Revised Servicing Rules for Fannie/Freddie Loans

On March 2, 2015, the Federal Housing Finance Agency (FHFA) announced new requirements for sales of non-performing loans (in default) by Freddie Mac and Fannie Mae that will reduce risk to taxpayers by transferring it to the private lenders and servicers.

The loans included in NPL sales will generally be severely delinquent – typically more than one year past due.

Of significant weight to homeowners, during loss mitigation servicers must apply a waterfall of resolution tactics that includes evaluating borrower eligibility for a loan modification (HAMP and/or proprietary modification), a short sale, and a deed-in-lieu of foreclosure.  Foreclosure must be the last option in the waterfall.  

There are also new loan modification requirements.  The new servicer will be required to evaluate all pre-2009 borrowers (other than those whose foreclosure sale date is imminent or whose property is vacant) for the U.S. Department of the Treasury’s Making Home Affordable programs, including the Home Affordable Modification Program (HAMP).  

All post-January 1, 2009 borrowers (other than those with an imminent foreclosure sale date or vacant property) must be evaluated for a proprietary modification.  Proprietary modifications must not include an upfront fee or require prepayment of any amount of mortgage debt, and must provide a benefit to the borrower with the potential for a sustainable modification.

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