Selling Representation and Warranty Framework
Mortgages impacted by eligible disasters on and after August 25, 2017 and consequently subject to a disaster-related forbearance plan during the applicable payment history period under the representation and warranty framework, may now eligible for relief from our enforcement of certain selling representations and warranties. See Single-Family Seller/Servicer Guide Bulletin 2017-28 for details.
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) Updated!
The Independent Dispute Resolution (IDR) process was designed to address alleged loan-level breaches of selling representations or warranties that remain unresolved after existing appeals and escalation processes have been exhausted. We originally announced the IDR Process for Selling, jointly with Fannie Mae and at the direction of the Federal Housing Finance Agency (FHFA), in the Single-Family Seller/Servicer Guide (Guide) Bulletin 2016-1. We have added the Impasse and Management Escalation Processes as further opportunities to resolve disputes before the IDR Process begins.
The Impasse Process can be initiated if a first appeal is denied, and if a second appeal is either not applicable or is denied. You can provide a correction of an alleged selling or servicing breach and may submit new material information that may not have been available at the time of the first or second appeal.
- The Management Escalation Process can be initiated if a dispute remains unresolved after the Impasse Process. No new corrections or material information may be submitted at this point. If the Management Escalation Process does not resolve the dispute, you can then initiate the IDR Process.
The IDR Process gives you an opportunity to submit unresolved loan-level disputes to a neutral third party arbitrator to elect a final, binding resolution. The arbitrator makes the final determination about whether a selling or servicing defect existed at the time the IDR Process began.
The IDR process does not replace our current quality control and related appeal processes. For more information about the updated IDR Process, see Guide Bulletin 2016-14.
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 AdvisorSM: A secure web-based application enabling Seller/Servicers to manage performing and non-performing loan data through the post-funding QC process. Quality Control Advisor can be accessed through Loan Advisor Suite®.
- Loan Coverage Advisor®: An application that calculates and tracks the representation and warranty relief date for any mortgage sold to Freddie Mac.
- Guide Bulletin 2016-14 announced the updated Independent Dispute Resolution (IDR) process.
- 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.
See a side-by-side comparison of Version 1 and Version 2.