FHLMC has released its February 10th Bulletin updating temporary servicing requirements for mortgages affected by Hurricane Katrina and Hurricane Rita.

With this Bulletin FHLMC announces that effective for the period from March 1 through May 31, 2006:

• FHLMC establishes a three-zone methodology and assigns a zone number to each county/parish in the eligible Disaster Areas in order to provide additional instructions regarding foreclosure and property preservation activities.
• FHLMC revises its credit reporting requirements.

This Bulletin consolidates previously announced temporary requirements that are still in effect for Mortgages secured by properties located in Major Disaster Areas and for Mortgages secured by properties located in "an eligible Disaster Area." The previously announced requirements summarized in this Bulletin will remain in effect until further notice from FHLMC.

Reminder—Assessment of prepayment premiums
Servicers are reminded that pursuant to Guide Section 51.19, a Servicer must not assess or collect a prepayment premium if the payoff of the Mortgage is received from any source, including insurance proceeds, in connection with the workout of a delinquent Mortgage or due to a default under the terms of a Security Instrument. FHLMC strongly encourages Servicers to waive the prepayment premium in all other situations for Mortgages secured by property located in eligible Disaster Areas.

NEW REQUIREMENTS
Three-zone methodology for properties in eligible Disaster Areas

FHLMC has established three zones and has assigned a zone number to each county/parish in the eligible Disaster Areas.

Regardless of the zone designation assigned to the county/parish Servicers are reminded that they should perform an individual assessment of each Mortgage to determine if forbearance in the form of a suspension or reduction of payments should be extended.

• Zone One—minimal to no damage

Effective March 1, for Mortgages secured by properties located in Zone One counties/parishes, unless a Servicer has determined that an extended forbearance is appropriate for a particular Mortgage, Servicers must resume normal foreclosure and property preservation activities, in accordance with the requirements in Guide Chapters 58 and 66–71. To view the Counties/Parishes in Zone 1 please click on the following Excel file.

 FHLMC Feb. 10 Bulletin Zone 1.xls

To view the zip codes for the Counties/Parishes in Zone 1 please click on the following Excel file (4 tabs).

 SPI FHLMC Feb. 10 Bulletin Zone 1 Zip Codes.xls

Zone Two— moderate damage

Effective March 1 for Mortgages secured by properties located in Zone Two counties/parishes, Servicers must continue to obtain Freddie Mac approval for initiation and resumption of foreclosure proceedings and any lender-initiated property preservation work. 

As announced in FHLMC's November 30, 2005 Bulletin, upon expiration of the foreclosure suspension period or forbearance, whichever is later, FHLMC approval is required for the initiation and resumption of foreclosure proceedings. After making every effort to assist a Borrower in retaining homeownership, if a Servicer determines there is no viable alternative to foreclosure for a Mortgage secured by property in  Zone Two, then after February 28, 2006 (expiration of the current suspension period) or expiration of the forbearance (as applicable), whichever is later, the Servicer must obtain FHLMC's written approval before initiating or resuming foreclosure proceedings in accordance with the requirements of this Bulletin.

To initiate a foreclosure, a Servicer must submit a written request to FHLMC by the later of:
a) 120 days from the Due Date of last Paid Installment (DDLPI) (90th day of Delinquency), or
b) Within five (5) business days of a borrower failing to fulfill a workout option, or
c) Within five (5) business days of a forbearance period ending, or
d) Within five (5) business days of February 28, 2006 (the expiration of the foreclosure suspension period)

If the Borrower has abandoned the property, Servicers must submit the request to initiate foreclosure proceedings within five Business Days of February 28, 2006 (the expiration of the foreclosure suspension period), or the notification of the abandonment, whichever is later.

To resume a foreclosure proceeding that was suspended, a Servicer must submit a written request to Freddie Mac by the later of:
a) Within five (5) business days of a borrower failing to fulfill a workout option, or
b) Within five (5) business days of a forbearance period ending, or
c) Within five (5) business days of February 28, 2006 (the expiration of the foreclosure suspension period)

Servicers must complete the written request on the Freddie Mac Form 105, Multipurpose Loan Servicing Transmittal, and must send it to the Servicer’s Freddie Mac foreclosure representative with the following information:
a) The Servicer's recommendation regarding foreclosure
b) A copy of the distressed property inspection, (pursuant to the October 7th Bulletin) if applicable.
c) Total debt figures
d) Current BPO value, if available
e) All information regarding pending insurance claims, including the insurance adjuster's report with estimate or claim denial if applicable.
f) FEMA claims results, if applicable
g) Listing of all lender-initiated property preservation work requested if applicable.

Once a foreclosure sale has been scheduled, FHLMC will prepare the bidding instructions for all Mortgages secured by properties in Zone Two. A Servicer must contact its FHLMC foreclosure representative at least 30 days prior to the scheduled foreclosure sale date to obtain the bidding instructions. If the Mortgage was referred for foreclosure to one of our Designated Counsel, then the Designated Counsel will issue the bidding instructions according to their normal practices.

Servicers must continue to obtain prior FHLMC approval on the Form 105 for commencement of any lender-initiated property preservation work other than decisions on accessing an abandoned property for insurance claims (per prior Bulletin requirement still in effect).

 FHLMC Feb. 10 Bulletin Zone 2.xls

To view the zip codes for the Counties/Parishes in Zone 2 please click on the following Excel file (4 tabs).

 SPI FHLMC Feb. 10 Bulletin Zone 2 Zip Codes.xls 

Zone Three— significant damage

Effective March 1 for Mortgages secured by properties located in Zone Three counties/parishes, Freddie Mac is:
a) Extending the suspension period on foreclosure proceedings through the end of May 2006.
b) Requiring that once the extension suspension period expires, Servicers must obtain prior FHLMC approval before initiating or resuming foreclosure proceedings on any Mortgage secured by property located in this zone.

FHLMC is extending the requirement for Servicers to obtain prior FHLMC approval on the Form 105 for commencement of any lender-initiated property preservation work other than decisions on accessing an abandoned property for insurance claims (per prior Bulletin requirement still in effect). To view the Counties/Parishes in Zone 1 please click on the following Excel file.

 FHLMC Feb. 10 Bulletin Zone 3.xls

To view the zip codes for the Counties/Parishes in Zone 3 please click on the following Excel file (4 tabs).

 SPI FHLMC Feb. 10 Bulletin Zone 3 Zip Codes.xls

Revised Requirements

In FHLMC November 30, 2005 Guide Bulletin, FHLMC announced that Servicers must not report delinquencies on Mortgages secured by property located in an eligible Disaster Area to credit repositories through February 28, 2006. The  December 22, 2005 Guide Bulletin updated that requirement by requiring additional occurences or loan statuses not to be reported through February 28, 2006. With this Bulletin, FHLMC further revises these requirements for reporting to credit repositories for the period from March 1 through May 31, 2006 as follows:

• For a Borrower who is 30 days or more delinquent on their Mortgage payment as of March 1, Servicers must not report the following payment statuses to credit repositories.

Delinquent payments
Repayment plans
Forebearance plans
Initiation of foreclosure
Foreclosure sales
Acceptance of deed-in-lieu of foreclosure
Short payoffs
Charge-offs
Bankruptcies

• For a Borrower with a payment status of "current" as of March 1, Servicers must resume full-file reporting to credit repositories effective March 1, in accordance with Guide Section 55.4
• For a Borrower who is current as of March 1 but subsequently experiences a Delinquency, Servicers must continue full-file reporting despite the Delinquency
• For a Borrower who is 30 days or more delinquent on their Mortgage payment as of March 1 who subsequently becomes current on their Mortgage payment through reinstatement or through a workout option, Servicers must resume full-file reporting to credit repositories once the Mortgage is current

In addition this Bulletin includes a listing and description of previously announced requirements still in affect. These include;

• Forbearance (October 7th Bulletin) - individual assessment of each Mortgage.

• Streamlined underwriting requirements for loan modifications (October 7th Bulletin)

• Reduced documentation for long-term forbearance (November 30th Bulletin) -Servicers are not required to collect the Borrower documentation identified in Guide Section A65.23 to determine eligibility for a long-term forbearance extension.

• Revised requirements for short payoff approval (October 7th Bulletin) - Servicers can approve a short payoff of a Mortgage secured by a property in an eligible Disaster Area with specific requirements being met.

• Servicer reimbursement for inspections of properties (October 7th and December 22nd Bulletins) - Includes instructions on how to file for reimbursement and the timing involved.

• Excluding certain criteria from the default management category of the Servicer Performance Profile (October 7th Bulletin) - Importance of accurate Electronic Default Reporting (EDR) using the correct Default Action Codes and Reason for Default Codes.

• Release of insurance loss proceeds—Hurricane Katrina and Hurricane Rita -(August 30 and September 7 Single-Family Advisories and October 7, 2005 Bulletin)

• Special relief for all other Borrowers negatively affected By Hurricane Katrina or Hurricane Rita (October 7th Bulletin) - Encourages Servicers to provide additional relief to Borrowers affected by Hurricane Katrina and Hurricane Rita who are in Major Disaster Areas other than those qualifying for "individual assistance" as designated by FEMA, or who are outside of a Major Disaster Area and have been negatively affected by Hurricane Katrina or Hurricane Rita (e.g., loss of employment, additional dependants in household, etc.) including, waiving the assessment of penalties or late fees against Borrowers, not report forbearance or Delinquencies to the credit repositories and possibly allow affected borrowers who may qualify to have their Mortgage payments reduced or suspended for up to 12 months.

• Relief for Borrowers who are members of the National Guard  (October 7th Bulletin) FHLMC extended Mortgage relief options provided under the Servicemembers Civil Relief Act of 2003 (SCRA) and Guide Chapter 82 to all National Guard members on active State duty involved in Hurricane Katrina or Hurricane Rita response efforts. 

• Re-keying of properties without prior approval (December 22nd Bulletin) 

All Selling and Servicing requirements for Hurricane Katrina and Hurricane Rita are available at;

www.FreddieMac.com/corporate/about/how_we_help/katrina.html.

To view the full Bulletin, please click on the following link

FHLMC February 10th Bulletin