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Servicer Incentives and Compensatory Fees

The Freddie Mac Servicing Success Program defines how we measure and recognize servicing excellence. The Freddie Mac Servicer Success Rewards and Remedies component of the Program provides incentives and assesses compensatory fees to encourage exceptional performance, discourage poor performance, and maintain high standards of quality servicing.

Servicer Benefits

  • Incentives help you offset your costs for completing eligible alternatives to foreclosure.
  • We track all non-Home Affordable Modification Program (HAMP) and non-Home Affordable Foreclosure Alternative (HAFA) workouts that you settle on a monthly basis, pay you incentives, and provide the loan detail for all of the workouts that are eligible for incentives.
  • You can clearly see what performance will earn incentives or avoid compensatory fees by the performance benchmarks we set.
  • You have access to an array of servicing tools to facilitate your default management activities.
  • You have access to educational materials (in English and Spanish) that you can provide to delinquent borrowers to help them understand workout options so they can work efficiently with you.

Borrower Benefits

  • Freddie Mac is committed to helping borrowers sustain homeownership and avoid foreclosure whenever possible. We deliver on that commitment by developing management tools that enable you to work effectively with defaulted borrowers, and awarding monetary incentives for complete Borrower Response Packages and completed alternatives to foreclosure that meet our eligibility requirements.
  • We encourage earlier and more frequent borrower contact. Our Web pages at http://www.freddiemac.com/homeownership/mortgage_help/ give you a powerful tool to help your borrowers better understand that they should contact you as soon as possible when financial hardship strikes. The pages explain the various workout options that may be available to at-risk borrowers, and offer resources to locate a qualified credit-counseling agency in their area.

Workout Incentives

Eligible Mortgages

Mortgages on 1- to 4-unit homes, including those covered by mortgage insurance, are eligible for the program. Second mortgages, home improvement loans, mortgages guaranteed by the FHA, VA, or RHS, and mortgages sold to us with recourse or subject to indemnification are not eligible. If a mortgage insurer’s contribution to a short payoff enables the borrower to fully pay off the entire debt owed to us (also known as a make-whole pre-foreclosure sale), you will receive the incentive amount for a short payoff.

How You Are Paid

Home Affordable Modification Program (HAMP) and Home Affordable Foreclosure Alternative (HAFA) incentives are paid via the Making Home Affordable program’s Program Administrator.

We will track all non-HAMP and non-HAFA workouts you settle on a monthly basis, pay you incentives, and provide the loan detail for all of the eligible workouts and repayment plans you settled during the period for which you are being compensated. Please note that compensation for qualified repayment plans is paid one month in arrears due to cycle cutoff requirements, and that we consider a workout “settled” when we receive and process your necessary documentation and transmissions.

Workout Incentive Amounts

You will receive the following incentives for eligible and successfully settled workouts:

  • Non-HAMP "classic" loan modification = $800 (must be approved by December 31, 2011, settled by February 28, 2012, and the LMTW submitted to Freddie Mac by March 6, 2012)
  • Freddie Mac Standard Modification (based on the mortgage's term of delinquency when the trial period plan starts)
    • Less than or equal to 120 days delinquent (less than or equal to 150 days from the due date of last paid installment [DDLPI]) = $1,600
    • 121-210 days delinquent (151-240 days from DDLPI) = $1,200
    • Greater than 210 days delinquent (greater than 240 days from DDLPI) = $400
    • You must correctly report the repayment plan to us via electronic default reporting (EDR)
    • You must submit data for settlement within two months of the end of the Standard Modification trial period plan
  • HAMP Modification (based on the mortgage's term of delinquency when the trial period plan starts)

  • Number of Days Delinquent at Trial Period Plan Effective Date Incentive Amount on or after October 1, 2011 and Prior to April 1, 2014 Incentive Amount on or after April 1, 2014
    Less than or equal to 120 days delinquent (150 days from Due Date of Last Paid Installment (DDLPI)) $1,600 $2,100
    121 days or more delinquent to and including 210 days delinquent (151 to 240 days from DDLPI) $1,200 $1,700
    Greater than 210 days delinquent (greater than 240 days from DDLPI) $400 $900

  • Non-HAMP Repayment plan = $500 if the following conditions are met:
    • The mortgage must be 60 or more days delinquent at the time the borrower entered into the repayment plan
    • The borrower must completely reinstate or pay off the mortgage
    • You must correctly report the repayment plan to us via electronic default reporting (EDR)
  • Non-HAFA short payoff and make-whole pre-foreclosure sale = $2,200
  • HAFA short payoff = $2,200
  • Non-HAFA deed-in-lieu of foreclosure = $275
  • HAFA deed-in-lieu of foreclosure= $1,500

Borrower Response Package Benchmarks, Incentives, and Compensatory Fees

  • We set benchmarks and pay incentives when obtaining complete Borrower Response Packages subject to certain requirements and exclusions (e.g., borrowers in bankruptcy are excluded).
  • Looking at the population of new borrowers who become 60 days delinquent as of the beginning of a month, we measure Servicer performance at the end of a six-month period to determine how many of these borrowers:
    • Deliver complete Borrower Response Packages
    • Become current
    • Become less than 60 days delinquent, or
    • Pay off the mortgage
  • It is important that Servicers reach out to defaulted borrowers early, obtain complete Borrower Response Packages and pursue alternatives to foreclosure.

  • Effective for all collection periods with a start date:
    On or after March 1, 2013
    Prior to August 1, 2013
    On or after August 1, 2013
    Requirement changes We will discontinue the assessment of compensatory fees for Servicers who do not meet the performance benchmark for the Borrower Response Package. We will continue to pay incentives in the amount of $500 for each complete Borrower Response Package reported to Freddie Mac if the Servicer has a performance measurement that meets or exceeds the incentive benchmark. We are eliminating the Borrower Response Package and Delinquency improvement performance standard.

Foreclosure Time Line Compensatory Fees

Compensatory Fees for Mortgages Referred to Foreclosure Before October 1, 2011

  • Based on the information a Servicer reports to Freddie Mac via electronic default reporting (EDR) and the foreclosure sale/deed-in-lieu transmission after the completion of the foreclosure sale or deed-in-lieu transaction (Transaction), Freddie Mac will determine how long it took a Servicer to complete the Transaction. The calculations for compensatory fees are currently based on the date the mortgage was referred to foreclosure.
  • FHA/VA/RHS mortgages, foreclosure sales reverting to a third-party bidder, and designated counsel program loans are not included in the compensatory fee calculation.
  • Additional time is added to the foreclosure time line for delays due to bankruptcy, probate, military indulgence, contested foreclosure, Chapter 11 bankruptcy, unemployment forbearance, a failed Standard Modification Trial Period Plan, and loans under HAMP review or in HAMP Trial Period Plans.
  • To calculate compensatory fees: multiply $30 by the total number of days by which the Servicer exceeded Freddie Mac's state foreclosure time lines with respect to all mortgages that resulted in a foreclosure sale that became a Freddie Mac REO during a calendar year.
  • Refer to Guide Exhibit 83A for complete details.

Compensatory Fees for Mortgages Referred to Foreclosure On or After October 1, 2011

  • Effective for all foreclosure sales completed on or after January 1, 2012, foreclosure sales that are completed by Servicers and are under the state foreclosure time line standard will now offset foreclosure sales that exceed the state foreclosure time line for that particular state only.
  • Effective for all foreclosure sales completed on or after January 1, 2012, to calculate the loan level compensatory fee calculation, first calculate for each state the total number of days by which the Servicer exceeded Freddie Mac’s state foreclosure time lines with respect to all mortgages that resulted in a foreclosure sale that became a Freddie Mac REO during a particular month. The compensatory fee = Unpaid Principal Balance (UPB) x Accounting Net Yield (ANY) in effect on the day of the foreclosure sale / 365 * Number of days over the overall allowed state foreclosure time line1

1Number of days over the overall allowed state foreclosure time line = [Actual number of days from the DDLPI to foreclosure sale - (state foreclosure time line (DDLPI to sale) + Any allowed delay days + Any data corrections)

  • FHA/VA/RHS mortgages, foreclosure sales reverting to a third-party bidder, and loans sold to Freddie Mac with recourse and repurchased prior to the assessment of the state foreclosure time line compensatory fee are not included in the compensatory fee calculation.
  • There are uniform standards for allowing additional time delays due to bankruptcy, probate, military indulgence, contested foreclosure, Chapter 11 bankruptcy, unemployment forbearance, a failed Standard Modification Trial Period Plan, and loans under HAMP review or in HAMP Trial Period Plans.
  • Servicers are subject to compensatory fee assessments for delayed transactions conducted by designated counsel.
  • Compensatory fees will not be assessed if a Servicer’s aggregate amount of monthly foreclosure time line compensatory fees for a particular month is $1,000 or less.

Reporting, Remitting, and Data Compensatory Fees

  • Reporting Foreclosure Sale Results: $100 compensatory fee for every day that a foreclosure sale is not reported correctly.
  • REO Rollback Compensatory Fee:
    • We will assess a $1,000 compensatory fee per occurrence when Freddie Mac must process an REO rollback, in accordance with Single-Family Seller/Servicer Guide (Guide) Section 66.56.
    • Effective January 1, 2013: We will assess a compensatory fee in the amount equal to $1,000 per occurrence for administrative costs plus any third-party costs when a foreclosure sale occurs, and Freddie Mac must process an REO rollback, in accordance with Single-Family Seller/Servicer Guide (Guide) Section 66.56.
  • We will assess a $1,000 compensatory fee per occurrence when Freddie Mac must process an REO rollback, in accordance with Single-Family Seller/Servicer Guide (Guide) Section 66.56.
  • Effective January 1, 2013: We will assess a compensatory fee in the amount equal to $1,000 per occurrence for administrative costs plus any third-party costs when a foreclosure sale occurs, and Freddie Mac must process an REO rollback, in accordance with Single-Family Seller/Servicer Guide (Guide) Section 66.56.
  • Reporting Noncompliance Fees: Compensatory fees are based on the number of occurrences within a consecutive 12-month period.
    • All Loans: A reporting noncompliance compensatory fee is assessed if you fail to report on at least a specific percentage of your portfolio by the fifth business day after the accounting cycle cutoff.
    • Effective September 1, 2012, if you do not report on at least 75 percent of your portfolio:
      • First violation: $5,000
      • Second violation: $10,000
      • Third violation or more: $15,000
    • Effective January 1, 2013, if you do not report on at least 80 percent of your portfolio:
      • First violation: The greater of $250 or $50 per loan, up to $5,000.
      • Second violation: The greater of $500 or $50 per loan, up to $10,000, and you may be required to attend a reporting training seminar at your expense.  
      • Third violation or more: The greater of $1,000 or $50 per loan, up to $15,000, and you may be required to attend a reporting training seminar at your expense.   
  • Electronic Default Reporting (EDR) Noncompliance Compensatory Fee: A reporting noncompliance compensatory fee is assessed for nonperforming loans if you fail to report applicable information through EDR within the first three business days of a month.
    • Prior to April 1, 2013:
      • First violation: $250
      • Second violation: $550
      • Third violation or more: $1,000
    • Effective April 1, 2013:
      • First violation: The greater of $250 or $50 per loan, up to $5,000.
      • Second violation: The greater of $500 or $50 per loan, up to $10,000, and you may be required to attend a reporting training seminar at your expense.  
      • Third violation or more: The greater of $1,000 or $50 per loan, up to $15,000, and you may be required to attend a reporting training seminar at your expense.   
  • Unreported Transactions and Loan Simulation Compensatory Fee:
    • Effective January 1, 2013: We will assess a fee of $100 per mortgage when you fail to correct reporting errors by the end of the month minus four business days. If you discover an error after you have transmitted your accounting reporting information, you must:
      • Correct the source of the error.
      • Transmit a revision to us that reflects the borrower’s payment activity or disposition of the mortgage.
      • Adjust remittances, if necessary.
    • This fee will not be assessed if you have been assessed the reporting noncompliance compensatory fee.
  • Additional Compensatory Fees: See Guide Exhibit 96 for complete details.
    • Contract Noncompliance and Contract Change
    • Aged Data Errors
    • Late Reported Payoff Noncompliance
    • Cash Remittance Interest Reimbursement
    • Late Execution of REO Repurchase
    • Unauthorized Transfers of Servicing

For More Information

  • Contact a Freddie Mac servicing representative.
  • Review Guide Exhibit 96.

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