Freddie Mac: FHLMC Guide Bulletin 2019-12: Servicing Updates

Investor Update
June 12, 2019

Source: Freddie Mac

This Guide Bulletin announces:

Deed-in-lieu of foreclosure inspection requirements

  • Removal of the requirement to perform a final interior inspection of the Mortgaged Premises for deed-in-lieu of foreclosure properties – July 15, 2019

EDR Codes

• Updates to reporting requirements to no longer require:

• EDR default action code 20 (Reinstatements (Full or Partial)) when processing and reporting full reinstatements and loan modifications

• EDR default action code TM (Alternative Modification Trial Period)

• EDR default action code H5 (Complete Borrower Response Package Received)

Subsequent Transfer of Servicing requirements

• Updates to our Subsequent Transfers of Servicing requirements for a Mortgage registered with MERS®

Escrow

• Clarification of our requirements when a Servicer advances funds for an unpaid Escrow charge

Exhibit 33

• Updates to Guide Exhibit 33

Participation Mortgages

• Removal of requirements for participation Mortgages from the Guide

Additional Guide updates and reminders

• Further updates as described in the Additional Guide updates and Reminders section of this Bulletin

EFFECTIVE DATE

All of the changes announced in this Bulletin are effective immediately unless otherwise noted.

DEED-IN-LIEU OF FORECLOSURE INSPECTION REQUIREMENTS

Effective July 15, 2019

Currently, Guide Section 9209.5 requires that Servicers perform a final inspection on the Mortgaged Premises subject to a deed-in-lieu of foreclosure (“DIL”) no more than two Business Days following receipt of the executed DIL documents to ensure that the property is vacant, undamaged and in broom-swept condition. If the final inspection reveals that there is damage to the Mortgaged Premises caused by the Borrower, or the Mortgaged Premises was not left in broom-swept condition, we instructed the Servicer to reduce any Borrower relocation assistance by the amount of the estimated cost of remediating the issue.

To complement the changes to Servicer requirements for REO properties announced in Bulletin 2019-6, we also are removing the requirement that Servicers perform a final interior inspection of the Mortgaged Premises.

Additionally, Servicers must pay the full amount of the relocation assistance to eligible Borrowers within 30 days, unless otherwise instructed by Freddie Mac.

Guide impacts: Sections 9202.12, 9209.4, 9209.5, 9209.7 and Guide Form 1013

EDR CODES

EDR default action code 20 reporting requirements

Previously, Servicers were required to report EDR default action code 20 (Reinstatements (Full or Partial)) to report full and partial reinstatements. With the implementation of the Investor Reporting Change Initiative, Freddie Mac systems will validate payment activity against the reported DDLPI and automatically reinstate loans when necessary.

Servicers will no longer be required to report EDR default action code 20 to reinstate a loan except when Servicers accept a partial reinstatement and need to change the mortgage status from “Foreclosure” to “Delinquent.” We also are renaming the code to EDR default action code 20 (Reinstatement (Partial)).

Guide impacts: Sections 9203.3, 9203.6, 9203.11 and 9206.17

EDR default action code TM

We are removing references to EDR default action code TM (Alternative Modification Trial Period). Servicers are reminded that they should use EDR default action code BF (Freddie Mac Standard Modification Trial Period) to report all Trial Period Plans, including those for the Freddie Mac Flex Modification® that were offered under streamlined eligibility criteria.

Guide impact: Section 9206.13

EDR default action code H5

We are updating references to EDR default action code H5 (Complete Borrower Response Package Received). Servicers will no longer be required to use this code to notify Freddie Mac of receipt of a complete Borrower Response Package, but are still encouraged to do so.

Guide impact: Section 9102.5

SUBSEQUENT TRANSFERS OF SERVICING REQUIREMENTS

We are updating the Guide to include requirements for Subsequent Transfers of Servicing for a Mortgage registered with MERS®. The requirements that apply to Concurrent Transfers of Servicing for Mortgages registered with MERS also apply to Subsequent Transfers of Servicing.

Guide impact: Section 7101.6

ESCROW

Currently, if Escrow is not collected and the Servicer discovers nonpayment of any charge otherwise payable from Escrow, the Servicer is required to advance funds for the unpaid charge and applicable penalty if the Borrower is unable to make the payment or does not provide proof of payment within 30 days.

We are updating the Guide to clarify that if a Servicer advances funds for an unpaid Escrow charge and is unable to reach a mutually satisfactory agreement for the Borrower’s repayment of the advance, or if the Borrower fails to comply with the terms of any such arrangement, the Servicer must comply with the collection, loss mitigation, and if necessary, foreclosure referral requirements in accordance with Guide Chapters 9101 or 9102, as applicable.

Guide impact: Section 8201.1

EXHIBIT 33

Freddie Mac’s standard Acknowledgment Agreement requires a Secured Party to execute a Release (as these terms are defined in Guide Exhibit 33, Acknowledgment Agreement Incorporated Provisions). We are updating the definition of “Release” in Exhibit 33, to address situations where a Secured Party’s interests arising out of or related to the Collateral and the Acknowledgment Agreement (as those terms are defined in Exhibit 33) have been terminated due to a Transfer of Servicing or a voluntary partial cancellation of the Servicer’s Servicing Contract Rights.

Guide impact: Exhibit 33

PARTICIPATION MORTGAGES

With the implementation of the Uniform Loan Data Delivery requirements in March 2012, Freddie Mac ceased the purchase of participation Mortgages. With the implementation of the Investor Reporting Change Initiative, Freddie Mac no longer has participation Mortgages in its portfolio. Therefore, any requirements for purchase and Servicing of participation Mortgages are being removed from the Guide.

Guide impacts: Sections 1201.3, 1301.9, 1301.11, 3302.3, 3602.5, 4702.2, 6303.3, 6303.5, 7101.4, 8103.2, 8104.5, 8105.1, 8302.9, 8303.11, 8503.7, 8503.9, 9208.8, 9701.4, Exhibit 60, and Glossary J-Q

ADDITIONAL GUIDE UPDATES AND REMINDERS

Servicer Success Scorecard – Loan Level Reporting Compliance metric

In Bulletin 2018-14, we introduced the Loan Level Reporting Compliance metric that will measure the number of loans not reported as of the last loan level reporting on the P&I Determination Date divided by the number of total loans serviced, excluding loans with outstanding edits. Servicers receive a PASS or FAIL on this metric based on the number of loans not reported.

While the numerator and denominator of the Loan Level Reporting Compliance metric remain unchanged, and the PASS or FAIL calculation remains the same, we are updating this metric’s description to ensure consistency with the description Servicers view in the user interface.

Effective with the July 2019 Servicer Success Scorecard that will be published at the end of August 2019, Servicers will receive a PASS or FAIL based on their rank group (Groups 1-4) and the following:

• Group 1 (>200,000 loans serviced): greater than or equal to 99% reported, then PASS; more than 1% not reported, then FAIL

• Group 2 (75,000-199,999 loans serviced): greater than or equal to 98% reported, then PASS; more than 2% not reported, then FAIL

• Group 3 (20,000-74,999 loans serviced): greater than or equal to 97% reported, then PASS; more than 3% not reported, then FAIL

• Group 4 (<20,000 loans serviced): greater than or equal to 96% reported, then PASS; more than 4% not reported, then FAIL

Borrower income documentation

Borrower income documentation requirements for loss mitigation assistance specify that, in most instances, a Borrower may submit his or her two recent bank statements to support the Borrower’s income source.

In response to Servicer feedback, we are clarifying that Servicers may, with Borrower consent, leverage a third-party service provider (e.g., Finicity®) to obtain bank account data to verify income provided by the Borrower on Form 710.

Form 59

We are updating Form 59 to embed the formula used to calculate the adjusted bank balance. Additionally, we are clarifying that the adjusted bank balance must be calculated as follows:

Current cycle Ending Bank Balance + Deposits in Transit – Outstanding Debits

Guide impact: Form 59

Community Land Trust Mortgages

We have added new Section 8104.8 to refer Servicers to Chapter 8701 for special Servicing requirements for Community Land Trust Mortgages.

Guide impact: Section 8104.8

Reminder on Servicing Mortgages impacted by Eligible Disasters

As the 2019 hurricane season begins, we are reminding Servicers of our requirements for Servicing Mortgages impacted by Eligible Disasters. Servicers must comply with Chapter 8404 when Servicing Mortgages where the related Borrower’s Mortgaged Premises or place of employment is located in an Eligible Disaster Area.

Servicers are also reminded that the Servicing requirements announced in Bulletins 2017-21 (property inspection reimbursement) and 2017-25 (Freddie Mac Extend Modification for Disaster Relief) remain in effect. The Guide was not updated to reflect these requirements.

Servicers should refer to the following for additional disaster-related information:

• Our Disaster Relief web page, including the Disaster Relief Reference Guide and Managing Distressed Properties Quick Reference document

• The Freddie Mac Learning Center which includes the Disaster Relief: Modifications webinar

• The Federal Emergency Management Agency’s (FEMA) web site to determine if a Borrower’s Mortgaged Premises or place of employment is located in an Eligible Disaster Area

Guide updates from Bulletin 2019-11

eMortgages

An eMortgage is a Mortgage that is originated using an eNote (as defined in new Section 1402.2), while the Security Instrument and other Mortgage documents may be paper or Electronic Records (as defined in Section 1401.2). eMortgages can help simplify the closing process for Sellers and Borrowers and shorten timeframes from origination to sale of the Mortgage in the secondary market.

While Freddie Mac’s prior written approval to sell to and/or service eMortgages for Freddie Mac will still be required, the eMortgage Guide on FreddieMac.com is being retired and all requirements will now be contained in new Chapter 1402. This will provide greater visibility of Freddie Mac’s eMortgage requirements as eMortgage adoption continues to grow. Additionally, we are adding Exhibits 45, 46 and 47, which are sample forms that may be helpful to Seller/Servicers of eMortgages.

Seller/Servicers of eMortgages must comply with all selling and Servicing requirements of the Guide and the Seller/Servicer’s other Purchase Documents, as applicable, including the special requirements set forth in Chapter 1402.

Seller/Servicers who wish to sell to and/or service eMortgages for Freddie Mac should contact their Freddie Mac account representative or the Freddie Mac eMortgage Team (eMortgage_Team@freddiemac.com) to begin the process of determining their eligibility to sell to and/or service eMortgages for Freddie Mac. As part of the Seller/Servicer’s approval process, the Seller/Servicer’s eClosing System and eNote Vault System (as those terms are defined in Section 1402.2) used to originate and close eMortgages and store related eNotes must go through a review and approval process.

Chapter 1402 contains eMortgage requirements, and Exhibits 45, 46, 47 and Form 994SF support the requirements in Chapter 1402. All other impacted Guide sections are related to the eMortgage requirements found in Chapter 1402.

Private flood insurance

Flood insurance is required on a property when it is located in a FEMA-designated special flood hazard area (SFHA). Currently, the Guide allows private flood insurance as an alternative to the National Flood Insurance Program (NFIP), when the terms and conditions of the private flood insurance policy are at least equivalent to the standard NFIP policy, and the insurer meets the ratings requirements for property insurers.

On February 20, 2019, the federal banking agencies announced a joint final rule that impacts private flood insurance requirements for financial institutions subject to their supervision. The rule becomes effective July 1, 2019.

Freddie Mac is not subject to the federal banking agencies’ rule. Freddie Mac is separately authorized by the Biggert-Waters Act to accept private flood insurance policies and establish requirements for financial solvency, strength or claims-paying ability for insurers who issue private flood insurance policies for the Mortgaged Premises securing Freddie Mac Mortgages.

Freddie Mac will continue to apply our criteria for acceptance of a private flood insurance policy, as defined in the Biggert-Waters Act. These Guide requirements in Section 8202.3, with insurer rating requirements in Section 8202.1, apply to all Seller/Servicers, including an institution subject to the federal banking agencies’ rule regardless of the rule provision (mandatory or discretionary) used to accept a private flood insurance policy.

We updated Section 8202.3 to clarify that a private flood insurance policy is acceptable to satisfy the flood insurance requirement if the terms and conditions are equivalent to the standard NFIP policy and the insurer meets the ratings requirements in Section 8202.1.

GUIDE UPDATES SPREADSHEET

For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, access the Bulletin 2019-12 (Servicing) Guide Updates Spreadsheet via the Attachments drop-down available at https://guide.freddiemac.com/app/guide/bulletin/2019-12.

CONCLUSION

If you have any questions about the changes announced in this Bulletin, please contact your Freddie Mac representative or call the Customer Support Contact Center at 800-FREDDIE.

Sincerely,

Yvette W. Gilmore
Vice President
Servicer Relationship and Performance Management

 

x

CHIEF EXECUTIVE OFFICER

Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.

x

Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.

x

CHEIF INFORMATION OFFICER

George Mehok

George Mehok is the chief information officer for Safeguard. He is responsible for all strategic technology decisions, new systems deployments and data center operations supporting a national network of more than 10,000 mobile workers.

George has more than 20 years of leadership experience dedicated to high-growth companies in the mobile telecommunications and financial services industries, spanning startups to global industry leaders.

George played a senior role in the formation of Verizon Wireless, leading the IT product development and strategic planning team. He led the integration planning for the Verizon merger including: GTE, Vodafone-AirTouch, Bell Atlantic Mobile and PrimeCo.

As chief information officer at Revol Wireless, a VC-backed CDMA wireless communications network operator, George’s team implemented an integrated technology infrastructure and award-winning business intelligence platform.

George holds a bachelor’s degree in political science and economics from Eastern Michigan University and an M.B.A. from The Ohio State University. He is a board member of Akron University’s School of Business Center for Information Technology, in addition to an advisory board member for OHTec.

In 2013, George won the Crain’s Cleveland Business CIO of the Year award for his team’s work in completing a major acquisition and technology transformation at Safeguard. In 2015, George’s team was recognized by InformationWeek’s annual Elite 100 ranking of the most innovative U.S.-based users of business technology. The mobile inspection technology developed at Safeguard was selected as InformationWeek’s “One of the top 20 ideas to steal in 2015”.

x

General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard, with oversight responsibilities for the legal, human resources, training, compliance and audit departments. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, pro-active risk mitigation, enterprise strategic planning, human capital and training initiatives, compliance and audit services, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda’s oversight of the legal department along with multiple compliance and human capital focused departments assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans almost 20 years, and Linda’s experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

x

Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for the Control, Quality Assurance, Business Development, Accounting & Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

x

AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.

x

AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.

x

AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.

x

AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.

x

AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.

x

AVP, Mobile and Analytics

Jason Heckman

Jason Heckman is the assistant vice president of mobile and analytics for Safeguard. He is responsible for both Safeguard’s mobile development and strategy as well as the company’s data warehousing and business intelligence. Jason oversees the design, development and release of all Safeguard’s internally developed mobile applications. He also oversees the development and delivery of operational and analytical data technologies throughout the organization.

Jason joined Safeguard as manager of mobile in 2012. During that time he led the development and integration of Safeguard’s mobile applications across the company’s vendor network to provide real-time data from the field. In 2014, he was promoted to director of mobile applications and named assistant vice president in 2017.

Prior to joining Safeguard, Jason was the director of application development and business intelligence for Revol Wireless, a privately held wireless provider in Ohio and Indiana.

Jason holds a bachelor’s degree in business management from Case Western Reserve University in Ohio.

x

AVP, Business Development

Tim Rath

Tim Rath is the AVP of business development for Safeguard. He is responsible for developing innovative growth strategies for Safeguard and developing and overseeing potential partnerships, mergers and acquisitions.

Tim joined Safeguard in 2011 as project director and has filled numerous roles within Vendor Management, most recently serving as director of vendor management, a role he assumed in 2011.

Prior to Safeguard, Tim worked as director of supply chain at PartsSource Inc. in Aurora, Ohio, a provider of medical replacement parts, procurement solutions and healthcare supply chain management technology services. He also has held sales positions with Rexel, ComDoc, and Pier Associates, all based in Ohio.

Tim holds a degree in marketing and sales from The University of Akron in Akron, Ohio. He also earned his FAA Certified Commercial UAS (Drone) Pilot license in 2017.