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.
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.
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 were previously discharged from the debt obligation 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 lien holders in exchange for a lien release and extinguishment of the indebtedness secured by the mortgaged premises. Servicers will have the discretion to divide the payment among subordinate lien holders in order to maximize the chances that all subordinate lien holders will release their liens and extinguish the debts, provided that the aggregate payout does not exceed $6,000.
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
Borrower Relocation Assistance
Borrowers who are eligible for a deed-in-lieu, occupy the mortgaged premises, and are not required to make a financial contribution toward the deficiency have the potential to receive up to $3,000 in relocation assistance.
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.
Servicers will receive a $1,500 incentive for each deed-in-lieu completed in compliance with the Guide.
Single-Family Updates and News Articles
- November 25, 2013 – Guide Bulletin 2013-24 Announces Servicing Updates That Help More Borrowers Avoid Foreclosure
- June 14, 2013 – Guide Bulletin 2013-10 Updates Many Requirements to Help Improve Processes for Servicers
- November 15, 2012 – Freddie Mac Standard Deed-in-Lieu Announced in Guide Bulletin 2012-27
- Refer to Single-Family Seller/Servicer Guide (Guide) Sections 63.4, 64.6, B65.43 through B65.48, 65.17(a), 65.42, and Exhibits 93 and 100.
- Contact your Freddie Mac representative.
- Refer to our Borrower Contributions for Standard Short Sales and Standard Deeds-in-Lieu Reference Guide.
- Register for our new webinar for Servicers: Freddie Mac Standard Short Sale and Deed in Lieu of Foreclosure.