Fannie Mae and Freddie Mac announced changes to their Servicing Guides Monday aimed at helping more borrowers avoid foreclosure through short sales and deeds-in-lieu of foreclosure (DILs).
Some of the changes are to align with certain Consumer Financial Protection Bureau (CFPB) rules and regulations that implement the mortgage servicing provisions of the Dodd-Frank Act, and some are simply to ease eligibility requirements for liquidation workout options. The new GSE requirements also become effective January 10, the same effective date as the CFPB’s new mortgage servicing standards.
Documentation Exceptions. Eligibility for a short sale or DIL with borrower documentation exceptions has been expanded to include borrowers whose mortgage debts have been discharged in a Chapter 7 bankruptcy, regardless of the borrower’s FICO score. Additionally, mortgages that were originated as investment properties are no longer eligible for the exception to borrower documentation. Servicers must now review a complete Borrower Response Package (BRP) to evaluate these borrowers for a short sale or DIL.
Cash Reserves. Servicers must now submit a short sale or DIL recommendation to Freddie Mac for approval when the borrower’s cash reserves exceed $50,000.
Foreclosure Delays. Servicers and their counsel must delay the next legal action in the foreclosure process when the first complete BRP is received more than 37 days prior to the scheduled foreclosure sale date and evaluation of the package results in an offer to proceed with a short sale or DIL.
Expedited Reviews. Servicers are no longer required to conduct an expedited review when a completed BRP with a short sale purchase offer is received greater than 37 days prior to a scheduled foreclosure sale date. However, servicers must continue to expedite review of a complete BRP received between 37 days and 15 days prior to a scheduled foreclosure sale date.
Trial Period Plans. If a borrower remains eligible for the original Trial Period Plan (TPP) offer after receiving an appeal decision and accepts the original offer, servicers must reissue the original offer with a new TPP due date. Any delinquent amounts accrued during the appeal review process should be included in the modified principal balance.