Fannie Mae has issued new standards for mortgage servicers related to the management of delinquent loans, default prevention, and foreclosure timeframes. This move was prompted by the Servicing Alignment Initiative announced in late April by the company’s regulator, the Federal Housing Finance Agency (FHFA), to bring both Fannie Mae’s and Freddie Mac’s procedures for handling past due mortgages in line with one another. The new rules are intended to address what the FHFA describes as “identified problems in mortgage servicing” stemming from the large volume of delinquent loans requiring attention. These identified problems include inadequate communication with borrowers and the commencement of foreclosure actions while loss mitigation talks are ongoing.
The revised requirements must be implemented no later than September 1, 2011. Under the new guidelines, servicers must implement what Fannie Mae calls the “Quality Right Party Contact” standard. This includes building a strong customer-service relationship with homeowners, determining the reasons for their delinquency, assessing their ability to pay, and providing them with education about foreclosure prevention options.
During the first 120 days of delinquency, homeowners will be contacted both verbally and in writing, and given information on mortgage modifications or other solutions to remain in the home, and on arrangements that may be made for exiting the home without a foreclosure. Fannie Mae says contacting homeowners early in the default process is one of the most important factors in reaching a resolution that avoids foreclosure.
Freddie Mac is expected to follow suit with updated guidelines that mirror Fannie Mae’s. Freddie Mac said in April that it will be implementing the changes with phased effective dates throughout the summer of 2011.
Contact: Rich Hogan