddie Mac offerings and solutions, it's important that you're familiar with all changes announced in our October 19 Guide Bulletin [PDF 191K], including the following:

Selling changes

Made changes related to the Uniform Instruments:
- Updated Guide Section 6.8 to indicate that we will no longer permit the modification of the Uniform Instruments through the use of an addendum or rider that terminates on the sale of the Mortgage to Freddie Mac.
- Revised Exhibit 5, Authorized Changes to Notes, Riders, Security Instruments and the Uniform Residential Loan Application, to provide additional permissive and required authorized changes in California, Pennsylvania, Virginia, and Washington.
Updated the Guide to call attention to the requirement that all attorneys' opinions of title must provide an opinion on environmental protection lien matters and providing further direction on when an exception for a State superlien statute may be taken in that opinion.
Added PMI Insurance Company as a Freddie Mac-approved mortgage insurer.
Updated Guide Section 17.13.1 and Form 11, Mortgage Submission Schedule, and Form 13SF, Mortgages Submission Voucher, to add special Characteristic code 140, introduced for certain Home Possible Mortgages in the August 1 Guide Bulletin.
Because of an amendment to New York State Banking Law Section 6-L, we revisedGuide Section 22.18.2(b) to delete the reference to loan size from the examples of mortgages that are not high-cost home loans. The amendment revised the maximum original principal balance for high-cost home loans to match our loan limits. Freddie Mac will continue to purchase home loans that comply with a Seller's Purchase Documents and that are not subject to Section 6-L of the New York State Banking Law.

Servicing changes

Updated the Guide to eliminate all claim filing instructions for FHA and VA Mortgages as a result of the recent Guide change requiring FHA and VA proceeds to be sent directly to the Servicer.
With respect to payment of/and reimbursement for regular condominium/homeowners association (HOA)/PUD assessments we:
- Emphasized that regular condominium, HOA, PUD assessments must be paid prior to foreclosure sale for properties located in states that give these assessments lien priority over a mortgage.
- Provided guidance regarding reimbursement requirements for condominium/HOA/PUD assessments for properties located in states with a redemption period.
Provided guidance regarding the due dates of various Form 104SF submission types and revising several adjustment code descriptions. We're also adding one new adjustment code to Exhibit 75, Adjustment Codes for Forms 104SF and 104DC, to better reflect our reimbursement time lines.
Updated Form 1127, BPO Request Form, to reflect revised pricing and BPO request selections by inspection type.
Reminded Servicers of changes made in August to the Designated Counsel/Trustee List reflecting new counsel and other updated contact information.
Made general updates to Directories 5 and 7:
- Revising Directory 5 to provide a new address for submission of hard copies of Form 104SF and Form 104DC, and to reflect updated Freddie Mac department names, phone numbers, fax numbers, and e-mail addresses.
- Revising Directory 5 and Directory 7 to reflect the new address for remittances that resulted from the JP Morgan Chase acquisition of Bank One, NA.
Removed obsolete forms – including Form 1073, Uniform Mortgage Insurance Claim for Loss, and Form 1109, Mortgage Insurer's Claim Payment Instructions – from the Guide.

For more information

Review the October 19 Guide Bulletin [PDF 191K] to become familiar with all changes and updates to the Guide.
Check out our At-a-Glance chart [PDF 89K] that summarizes the Guide changes announced in the October 19 Guide Bulletin