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FAQs on Remedies for Servicer Related Violations Freddie Mac


									      Confidential Commercial Information - Confidential Treatment and FOIA Exemption Requested
                                        Final 10/02/12 Freddie Mac

Frequently Asked Questions on Remedies for Servicer-Related Violations
Announced in Single-Family Seller/Servicer Guide Bulletin 2012-20

October 3, 2012

Question 1: Will there be any change in the notification process for servicing violations?
Answer:      Servicers will be notified of any repurchase request in the same way they are notified
             today. There are some changes to the notification process for repurchase alternatives.
             Please refer to Bulletin 2012-20 for the specific changes.

             Additionally, under certain circumstances, Freddie Mac may notify the Servicer
             regarding an opportunity to cure a servicing violation. For example, when there is a title
             defect discovered post closing, Freddie Mac may provide the Servicer with notice of the
             title defect. In such an example, the Servicer may be provided up to 90 days to cure the
             title defect; however if the title defect is not cured within the 90 day time frame, the
             Servicer will be sent a repurchase request. If an opportunity to cure is provided and the
             Servicer does cure the violation for Freddie Mac’s satisfaction, Freddie Mac reserves
             the right to require the Servicer to indemnify Freddie Mac for any loss, damage or
             expense that it may sustain.

Question 2: What are the possible remedies that the Freddie Mac may utilize for servicing
Answer:      The remedy Freddie Mac utilizes in the event of a servicing violation will depend upon
             Freddie Mac’s determination of the significance and frequency of the violation, and in
             accordance with a consistent framework developed with Fannie Mae at the direction of
             FHFA. Since many of the reasons for a violation and the required solutions, may be
             unique to the Servicers’ specific operations, Freddie Mac will determine which remedy
             to apply based upon the particular facts of the violation and the condition of each
            Following a servicing violation, Freddie Mac may impose the remedies set forth in the
            Guide, including without limitation, one or more of the following loan level remedies:
            1. Request for repurchase;
            2. Request for a repurchase alternative (i.e., an indemnification amount, amount to
                 make Freddie Mac whole, or other loss reimbursement);
            3. Assessment of compensatory fees.

Question 3: Am I able to appeal a repurchase or repurchase alternative?
Answer:     A responsible party may submit a written appeal within 60 days from the date of the
            repurchase or repurchase alternative request letter the party received from Freddie Mac
            or within such time frame specified by Freddie Mac. The appeal must include:
               A statement of all relevant facts concerning the servicing of the mortgage
               A statement of why Freddie Mac should reverse its decision
               Any documentation supporting the basis for the appeal

            If the appeal is denied, then the Servicer must repurchase or remit payment, as
            applicable, within 15 days of the date of Freddie Mac’s denial letter or within such other
            time frame as specified by Freddie Mac. If new material information that was not
            available at the time of the first appeal becomes available after submission of the first
            appeal, the Servicer may submit an additional appeal of the request within 15 days of
            Freddie Mac’s denial. The additional appeal must contain the same information
            described above and supported by the new material information. Freddie Mac, in its
            sole discretion, will determine whether to consider such additional appeal.

Question 4 When will the new time frames go into effect? How will pending appeals be
Answer:     For Freddie Mac loans, the new time frames for appeals for servicing violations will
            become immediately effective on January 1, 2013. For any repurchase requests for
            servicing violations issued prior to January 1, 2013, Servicers will continue to have 30
            days to file an appeal. Servicers will have 60 days to appeal any repurchase or
            repurchase alternative request issued after January 1, 2013.

Question 5: Can Freddie Mac provide some examples of how remedies might be imposed?
Answer:     Freddie Mac is providing some illustrative examples to help Servicers understand how
            Freddie Mac has imposed such remedies in the past and may do so in the future.
            However, each breach is unique and the imposition of the remedy would be selected at
            the sole discretion of Freddie Mac according to several factors, which could include the
            financial strength of the counterparty and its overall performance. The examples below
            are intended only for illustrative purposes and do not guarantee that the remedy will be
            utilized in all cases for the identified servicing violation.

Repurchase Request

Example 1: Following are two examples of when Freddie Mac may request repurchase for a
           servicing violation:
            The Servicer completed a modification outside of the Guide requirements and
               cannot be accommodated by Freddie Mac’s systems.

              The responsible party does not cure a title defect within the 90 day cure or appeal

Indemnification or Make Whole Payment Request

Example 2: Following are two examples of when Freddie Mac may request an indemnification or
           make whole payment:

             Indemnification: Improper Bidding - Freddie Mac delegates foreclosure sale
              bidding to Servicers and provides them with clear bidding instructions and
              guidelines. Servicers bidding too high or too low can result in a loss to Freddie Mac.
              Improper bidding can negatively affect our deficiency rights or result in reduced
             Make Whole Payment: Ineligible borrower/mortgage on a short sale – Both Freddie
              Mac and HAFA short sales have clear borrower, property and mortgage eligibility
              requirements. A Servicer’s failure to comply with these requirements may expose
              Freddie Mac to additional losses. Freddie Mac may also require Servicers to repay
              any loss mitigation incentives previously paid to the Servicer by Freddie Mac.


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