Freddie Mac Standard Short Sale

Eligibility and Servicer Delegation

Eligible Property Types

• Primary residences, investment properties, or second homes.
• Borrowers who are current or less than 31 days delinquent must occupy the mortgaged premises as their primary residence.

Borrower Eligibility

Every borrower is eligible to be considered for a short sale, provided:

• The borrower has one of the eligible hardships in Guide Section 65.17(a).
• The sale is an arm's length transaction as defined in Guide Section B65.40.
• The borrower did not enter into a program or arrangement where a third party takes the title to the mortgaged premises and arranges a short sale in exchange for a fee.

Borrowers who are current or less than 31 days delinquent must:

• Occupy the mortgage premises as a primary residence.
• Have a monthly debt-to-income ratio greater than 55 percent (service members with Permanent Change of Station orders are exempt from this requirement).

Servicer Delegation

Servicers have delegated authority to approve a Standard Short Sale for:

• Borrowers who are 31 days or more delinquent.
• Borrowers who are current or less than 31 days delinquent, provided the borrower is experiencing one of the following eligible hardships:
  • Divorce or separation
  • Death of a borrower or primary wage earner
  • Borrower or dependent family member has a long-term or permanent disability
  • Distant employment transfer or relocation, including Permanent Change of Station orders for service members

If the borrower is current or less than 31 days delinquent and their hardship is other than one of the four listed above, Servicers may submit a short sale recommendation to Freddie Mac for approval.

Borrowers must meet all eligibility requirements in order for Servicers to approve a short sale.

Mortgage Insurance (MI) Delegation

• Servicers can approve Standard Short Sales that are completed in accordance with the Guide without obtaining pre-approval from the participating MI companies.
• Servicers can access the list of participating MI companies in the Service Loans application by selecting “Delegated MI Companies” link in the Home tab.
• The list will be updated from time to time if MI companies are added or removed from the list.

Other mortgage and borrower eligibility requirements apply as noted in Guide Section B65.36.

Solicitation

Using a Borrower Solicitation Package, Servicers must solicit borrowers who are 31 days or more delinquent between the 31st and 35th day of delinquency and again between the 61st and 65th day of delinquency if quality right party contact was not achieved or the borrower did not respond to the initial solicitation.

If the borrower is 90 days or more delinquent and has a credit score less than 620 as of the evaluation date, the Servicer is not required to obtain or review the Borrower Response Package. (The credit score cannot be more than 90 days old as of the date the Servicer evaluates the borrower for a short sale.)

Refer to Guide Section 64.6 for complete requirements.

Short Sale Transactions

Obtain Valuation

Servicers must request an estimated market value and minimum net proceeds via the Obtain Valuation tab in the Freddie Mac Service Loans application. The property valuation results provided by Freddie Mac to Servicers will include an estimated market value and minimum net proceeds with a "good through date."

Effective November 1, 2012, for borrowers who are 31 days or more delinquent, Servicers may no longer request a property value from BPOdirect® for a Standard Short Sale. Until further notice, for borrowers who are current or less than 31 days delinquent, Servicers must:

• Continue to request a property value from BPOdirect for a Standard Short Sale.
• Request the minimum net proceeds from Freddie Mac by sending an email to ShortSales@FreddieMac.com that includes the Freddie Mac loan number, Servicer name, Servicer loan number, and contact information.

To gain access to the new Obtain Valuation functionality, you must enroll for a new authorized user role, Workout – Specialist, in the Service Loans application by completing and submitting a new Authorized User Roles Form. The forms are:

• Form 902, Freddie Mac Service Loans Application Authorized User Roles Form – For Use by Servicers Only or
• Form 902SA, Freddie Mac Service Loans Application Authorized User Roles Form – For Use by Servicing Agents Only.

The Authorized User Role Forms have been updated to include the new user role. Visit the Service Loans Application Resource Center to complete and submit the appropriate forms no later than October 15, 2012.

Short Sale Offers

Servicers must:

• Acknowledge receipt of the purchase offer within three business days.
• Notify the borrower within five business days of receiving the purchase offer if there is outstanding information needed to evaluate the offer.
• Respond with a purchase offer decision within 30 days of the purchase offer receipt, but no later than 60 days.
• If Servicers cannot provide the borrower with a decision within 30 days, they must provide the borrower a weekly status update verbally or in writing on why a decision is still pending.

Short Sale Counteroffers

• Servicers may only submit a counteroffer if the purchase offer is less than the minimal net proceeds.
• The borrower must respond to the Servicer's counteroffer within five business days.
• The Servicer must respond to the borrower within 10 business days of receiving the borrower's response to the counteroffer.

Refer to Guide Section B65.39 for complete requirements.

Short Sale Affidavit Document

• Short Sale Affidavit, located in Guide Exhibit 97.
  • Servicers must obtain a short sale affidavit when requiring parties to the transaction to attest that the sale constitutes an "arm's length" transaction.
  • Servicers may use Guide Exhibit 97, Short Sale Affidavit, or a customized equivalent that contains the same level of specificity as the template.

Workout Prospector

Servicers must continue using Workout Prospector® to submit short sale transactions to Freddie Mac.

Workout Prospector will be updated to reflect the delegated authority and new Standard Short Sale requirements in the future.

Incentives

Servicer Incentives

• $2,200 will be paid upon successful completion of the borrower's short sale.

Borrower Incentives

• Borrowers may be paid up to $3,000 to help with relocation expenses after a completed short sale has been received.
• If a Servicer is aware that the borrower has received relocation assistance funds from a third party, Freddie Mac will pay the difference up to $3,000.
• Servicers may in their discretion offer the borrower additional financial incentives from their own funds to complete the short sale, but Servicers cannot deduct this payment from the short sale proceeds.

Subordinate Lien Holder Incentives

• Payment of up to an aggregate of $6,000 to subordinate lien holders will be offered in exchange for releasing each subordinate lien, extinguishing the underlying debts, and waiving the right to pursue the deficiency.

Real Estate Broker Commissions

• Unless a real estate broker's sales commission exceeds six percent of the homeowner's mortgage, Servicers cannot renegotiate a lower sales commission.

Announcements

Guide Bulletins

• Guide Bulletin 2012-23
• Guide Bulletin 2012-16

Single-Family Updates and News Articles

• October 31, 2012 – Guide Bulletin 2012-23 Announces Changes to Servicing Requirements
• October 29, 2012 – New Resources to Help Servicers Implement the Freddie Mac Standard Short Sale
• August 21, 2012 – Aligned Short Sale Requirements in Guide Bulletin 2012-16
• August 21, 2012 – New Online Functionality Will Help Process Short Sales – Register Today!