Fannie and Freddie Announce Foreclosure Guidelines
Posted by Benjamin Dona on Friday, April 29th, 2011 at 5:02pm.
The government sponsored GSEs Fannie Mae and Freddie Mac have announced new standard guidelines for Loan Servicers to follow during the foreclosure process.
Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco said "by the end of 2011, foreclosures under Fannie Mae and Freddie Mac must follow the same procedures and Loan Servicers under Fannie and Freddie will be rewarded if they perform well and punished if they do not." In addition, the GSEs hope the new guideline will help minimize taxpayer losses by ensuring that (Fannie and Freddie) loans are serviced more efficiently and fairly.
Under the new guidelines:
- Loan servicers cannot work with homeowners on their loans while simultaneously moving forward with a foreclosure, called a "dual track" by FHFA.
- Loan servicers must contact homeowners as soon as they become delinquent and focus solely on remediating that delinquency. As long as the "borrower and servicer are engaged in a good-faith effort to resolve the delinquency," a foreclosure cannot move forward.
- The servicer must formally review each case before taking any actions to consider the homeowner for any foreclosure alternatives.
- Loan servicers will be rewarded for speed. If a loan is modified in some way within four months, for example, the servicer receives $1,600. If it takes over seven months, however, the servicer gets only $400.
- Even if the foreclosure process has already begun, loan servicers will be paid a "financial incentive" if they continue to help the homeowners find an alternative to foreclosure.
In addition, there will be fewer forms to fill out. According to Freddie Mac Chief Executive Officer Charles Haldeman Jr, "it will simplify the process by giving borrowers one application to fill out and servicers one application to review for all loan modifications and foreclosure alternatives."
Fannie Mae and Freddie Mac said they will issue detailed information to their servicers later in the year.
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