Feds create uniform foreclosure guidelines

WASHINGTON – April 29, 2011 – By the end of 2011, foreclosures under Fannie Mae and Freddie Mac – which hold or guarantee roughly 90% of all U.S. loans – must follow the same procedures. Loan servicers under Fannie and Freddie will be rewarded if they perform well and punished if they do not, according to Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco


“This initiative will direct servicers to reach families earlier, communicate more frequently and clearly, and provide relief,” says Michael J. Williams, Fannie Mae president and chief executive officer.

Changes 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.

• There will be fewer forms to fill out. “It will simplify the process … by giving borrowers one application to fill out and servicers one application to review for all Freddie Mac loan modifications and foreclosure alternatives,” says Freddie Mac Chief Executive Officer Charles E. “Ed” Haldeman Jr.

In addition to helping at-risk homeowners, “the newly aligned policies will minimize taxpayer losses by ensuring that (Fannie and Freddie) loans are serviced efficiently and fairly,” says DeMarco.

Fannie Mae and Freddie Mac will issue detailed guidelines to their servicers in the second and third quarters of 2011.