Mortgage servicers on conventional agency loans are being provided with a new set of guidelines that are in line with the recent servicer settlement. The guidelines are expected to be delivered by September.
The mortgage servicing guidelines at the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. will be aligned under a directive issued Thursday by the Federal Housing Finance Agency. Under the revised framework, servicing requirements and monetary incentives will become uniform between the two government-controlled enterprises.
The changes are being made in conjunction with recent settlement between federal regulators and the nation’s largest mortgage servicers.
The FHFA hopes the new guidelines will generate servicer engagement with defaulting borrowers earlier in the process.
Among the issues resolved under the new guidelines are dual-track foreclosures; servicers will be required to solely focus on bringing the current before the foreclosure process can commence.
“The servicer must conduct a formal review of each case to ensure a borrower has been considered for foreclosure alternatives before the loan is referred for foreclosure,” according to FHFA — which regulates the Federal Home Loan Banks in addition to Fannie Mae and Freddie Mac. “Even after foreclosure processing begins, financial incentives are provided to encourage “servicers to continue to help borrowers pursue a foreclosure alternative.”
In a statement, Washington, D.C.-based Fannie called the initiative “a major step toward creating a consistent and transparent process.”
Charles E Haldeman Jr., chief executive officer at McLean, Va.-based Freddie, said in a statement that the scope of the alignment will change how delinquent borrowers are engaged. It’s also expected to increase servicer accountability while helping delinquent borrowers avoid foreclosure.
Haldeman highlighted how the alignment will enable just one application to be completed for all loan modification and foreclosure alternatives.
The new guidelines will be rolled out to Fannie and Freddie servicers by the third quarter.
“Once fully implemented by the servicing industry, the enterprises’ aligned policies should give homeowners a greater understanding of the process and faster resolution by requiring earlier contact, more frequent communication, and prompt decisions,” FHFA Acting Director Edward J. DeMarco said in the statement.
