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Solving Default
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Challenges
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Foreclosure Timeline Management

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wofwContents
Table
Customer Education

ƒTopic Slide Number

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ƒTools and tips for recorded sessions .. .……………. 3

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ƒObjective / Agenda .. .………………..………………… 4 - 5
ƒForeclosure process flow……………………………… 6-7

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ƒAccelerate the mortgage……………………………… 8-9

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ƒRefer to Counsel/Designated Counsel……………… 10-14
ƒPrepare for foreclosure…………………………….….. 15-19

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ƒInitiate foreclosure ……………………………………… 20-26
ƒManage the foreclosure………………………………… 27-30
ƒSchedule the foreclosure sale………………………… 31-34 ud
ƒConduct the foreclosure sale………………………….. 35-39
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ƒPost foreclosure sale activities……………………….. 40-43
ƒWrap-up and resources………………………………… 44-47
© Freddie Mac 2009
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Tools Tips
®
Customer Education

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9 Close all other applications to enhance your workstation’s performance

4c
9 Maximize the window used for viewing this recording

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9 For technical support, call (866) 229-3239

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ef
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© Freddie Mac 2009
www.FreddieMac.com/learn
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Visit our Learning Center to view other distance learning offerings:

3
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Objectives
®
Customer Education

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We want to provide you with an overview of the

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default management area with a focus on common
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servicing challenges regarding foreclosure timeline
management.
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© Freddie Mac 2009
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Agenda
®
Customer Education

w.
Overview, challenges and best practices for foreclosure
timeline management:
4c
9 Prepare for foreclosure

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ƒ Selecting counsel/designated counsel and required documentation
9 Initiate foreclosure
9 Manage the foreclosure
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9 Schedule the foreclosure sale
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9 Conduct the foreclosure sale
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ƒ Bidding instructions
ƒ Reporting requirements ud
9 Post foreclosure sale activities
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© Freddie Mac 2009
ƒ Expense reimbursement
ƒ Canceling insurance
rg 5
 ww ®
Customer Education

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4c
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Foreclosure Process Flow
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© Freddie Mac 2009
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 w ®

ww Process Flow
Foreclosure
Customer Education

.4
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Prepare for Foreclosure Initiate Foreclosure Manage the Foreclosure

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re
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Schedule the Conduct the Post-FC Sale
Foreclosure Sale Foreclosure Sale
ud Responsibilities

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© Freddie Mac 2009
rg 7
 w ®

ww the Mortgage
Accelerating
Customer Education

.4
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ƒ First-lien, not previously modified
ƒ First-lien, previously modified
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ƒ Second mortgage/HIL

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© Freddie Mac 2009
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 w ®

ww the Mortgage - Best Practices

Accelerating
Customer Education

.4
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ƒ Send an acceleration letter as soon as you

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identify that the delinquent mortgage has a
borrower “no contact” situation or you identify
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that the property is abandoned.
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© Freddie Mac 2009
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 ww ®
Customer Education

w.
Selecting the Foreclosure Counsel or
Trustee
4c
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ƒ Designated Counsel/Trustee
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ƒ Non-designated Counsel/Trustee
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ra
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© Freddie Mac 2009
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 w ®

wwof Using Designated Counsel

Benefits
Customer Education

.4
ƒ Loans in the Designated Counsel program receive
foreclosure timeline benefits in the Servicer Performance
Profile clo
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ƒ Foreclosure and bankruptcy fees and costs are managed
directly between Freddie Mac and Designated Counsel
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ƒ Counsel will order the BPO (Broker’s Price Opinion), and
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prepare the bidding instructions for the foreclosure sale

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ƒ Form 104DC (hard copy or online) is the only documentation
required for reimbursement of foreclosure and bankruptcy
costs .o
© Freddie Mac 2009
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 ww ®
Customer Education

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Select Foreclosure Counsel
4c
los
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ef
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© Freddie Mac 2009
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 ww ®
Select Foreclosure Counsel, cont’d
Customer Education

w.
4c
los
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ef
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© Freddie Mac 2009
rg 13
 w ®

ww Counsel - Best Practices

Designated
Customer Education

.49 Promote competition by hiring two or more attorneys in

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each state where your volume is sufficient to warrant
using more than one attorney. Refer business to the
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firms with the best timelines and performance

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9 Always communicate your expectations to the attorney in
writing
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9 Give the foreclosure attorney a current list of your
department personnel including name, telephone number

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and title. Update this list regularly

© Freddie Mac 2009

r g 14
 w ®

wwfor Foreclosure
Prepare
Customer Education

.4
ƒ Required documentation for counsel:

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ƒ Copies of Note (original if required)
ƒ Mortgage or Deed of Trust
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ƒ Copy of original title insurance policy
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ƒ Copy of breach,accelerations or demand letter sent to
borrower
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ƒ Military affidavits
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ƒ Executed Substitution of Trustee, as necessary
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ƒ Payoff statement with per diem interest as of the date of the
foreclosure referral
© Freddie Mac 2009
rg 15
 w ®

ww - Best Practices
Documentation
Customer Education

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9 When acquiring new servicing portfolios address missing
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mortgage assignment problems and other loan
documentation deficiencies through due diligence
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reviews

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9 Maintain a database of information. Include contact

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names and telephone numbers to help you locate
representatives of prior Servicers who may need to sign

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missing assignments
d.
9 Provide all reinstatement and payoff figures within 24
hours after you receive the request or
© Freddie Mac 2009
g 16
 w ww
Question
®
Customer Education

ƒ
. What percentage of delays in foreclosure are due
4c
to poor coordination between attorneys and
Servicers?
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a) 5%
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b) 10% ef
c) 30% ra
d) 50% ud
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© Freddie Mac 2009
rg 17
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Question
®
Customer Education

ƒ
. What percentage of delays in foreclosure are due
4c
to poor coordination between attorneys and
Servicers?
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a) 5%
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b) 10% ef
c) 30% ra
d) 50% ud
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© Freddie Mac 2009
rg 18
 w ®

wwand Prepare Documentation

Collect
Customer Education

.4
Begin collecting and preparing documentation
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required for foreclosure referral before the
acceleration period ends.
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fra
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© Freddie Mac 2009
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 w ®

wwForeclosure
Initiate
Customer Education

.4
clo
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ref
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120th day of
(150
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© Freddie Mac 2009
rg 20
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®

Initiate Foreclosure, cont’d

Customer Education

If the mortgage is Then

.4
Secured by a property that has
one or more of the following
You must not initiate foreclosure without Freddie Mac’s prior approval.

conditions:

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ƒ Hazardous substances on
or near the property (for
Perform the following steps to request Freddie Mac’s approval:
1. Complete Form 105, Multipurpose Loan Servicing Transmittal (for

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example, toxic mod, lead
paint)
first-lien mortgages) or Form 102, Second Mortgage/HIL Servicing
Transmittal (for second mortgages and home improvement loans).

natural or man-made
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ƒ Damage from fire, flood,
disaster
ƒ Deterioration and requires
asset preservation fra
2. Send or fax the form to the following address within five business
days of discovering the condition:
Overnight or Regular Mail
Attention: Foreclosure/Bankruptcy Unit
Fax
(703) 918-98019

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Freddie Mac
ƒ A Manufactured home that 8250 Jones Branch Drive
has significantly decreased Mailstop A61

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in home value McLean, VA 22102

ƒ A forfeiture or pre-seizure Freddie Mac will provide you with further instructions.
action being litigated (for
example, government
seizure)

© Freddie Mac 2009

rg 21
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®

Initiate Foreclosure, cont’d

Customer Education

If the mortgage is Then

.4
Secured by a property
that is owned by a
You must not initiate foreclosure without Freddie Mac’s prior approval.
Perform the following steps to request Freddie Mac’s approval to initiate
military service
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borrower in active

1.
foreclosure on a property owned by a borrower in active military service:
Complete Form 105, Multipurpose Loan Servicing Transmittal (for first-

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lien mortgages) or Form 102, Second Mortgage/HIL Servicing
Transmittal (for second mortgages and home improvement loans).
2. Attach the following documentation to the Form 105 or Form 102:

re 9 Information on any statutory protection available to the service

member

3. fra9 Whether the borrower has invoked any statutory protection

Send or fax the form and supporting documentation to the following
address:
Overnight or Regular Mail ud Fax
Attention: Foreclosure/Bankruptcy Unit
Freddie Mac
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(703) 918-98019

© Freddie Mac 2009

8250 Jones Branch Drive
Mailstop A61
McLean, VA 22102

Freddie Mac will provide you with further instructions

rg 22
 w ®

wwForeclosure, cont’d
Initiate
Customer Education

.4
If the mortgage is Then

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Secured by a property Effective through December 31, 2010, you must not initiate foreclosure or resume
that is owned by a foreclosure proceedings for at least 9 months after the borrower has been
borrower that has been released from active duty. During this period, work with the borrower to explore

su
released from active duty the relief and workout options that Freddie Mac offers.
If you and the borrower cannot agree upon an alternative to foreclosure during
this period, you must request Freddie Mac’s approval to proceed with foreclosure.

re To do this, send or fax us Form 105, Multipurpose Loan Servicing Transmittal:

Overnight or Regular Mail Fax

fra Attention: Foreclosure/Bankruptcy Unit

Freddie Mac
(703) 918-98019

8250 Jones Branch Drive

Mailstop A61
McLean, VA 22102 ud
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© Freddie Mac 2009
rg 23
 w w
Initiate
®

Foreclosure –
Customer Education

w. Mortgages
Low Balance
4c
ƒ You must recommend a charge-off to Freddie Mac
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instead of a foreclosure for a loan with an unpaid

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principal balance (UPB) of $5,000.00 or less,
regardless of the equity in the property
ef
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ƒ Refer to Section B65.50 of the Guide for information

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on managing delinquent low balance mortgages

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© Freddie Mac 2009
rg 24
 w w
Initiate
®

Foreclosure –
Customer Education

w. Homes
Manufactured
4c
ƒ If the mortgage is secured by a Manufactured Home,
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you must notify the foreclosure attorney that the
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property is in fact secured by a Manufactured Home

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at the time of the foreclosure referral

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ƒ Provide the foreclosure attorney with the appropriate
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documents evidencing the property is classified as

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real property, per the state laws in which the
property is located

© Freddie Mac 2009

rg 25
 w ®

wwForeclosure – Best Practices

Initiate
Customer Education

.4
clo
ƒ Communicate our foreclosure timeline
requirements to all of your staff and attorneys
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9 Encourage them to actively decrease timelines

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ƒ Instruct all of your staff and attorneys to strive for
fra
timelines that are less than our published state
foreclosure timelines
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9 Many of them include cushions for normal delays

© Freddie Mac 2009

r g 26
 w ®

wwthe Foreclosure
Manage
Customer Education

.4
9 Report the foreclosure status each month:

clo ƒ EDR Code 43, (Referred to Foreclosure)

9 No less than one time per month, and preferably more

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often, the attorney should send you a status update on

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each foreclosure, bankruptcy, or eviction case

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9 Adhere to Freddie Mac’s allowable expenses for legal
fees and costs, and property preservation
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ƒ Freddie Mac approval is required for incurring costs that exceed
those listed in Exhibits 57 and 57A of the Guide
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© Freddie Mac 2009
to overallowables@FreddieMac.com rg
ƒ Request approval prior to incurring the expense. Send an e-mail

27
 w ®

wwthe Foreclosure, cont’d

Manage
Customer Education

.4
clo
ƒ Process the foreclosure in your institution’s name
name, or MERS (Mortgage Electronic Registration
su
System), if applicable
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ƒ Refer to section 66.17 of the Guide
fra
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© Freddie Mac 2009
g 28
 ww ®
Customer Education

w.
Manage the Foreclosure, cont’d
4c
9 Respond to borrower’s actions and resolve payment
disputes
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9 Respond to payoff and reinstatement requests within 2
business days
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9 Report approved repayment plans – by transmitting EDR
Code 12, Repayment Plan ra
ud
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© Freddie Mac 2009
rg 29
 w w
Manage
®

the Foreclosure –
Customer Education

w.
Best Practices
4c
9 After you have initiated foreclosure, continue to pursue a
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repayment plan or an alternative to foreclosure in
accordance with Chapters A65 and B65 of the Guide
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9 Work with your attorney to promptly document the
ef
repayment plan in a written agreement or court stipulation
ra
that allows the foreclosure process to resume if the
borrower defaults
ud
9 As a best practice, request bi-monthly status updates
from the foreclosure attorney .o
© Freddie Mac 2009
rg 30
 w ®

ww the Foreclosure Sale

Schedule
Customer Education

.4
9 Obtain a property valuation, either an automated value or

clo
Broker’s Price Opinion (BPO) from us via BPODirect® no
less than 30 days prior to the foreclosure sale date, to
assist in establishing bidding instructions
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9 Request Freddie Mac approval to delay a scheduled

fra
foreclosure sale if your proposed delay causes you to
exceed FM timelines

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9 Report delays to foreclosure sale, such as bankruptcy or
probate via Midanet® d.
or
9 Refer to Exhibit 83 of the Guide, for the foreclosure
timelines, by state
© Freddie Mac 2009
g 31
 w w
Schedule
®

the Foreclosure Sale –

Customer Education

w.
Best Practices
4c
9 Analyze your average timeline performance for completed

los
foreclosures in each state on a monthly basis
ƒ If your average foreclosure timelines exceed our foreclosure

ur
timeline in a particular state, you will have the remainder of the

ef
calendar year to improve your performance and possibly avoid
penalties

ra
ƒ Use Freddie Mac’s Timeline ManagerSM to help you proactively

ud
manage loans through the foreclosure process

.
9 Reminder: use the appropriate EDR code when
transmitting delay reasons to Freddie Mac
or
© Freddie Mac 2009
g 32
 w ww
Question
®
Customer Education

•
. The maximum allowable delay for Chapter 7
4c
Bankruptcy is the same as the Chapter 13
Bankruptcy?
los
a) True
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b) False ef
ra
ud
.o
© Freddie Mac 2009
rg 33
 w ww
Question
®
Customer Education

•
. The maximum allowable delay for Chapter 7
4c
Bankruptcy is the same as the Chapter 13
Bankruptcy?
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a) True
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b) False ef
ra
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© Freddie Mac 2009
rg 34
 w ®

ww the Foreclosure Sale-

Conducting
Customer Education

.4
clo
su
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Bidding
Instructions for
Conventional
Mortgages
fra
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.or
© Freddie Mac 2009
g 35
 w ®

wwthe Foreclosure Sale

Conduct
Customer Education

.4
9 Freddie Mac requires servicers to report the foreclosure sale
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results within one business day of the sale through the
Foreclosure Sale/DIL Transmission via Midanet®
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9 Report changes to the foreclosure sales results, or changes in
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confirmation or redemption periods to Freddie Mac by

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submitting a Form 105, Multipurpose Loan
ServicingTransmittal
u d.
ƒ You can also provide us with this information via e-mail at
REO_rollback@FreddieMac.com

9 Report deeds in lieu of foreclosure within one business day of or

receiving the executed deed
© Freddie Mac 2009
g 36
 w ww
Question
®
Customer Education

ƒ
. You must report the Foreclosure Sales Results
4c
within the first 3 business days of the month
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following the foreclosure sale date?
a) True
ur
b) False ef
ra
ud
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© Freddie Mac 2009
rg 37
 w ww
Question
®
Customer Education

ƒ
. You must report the Foreclosure Sales Results
4c
within the first 3 business days of the month
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following the foreclosure sale date?
a) True
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b) False ef
ra
ud
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© Freddie Mac 2009
rg 38
 w w
Conduct
®

the Foreclosure Sale –

Customer Education

w.
Best Practices
4c
ƒ Obtain your confirmation via Midanet®
los
indicating you have reported the foreclosure sale

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results and retain for your records

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ƒ Report accurate results the same day as the

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foreclosure sale date to:

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ƒ Avoid late reporting penalties

d.
ƒ Maximize points on your Servicer Performance Profile for the

or
Default Management criterion Average Number of Days to

g
Report Foreclosure Sales

© Freddie Mac 2009 39

 wPost ®

wwForeclosure Sale Responsibilities

Customer Education

.4
ƒ Request reimbursement of expenses incurred up to and

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including the acquisition date on Freddie Mac Real Estate
Owned (REO) properties

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9 The acquisition date is:

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ƒ The foreclosure sale date or
ƒ Date of the expiration of the redemption period and/or

fra
ƒ Confirmation/ratification date (whichever occurs last)

ud
ƒ Request reimbursement of allowable expenses incurred after
the acquisition date no later than 60 days after settlement of
the sale of the REO .o
© Freddie Mac 2009
rg
9 Refer to section 71.7 of the Guide

40
 w
Postw
®

Foreclosure Sale Responsibilities,

Customer Education

cont’d w
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clo
9 Monitor status of the property via REO Manager®

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9 File and conclude property insurance claims, if
applicable, and cancel the existing property insurance
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upon receipt of the Property Condition Certificate (PCC)

fra
and apply for premium refunds

ud
9 Within 14 days of receiving the PCC indicating property is
vacant and inspected, cancel the property insurance
policy
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© Freddie Mac 2009
rg 41
 w
Postw
®

Foreclosure Sale Responsibilities,

Customer Education

cont’d w
.4
clo
9 Pay any outstanding fees that are still owed after the
foreclosure sale such as real estate taxes and municipal
su
liens

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9 Pay and maintain as current special assessments, HOA

fra
dues and condo assessments, and for leasehold
properties, all payments required under the lease

ud
9 Pay all utility bills incurred on an REO property after the

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REO acquisition until you receive the PCC

© Freddie Mac 2009

rg 42
 w w
Managing
®

Common Delays to the

Customer Education

w. Timeline: Probate
Foreclosure
4c
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9 Report EDR code 31 (Probate) to report that the
borrower is deceased, and the will is being validated
ur
9 Contact your Freddie Mac Loss Mitigation
ef
Representative to review alternatives to foreclosure
ra
9 Refer to section 66.32 of the Guide
ud
. or
© Freddie Mac 2009
g 43
 w ww
Wrap-Up
®
Customer Education

. 4c
We provided you with an overview of the following
default management areas with a focus on common
los
servicing challenges regarding foreclosure timeline
management:
ur
ƒ Prepare for foreclosure
ef
ƒ Initiate foreclosure
ƒ Manage the foreclosure ra
ƒ Schedule the foreclosure sale ud
ƒ Conduct the foreclosure sale
.o
© Freddie Mac 2009
ƒ Post-foreclosure sale activities
rg 44
 w ww
Resources
®
Customer Education

ƒ The Single-Family Seller/Servicer Guide

.4
9 www.allregs.com
c los
9 http://www.FreddieMac.com/singlefamily/

ƒ FreddieMac.com
ur
9 Single-Family Seller/Servcier Guide Bulletins
9 The Learning Center ef
ƒ Training questions ra
9 Wayne_Ferguson@FreddieMac.com ud
571-382-5214 .o
© Freddie Mac 2009
rg 45
 w ®

wwCenter Updates
Learning
Customer Education

The Learning Center Updates page provides quick access to new and updated

.4
resources to help you with underwriting, mortgage products, selling, servicing, and more.

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View a summary of recent changes at www.FreddieMac.com/learn/ch_ind/

su FREE! Subscribe!

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fra at
www.FreddieMac.com/learn/subscribe

ud It’s a notification that’s not just

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another email in your inbox!

© Freddie Mac 2009

rg Receive a timely email informing you of new
and updated training and education resources.
 ww ®
Customer Education

w .4
Thank you for your participation!
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su
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fra
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© Freddie Mac 2009
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