GSEs Align Servicing Regs to Streamline Delinquency Resolution


Federal Housing Finance Agency (FHFA) has directed Freddie Mac and Fannie Mae to
establish consistent mortgage loan servicing and delinquency management
requirements for the companies servicing the two government sponsored
enterprises’ (GSEs) delinquent mortgages.   The updated
framework will establish uniform servicing requirements across the GSEs for servicing
companies with which they contract and will establish “monetary incentives
for servicers that perform well and penalties for those that do not.”

FHFA Director Edward J. DeMarco said “FHFA’s directive to align Enterprise
policies for servicing delinquent mortgages should result in earlier servicers’
engagement to identify the best solution available for homeowners, given their
individual circumstances.”

said that the guidelines also address the “dual track” that has been
a subject of many complaints.  Servicers
will no longer be allowed to pursue foreclosure if borrower and servicer are
engaged in good-faith negations toward an alternative solution.

with the announcement from FHFA the Enterprises each released additional
information on the scope of the Servicing Alignment Initiative.  Freddie Mac’s announcement stressed that
while the Enterprises are aligned in the requirement categories, companies servicing
mortgages for both Freddie and Fannie should understand that there will be some
operational differences in the implementation.

changes will cover:

  • Borrower Contact and Delinquency Management. The policies will require servicers to
    contact borrowers earlier, ideally after any missed payment and to continue the
    contact on a frequent basis. All
    borrowers must be evaluated for any available foreclosure alternatives such as
    the Home Affordable Modification Program (HAMP). Servicers must establish a uniform definition
    for a Quality Right Party Contact (QRPC) and encourage adoption of a single contact
    the borrower can communicate with on an ongoing basis. The servicers must set up consistent written
    communications and solicitation and response packages and standards and
    timelines for call center activity.
    There will also be metrics for evaluating call center performance
    including speed to answer, call abandonment rate, and timelines for collection
    and follow-up calls.

  • Loan Modifications
    . The details will include a new
    set of requirements that promote long-term, sustainable mortgage modification
    solutions based on best practices, consistent borrower evaluation standards,
    and a required trial period for all borrowers before a permanent modification. Freddie Mac’s announcement contains the additional
    requirement that servicers begin assessing borrowers for a new mortgage
    modification program being developed for borrowers who do not qualify for a
    HAMP modification.”
  • Foreclosure Prevention Solicitation. The
    alignment will provide requirements for documentation to be sent to the
    borrower inviting them to participate in a foreclosure prevention program and
    will include a uniform Borrower Assistance Form and hardship affidavit which
    will be used to evaluate the borrower for participation in all solutions
    including HAMP and non-HAMP modifications and pre-foreclosure sales and will
    replace the forms currently used for HAMP.
    Modifications will be aligned with updated modifications issued earlier
    in Servicing Guide Announcements from the respective Enterprises.
  • Delinquency Management. Guidelines will be established
    to insure consistent communication with the borrower. This will include acknowledgement of events
    such as receipt of borrower documents and notices about the process, timelines,
    and instances when foreclosure actions may not be halted. Consistent schedules will be set up for late
    notices, reminder letters, notifying borrowers of missing or incomplete
    information, breach letters and other pertinent information and events.
  • Delinquency Timelines. Servicers will establish
    consistent timelines and requirements for property inspections, pre-foreclosure
    review, and foreclosure referral.
  • Case Escalation. Servicers will be required to implement a process for reviewing and
    responding to borrower complaints, and raising those disputes to an escalated
    case level as needed. The requirements will include timelines for review and
    response, and information to be communicated back to the borrower.
  • Foreclosure Timelines. Timelines will be established
    to cover procedures from the payment due date through the referral to an
    attorney and then to the date of sale with a maximum number of days set to
    conform with state laws. There will,
    however, be allowances for unavoidable delays

An incentives and compensatory fee schedule will be established for
Borrower Response Packages and workouts, and compensatory fees will be set for
violations of foreclosure timelines and missed incentive package benchmarks.  The workout incentives will be structured so
that the servicer receives a larger incentive for closing workouts early in
delinquency and are dependent on the servicer completing the modification
within 60 days of completion of the trial period.

Freddie Mac CEO Charles E. ‘Ed’
Haldeman, Jr. said, “Alignment of key servicing practices
between our two companies will help servicers achieve these goals by enabling
them to streamline their operations and more effectively target resources to
distressed borrowers.
 For example, it will simplify the process for
seeking help by giving borrowers one application to fill out and servicers one
application to review for all Freddie Mac loan modifications and foreclosure

The requirements for the alignments match some of those set forth earlier
as part of a settlement agreement between servicers and the 50 state attorneys
general.  Missing from the Enterprise guidelines
however are any requirements of servicers to verify the accuracy of amounts
owed by borrowers, limit fees charged to distressed borrowers, increase supervision
of attorneys and third-party vendors, or adoption of directives to improve
tracking of mortgage documents and the chain of title.

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