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, such as inadequate communication with borrowers and the commencement of foreclosure actions while loss mitigation talks are ongoing.
As part of the initiative, servicers will be rewarded with monetary incentives for maintaining the GSEs’ standards and timelines for resolution related to loan modifications, other workouts, and foreclosures, and will be held accountable and fined for failing to comply with the new rules.
“These new standards give homeowners facing difficulty making their mortgage payments a clear, consistent process,” said Jeff Hayward, SVP of Fannie Mae’s National Servicing Organization. “We want homeowners to be able to understand their options when facing foreclosure, and we want servicers to reach homeowners early in the process, communicate frequently and clearly, and help homeowners avoid foreclosure.”
Under the new guidelines, servicers must implement what Fannie Mae calls the “Quality Right Party Contact” standard. The GSE explained that this key component of its new borrower communication directive includes building a strong customer-service relationship with
homeowners, determining the reasons for their delinquency, assessing their ability to pay, and providing education about foreclosure prevention options.
During the first 120 days of delinquency, homeowners will be contacted both verbally and in writing to complete a mortgage modification or other solution to remain in the home, or enter into an arrangement to exit 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.
The GSE says it is “encouraging” servicers to follow a model that provides borrowers with a dedicated individual or team to serve as a single point-of-contact throughout the loss mitigation process. The guidelines outline acceptable communication methods, including Web portals and face-to-face discussions, and all servicers are required to institute processes and procedures for handling escalated cases.
Fannie Mae’s 29-page document on delinquency management details various key benchmarks that servicers must meet, including a 60-second window for answering inbound inquiries to call centers and 48 hours to respond to borrower emails, as well as specific timelines for property inspections depending on loan status.
The new guidelines for delinquency management are available on Fannie Mae’s business site. The revised requirements must be implemented no later than September 1, 2011.
For loans that do not qualify for a loss mitigation option, Fannie Mae has updated the maximum number of allowable days for completing foreclosure in each jurisdiction. The new timelines are effective for all loans referred to a foreclosure attorney as of January 1, 2011.
Compensatory fees will be assessed for failing to meet the specified timeframe, and will be based on the unpaid principal balance of the mortgage loan, the applicable pass-through rate, the length of the delay, and any additional costs that are directly attributable to the delay.
The jurisdiction-specific foreclosure timelines have not yet been published but will be made available on the GSE’s business site on June 10th.
Freddie Mac is expected to soon follow suit with updated guidelines that mirror Fannie Mae’s. Freddie said in April that it will be implementing the changes with phased effective dates throughout the summer of 2011.
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