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Step 2 – Settle Workout

Choose the workout type you’ve determined to be the best solution for the borrower:

A loan modification is a written agreement with the borrower that permanently changes one or more of the original terms of the note, such as the interest rate, monthly payment, maturity date, or forbearance of a portion of the principal balance.

Modification Pre-Settlement Overview

Steps Guide Requirements
1. Determine the appropriate modification.

HAMP

Chapter 9205

Standard Modification

Chapter 9204

Streamlined Modification

MyCity Modification

Guide Section 9206.1

Disaster Relief Modification

Guide Section 9206.4

Bankruptcy Cramdown

Guide Section 9401.8

2. Submit the modification through Workout     Prospector® to obtain a delegated or     negotiated approval to complete the     modification.

Guide Section 9206.10

3. Submit the fully executed modification     agreement to the Document Custodian.

Guide Section 9206.18

Modification Settlement Overview

Step
1. Verify the modification workout type is in a “Modification Approved” status in Workout Prospector.
2. Complete the “Loan Modification Settlement” screen in Workout Prospector by the 4th business day of the month that the 1st     modified payment is due.
3. Monitor the status of the modification settlement in the Servicer Performance Profile.
4. Report and remit the modified principal and interest payment in the next accounting cycle after the effective date of the     modification.

Frequent Modification Settlement Issues

  1. The Current UPB (unpaid principal balance) reflected on the “Loan Modification Settlement” screen in Workout Prospector does not match the UPB reported to Freddie Mac as of the last accounting cycle cutoff prior to the first modified payment due date.

    Solutions:
    • Verify the UPB that your investor reporting area reported to Freddie Mac as of the last accounting cycle cutoff prior to the first modified payment due date.
    • Determine if the error impacts the terms of the modification and, if necessary, correct the modification agreement and re-execute the documents.
    • Correct the value on the “Loan Modification Settlement” screen in Workout Prospector, and any other values on the “Loan Modification Settlement” screen that changed as a result of a corrected modification agreement, and resubmit it to Freddie Mac.

  2. The Maturity Date and/or the Term of Modification (in months) on the “Loan Modification Settlement” screen does not agree with the Maturity Date and/or Remaining Term data on the “Modification Solution” screen in Workout Prospector.

    Solutions:
    • Validate the maturity date and/or the term of modification using the executed modification agreement.
    • Correct the appropriate data on the “Loan Modification Settlement” screen and resubmit to Freddie Mac.

Tips to Avoid Modification Settlement Delays

  • Know the monthly reporting and remitting due dates needed to transmit modifications for settlement via Workout Prospector. After the modification cycle each month, report the new principal amount.
  • Email Loss_Mit_Support_Cancellation@FreddieMac.com to take the following actions:
    • Remove a modification from the cycle.
    • Remove a modification from the pending settlement update queue, send your request no later than two business days prior to the modification cycle close. Your request must indicate “pull from cycle.”
    • Cancel an approved modification. Your request must indicate “model release” to return the Workout Prospector model to your control.

Resources

A Freddie Mac Standard Short Sale (short sale) is the sale of mortgaged property for less than the total amount due to satisfy the mortgage.

Short Sale Pre-Settlement Overview

Step Guide Requirements
1. Submit the short sale transaction in Workout Prospector® to obtain a delegated or negotiated     approval to complete the short sale.

Guide Section 9208.7

2. Close the short sale.

Guide Section 9208.8

3. Report the short sale transaction in Service Loans application.
4. Remit the net proceeds to Freddie Mac, as listed on the Settlement/Closing Disclosure statement,     to Freddie Mac.
5. Remit the cash contribution, if applicable, to Freddie Mac.
6. Submit the original executed promissory note, if applicable, to Freddie Mac.

Short Sale Settlement Overview

Step
1. Verify the short sale workout is in an ‘Approved’ status in Workout Prospector.
2. Verify loan-level reporting has been completed to move the loan to a ‘Closed’ status.
3. Complete the “Liquidation Settlement” screen in Workout Prospector.
4. Monitor the status of the modification settlement in the Servicer Performance Profile.

Tips to Avoid Short Sale Settlement Delays

  • Confirm that the net proceeds meet or exceed the minimum net proceeds required.
  • Confirm that the amount paid to the second mortgage holder meets, or is less than, the approved amount to be paid to the second mortgage holder.
  • Confirm that the amount paid for a relocation incentive meets or is less than the approved amount to be paid as the relocation incentive.

Resources

 A Freddie Mac Standard Deed-in-Lieu of Foreclosure (deed-in-lieu) is a borrower's voluntary conveyance of clear and marketable title to the property to Freddie Mac in exchange for a discharge of debt.

Deed-in-Lieu Pre-Settlement Overview

Step Guide Requirements
1. Submit the deed-in-lieu transaction in Workout Prospector® to obtain a delegated or negotiated     approval to complete a deed-in-lieu. Guide Section 9209.7
2. Work with the borrower to complete the final settlement requirements. Guide Section 9208.8
3. Ensure that clear and marketable title free of any liens or encumbrances is conveyed to Freddie Mac. Guide Section 9209.7
4. Inspect the property interior for “broom swept condition.” Guide Section 9208.8
5. Obtain the executed deed reflecting transfer from the borrower to Federal Home Loan Mortgage Corporation.
6. Report the deed-in-lieu transaction in Service Loans application within one business day of receiving the executed deed. Guide Section 9209.8
7. Remit the borrower's contribution, if applicable, within five business days of receipt to Freddie Mac.

Deed-in-Lieu Settlement Overview

Step
1. Verify the deed-in-lieu workout is in an ‘Approved’ status in Workout Prospector.
2. Send Freddie Mac:
    • A copy of the executed lease assignment or leasehold mortgage, if applicable.
    • A copy of the signed personal property release, if applicable.
3. Complete the “Liquidation Settlement” screen in Workout Prospector.
4. Monitor the status of the modification settlement in the Servicer Performance Profile.

Tips to Avoid Deed-in-Lieu Settlement Delays

  • Confirm that the mortgage has been reported as a transfer to Real Estate Owned (REO) via loan-level reporting in Service Loans application.
  • Confirm that any hazard insurance proceeds and/or borrower contributions required have been remitted to Freddie Mac.
  • Confirm the executed deed transfers title to Federal Home Loan Mortgage Corporation.

Resources

 A third-party foreclosure sale is a sale of the property to a successful bidder at the foreclosure sale. The successful bidder is someone other than the attorney representing the Servicer or Freddie Mac and is commonly referred to as the “third-party” purchaser.

Third-Party Foreclosure Sale Pre-Settlement Overview

Step Guide Requirements
1. Obtain foreclosure sale bidding instructions as required. Guide Section 9301.31
2. Manage the foreclosure process in accordance with Freddie Mac requirements. Guide Section 9301.1
3. Report the third-party foreclosure sale results in Service Loans application within one business day of     the foreclosure sale.  Guide Section 9301.38
4. Complete the appropriate reporting and remittance requirements following receipt of the proceeds      from the third-party foreclosure sale. Guide Section 8303.10

Third-Party Foreclosure Sale Settlement Overview

Step
1. Verify the loan-level reporting in Service Loans application has been completed to move the loan to a ‘Closed’ status.
2. Model the third-party foreclosure sale transaction in Workout Prospector®.
3. Verify the third-party foreclosure sale workout is in ‘Approved’ status in Workout Prospector.
4. Enter third-party foreclosure sale settlement data in the "Liquidation Settlement" screen in Workout Prospector.

If you are having issues submitting 'Approved' workouts through Workout Prospector, please contact WSO_Inquiries@freddiemac.com.
5. Monitor the status of the modification settlement in the Servicer Performance Profile.

Tips to Avoid Third-Party Sale Settlement Delays

  • Review Guide Section 9301.31 for Freddie Mac’s foreclosure sale bidding requirements.
  • Complete the required reporting and remittances per Guide Sections 9301.38 and 9301.43.
  • Complete Freddie Mac Rollback request Form 106: Rollback Request, per Freddie Mac Guide Section 9301.39 if the third-party foreclosure sale was reported as an REO.  Form 106 is not required if the result of the foreclosure sale was erroneously or otherwise reported as a third-party foreclosure sale but is an REO. If Form 106 is not required, then you can re-report the correct foreclosure sale results through Service Loans application.

Resources

A charge-off ceases collection efforts on a mortgage when all appropriate measures have been exhausted to collect on the delinquent mortgage. The Servicer deems the debt to be uncollectible or that a foreclosure should not be completed.  A charge-off does not cancel the note, nor does it release the lien on the property.

Charge-Off Types

A charge-off of a balance left over after a short payoff.

A charge-off of a low balance mortgage where the mortgage is delinquent and Freddie Mac has determined to not complete a foreclosure of the mortgage.

A full charge-off of a mortgage when the property has been condemned.

Charge-Off Settlement Overview

Step Guide Requirements
1. Submit your recommendation for a charge-off to Freddie Mac, along with the appropriate     documentation.

Guide Section 9210.3

2. Obtain approval from Freddie Mac on the charge-off request.

Guide Section 9210.4

3. Notify the borrower that servicing of the mortgage has been transferred to Freddie Mac within three     business days of approval of the charge-off request.

Guide Section 9210.5

4. Submit the following items to the Freddie Mac-approved vendor once notified by them:

  • the note,
  • security instrument,
  • recorded assignment,
  • copy of the original loan application, and
  • payment history, if applicable. 

Guide Section 9210.5

5. Report the charge-off transaction via loan-level reporting in Service Loans application within two     business days of approval. 

    When reporting, ensure that the Due Date of the Last Paid Installment (DDLPI) field contains the     due date of the last fully paid installment. 

Guide Section 9210.5

6. Send any hazard insurance claims proceeds or litigation settlement proceeds to Freddie Mac     regardless of whether the lien is or is not released on an approved charge-off request.

Guide Section 9210.5

Charge-Off Settlement

Step
1. Verify the charge-off workout is in an ‘Approved’ status in Workout Prospector®.
2. Verify loan-level reporting has been completed to move the loan to a ‘Closed’ status.
3. Complete the “Liquidation Settlement” screen in Workout Prospector.
4. Monitor the status of the modification settlement in the Servicer Performance Profile.

Tips To Avoid Charge-off Settlement Delays

  • When hazard insurance claims or litigation proceeds have not been remitted to Freddie Mac, submit a copy of the wire transfer or check copy to NPL_Settlement@freddiemac.com simultaneously with the completion of your reporting requirements.

Resources

Cancel Workout or Request Release Model

Request a Workout Cancellation when you no longer intend to complete the workout option in Workout Prospector®.

Request Model Release when you want to change or correct a workout option in Workout Prospector.
Send your requests to Loss_Mit_Support_Cancellation@freddiemac.com.

  • The email subject line must contain the Freddie Mac loan number.
  • Send one email per release/cancellation request.
  • If you’re sending a cancellation request, include the reason you’re requesting the cancellation.

We will send you an email confirmation of the completion of your request or a request for additional information, if needed. 


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