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Freddie Mac Standard Deed-in-Lieu

When a home retention option or Freddie Mac Standard Short Sale are not workable solutions for at-risk homeowners, the Freddie Mac Standard Deed-in-Lieu (deed-in-lieu) offers them another opportunity to avoid foreclosure. The deed-in-lieu requirements are intended to facilitate a faster and more efficient process. Borrower relocation assistance helps struggling homeowners transition to more affordable housing. The deed-in-lieu is effective for new borrower evaluations conducted on or after March 1, 2013.

 

Eligibility and Servicer Delegation

Eligible Property Types

  • Borrowers who are current or less than 31 days delinquent must occupy the mortgaged premises as their primary residence.

Borrower Eligibility

Provides all borrowers, regardless of delinquency status, with eligibility for a deed-in-lieu if:

  • The Servicer complied with the evaluation hierarchy.
  • The borrower has an eligible hardship.
  • The borrower can convey clear and marketable title to the property.
  • A borrower who is current or less than 31 days delinquent occupies the premises and their current monthly debt payment-to-income ratio is greater than 55 percent.

Servicer Delegation

Servicers may approve a deed-in-lieu that meets Single-Family Seller/Servicer Guide (Guide) requirements for eligible borrowers who:

  • Are 90 or more days delinquent.
  • Are current or less than 90 days delinquent if the borrower’s eligible hardship involves death of a borrower or primary or secondary wage earner in the household; or long-term or permanent disability or serious illness of a borrower/co-borrower or dependent family member.
  • Do not have an eligible hardship, but whose mortgage debt was previously discharged in a Chapter 7 bankruptcy.

Interior Property Inspection

Servicers must conduct an interior property inspection no more than two business days following receipt of the executed deed and all related documents. Servicers must ensure that the property is undamaged, free of exterior and interior debris and in broom-swept condition.

Subordinate Lien Payments

Servicers may authorize payment of up to an aggregate $6,000 to subordinate mortgage holders in exchange for a mortgage release and extinguishment of the indebtedness secured by the mortgaged premises. Servicers will have the discretion to divide the payment among subordinate mortgage holders in order to maximize the chances that all subordinate mortgage holders will release their mortgages and extinguish the debts, provided that the aggregate payout does not exceed $6,000. Any and all other types of liens, such as a mechanic’s lien, are not eligible for the subordinate mortgage payment.

Documentation

The Borrower must submit a complete Borrower Response Package, as defined in Section 64.6, to the Servicer in order to be considered for a Freddie Mac Standard Deed-in-Lieu of Foreclosure.

Streamlined Deed-in-lieu of Foreclosure ("Streamlined DIL")

Unless otherwise required by applicable law, a Borrower who is 90 days or more delinquent is eligible for a Streamlined DIL under which the Servicer is not required to obtain the Borrower Response Package or to verify an eligible hardship when the property was not originated as an Investment Property Mortgage and:

  • The Borrower’s FICO® score is less than 620  or
  • The debt secured by the Borrower’s Mortgage has been discharged in a bankruptcy proceeding filed pursuant to Chapter 7 of the U.S. Bankruptcy Code

Deed-In-Lieu Transactions

Borrower Relocation Assistance

Borrowers who are eligible for a deed-in-lieu, and who meet the eligibility requirements for relocation assistance, may receive up to $3,000 in relocation assistance. From November 14, 2014 to December 1, 2015, a Servicer may offer a supplemental incentive up to $7,000 to an eligible borrower whose mortgaged premises is located in select states. See Guide Section B65.44.1, for a list of states and other requirements.

The property must be vacant and broom-swept or the relocation assistance is reduced by the cost of cleaning and repair.

Borrower Personal Property Release

Borrowers must sign a form at execution that waives ownership of personal property left on or in the mortgaged premises.

Incentives

Servicers will receive a $1,500 incentive for each deed-in-lieu completed in compliance with the Guide.

Workout Prospector

Servicers must use Workout Prospector® to submit deed-in-lieu transactions to Freddie Mac. In addition, Servicers must report the deed-in-lieu transaction via the Service Loans application within one business day of receiving the executed deed.

Additional Resources

Training

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