Freddie Mac has released its August 21st Bulletin amending a number of Servicing and Selling requirements.

Some of the Servicing amendments include:

Requirements for Servicing a Mortgage affected by a disaster - Freddie Mac has updated its disaster-related Servicing requirements in the Guide. The intent is to expedite recovery efforts for Borrowers and help Servicers with resources that are taxed as a result of a disaster. The changes will apply to Mortgages secured by properties located in areas declared by the President of the United States to be Major Disaster Areas (Individual Assistance). The changes include requirements for:

a) Forbearance relief - Servicers are instructed to perform an individual assessment of each impacted Mortgage to determine if forbearance in the form of a suspension or reduction of payments for up to a total of 12 months should be extended. Servicers may suspend collection activity, foreclosure and eviction proceedings for up to a total of 12 months from the date a disaster strikes, based on the relative merits of each case. Servicers should reassess each impacted Mortgage on a regular basis during the forbearance or suspension period to determine if forbearance or suspension should continue to be extended up to a total of 12 months.
b)Credit repository reporting - Servicers must not report delinquencies to credit repositories if a Borrower has been extended forbearance (including suspension, a reduced payment plan or a repayment plan) due to disaster-related circumstances.

Bankruptcy fee adjustments - Concerning situations where a Borrower has filed two or more bankruptcies, the following information was added to the Guide.

a)  Additional direction concerning multiple filers, such as how Servicers are to handle multiple filers whose bankruptcies were filed more than 12 months apart as opposed to multiple filers whose bankruptcy filing is within 12 months of the previous filing.
b) Provided for reimbursement of up to $350 for Servicers to object in the event that a multiple filer petitions the court to extend the stay. In the event that the court denies the objection and the Servicer must protect Freddie Mac's interest in the bankruptcy proceeding, Freddie Mac will also reimburse the Servicer for the allowable bankruptcy fee for the chapter of bankruptcy filed.
c)  Additional language to explicitly state that, for bankruptcy conversions, Freddie Mac will reimburse Servicers for the allowable bankruptcy fee for each of the chapters filed.

Redemption process for third-party and REO sales -  For properties sold to third parties at foreclosure sales and subsequently redeemed, Chapter 66 of the Guide has been updated to state that, if the third-party sale proceeds cover more than Freddie Mac’s required principal and interest (P&I), Servicers must remit the required P&I to Freddie Mac but may retain the amounts necessary to cover reimbursable and non-reimbursable expenses.

However, if the sale proceeds are less than total indebtedness, Servicers must remit to Freddie Mac the total required P&I and submit a Form 104SF, Statement of Loan, Workout and REO Expenses and Income, for the reimbursement of expenses.

The third-party full redemption process will mirror the process for third-party payoff, so Servicers will only remit the amount due Freddie Mac, enabling Servicers to retain both their reimbursable and non-reimbursable expenses. Likewise, if redemption proceeds are less than the total indebtedness, Servicers will remit the required P&I and request reimbursement of reimbursable expenses through the Form 104SF process.

REO redemptions - Chapter 66 has been revised to reflect that, if REO redemption proceeds cover both the P&I due to Freddie Mac and the amount claimable by the Servicer for reimbursable expenses, the Servicer may retain any excess funds collected as part of the redemption to recover amounts that are non-reimbursable by Freddie Mac. The Servicer may not retain any funds to cover reimbursable expenses but must continue to follow the Form 104SF submission process for reimbursement of these expenses.

EDR e-mail address - Chapter 64 now includes an e-mail address (edr@freddiemac.com) to make it easier for Servicers to ask questions related to Electronic Default Reporting.

To view the Bulletin in its entirety, along with Exhibit A that highlights the changes in the Bulletin, please click on the following link.

August 21 Bulletin