Selling Representation and Warranty Framework
The selling representation and warranty framework helps address Seller/Servicer concerns related to loan repurchase risk.
Under the framework, Freddie Mac will not exercise its remedies, including the issuance of a repurchase request, for breaches of certain selling representations and warranties described in
Single-Family Seller/Servicer Guide (Guide) Section 1301.11(a) if a mortgage meets certain eligibility criteria.
Framework Versions 1 and 2
Guide Section 1301.11 lists the requirements of Version 1 and Version 2 of the framework.
- The original framework, as introduced in September 2012, is referred to as Version 1, with the requirements applying to mortgages with Freddie Mac settlement dates on and after January 1, 2013 and before July 1, 2014.
- Version 2 refers to the framework as modified by the enhancements announced in May 2014 that are effective for mortgages with Freddie Mac settlement dates on and after July 1, 2014.
Under Version 2, a mortgage that meets certain eligibility requirements will be granted relief from certain selling representations and warranties, if one of the following conditions are met:
- The mortgage has established an acceptable payment history, or
- There is a satisfactory conclusion of a Freddie Mac quality control review.
Review the differences in requirements under Version 1 and Version 2 in these tables.
It is important for Seller/Servicers to review Guide Section 1301.11 to become familiar with the eligibility criteria and the effective dates to obtain relief under the framework.
The Framework's Life-of-Loan Exclusions
Guide Section 1301.11(c) describes the exclusions to this framework. Seller/Servicers are not relieved from Freddie Mac’s enforcement of its representations and warranties with respect to the following matters:
- Charter matters.
- Misstatements, misrepresentations, and omissions.
- Data inaccuracies.
- Clear title/First Lien priority.
- Compliance with laws.
- Unacceptable mortgage products.
The Remedies Framework
The origination defects and remedies framework (the “remedies framework”) expands the selling representation and warranty framework, specifically provisions related to corrections of identified origination defects, and available repurchase alternatives.
The remedies framework provides clarity on the process we follow in categorizing origination defects, Seller corrections of such defects and available remedies. In addition, it provides more transparency regarding our discretion on loan-level decisions when reviewing a mortgage in quality control.
Highlights of the remedies framework include:
- Categories of defects. After a quality control (QC) review of a loan, origination defects, if any, fall into one of three categories. This determines whether the Seller can correct the defect and what remedy is required.
- Definitions. New terms have been added to the Guide to help you understand the application of the remedies framework.
- Remedying origination defects. We’ve outlined our four-step process that we will follow to categorize origination defects, Seller corrections of the defects and available remedies.
Guide Section 3401.1, Postfunding Quality Control, includes terms and detailed guidance that support the application of the remedies framework.
The remedies framework does not affect any Servicing representations and warranties.
Independent Dispute Resolution (IDR) NEW!
The Independent Dispute Resolution (IDR) process is designed to address alleged loan-level breaches of selling representations or warranties that remain unresolved after existing appeals and escalation processes have been exhausted. It gives lenders an opportunity to submit these unresolved loan-level disputes to a neutral third party arbitrator to elect a final, binding resolution.
The IDR process is the final phase of our four-year effort to provide a simpler, clearer and more certain Representation and Warranty Framework. It does not replace our current quality control and related appeal processes.
Take advantage of our tools to help manage the QC review process and track the representation and warranty relief dates for loans you’ve sold to us.
- Quality Control Information Manager (QCIM): A single end-to-end solution for managing performing and non-performing mortgages throughout the entire quality control process.
- Loan Coverage Advisor®: An application that calculates and tracks the representation and warranty relief date for any mortgage sold to Freddie Mac.
- FHFA press release
- FRE Statement of Support
- Guide Bulletin 2016-1 announced the Independent Dispute Resolution (IDR) process.
- Guide Bulletin 2015-17 announced the remedies framework.
- Guide Bulletin 2014-21 announced changes to the framework's life-of-loan representations and warranties.
- Guide Bulletin 2014-8 announced enhancements to the selling representation and warranty framework.
- Guide Bulletin 2012-22 announced changes to Freddie Mac's Quality Control Processes and Requirements.
- October 19, 2012, Industry Letter provided supplemental information on Freddie Mac's Quality Control Enforcement Practices.
- Guide Bulletin 2012-18 introduced Freddie Mac's selling representation and warranty framework.
- September 11, 2012, Industry Letter described Freddie Mac's Quality Control Process.
- Overview of the Selling Representation and Warranty Framework
- Representation and Warranty Framework FAQs
- Overview of Repurchase and Appeal Process
- Understanding the Selling Representation and Warranty Relief Date Report job aid.
See a side-by-side comparison of Version 1 and Version 2.