Freddie Mac announced today that it is doubling financial incentives to servicers who help borrowers avoid foreclosure. The additional financial incentives will start August 1, 2008 and will include raising the compensation for negotiating repayment plans from $250 to $500, increasing the compensation for loan modifications from $400 to $800, and increasing the compensation for short sales or other preforeclosure sales, that are for less than the full amount owed, from $1,100 to $2,200.
Freddie Mac also announced that they will be implementing policies to increase the incentive a servicer has to perform door-to-door outreach programs. Starting August 1, 2008 and lasting until March 31, 2009, servicers who be reimbursed for the cost of leaving a door hanger with $50 per mortgage (up from $15), when the effort results in the borrower contacting their servicer. Servicers will also be able to collect up to $200 in reimbursement for additional fees paid to vendors for door knocking that results in avoiding foreclosure.

“We are taking these steps because we want to reinforce the tremendous importance of workout and reward their use,” said Ingrid Beckles, Freddie Mac’s VP of Servicing and Asset Management “Giving our servicers more time and greater compensation to help troubled borrowers is fundamental to preserving homeownership and maximizing our efforts to minimize foreclosures.”
In order to help servicers who operate in fast foreclosure states, Freddie Mac has extended the deadline that servicers have to seek foreclosure alternatives or complete the foreclosure.
This policy change will affect the states of Alabama, Alaska, Arizona, Arkansas, California, Georgia, Hawaii, Maryland, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, North Carolina, Rhode Island, Tennessee, Texas, Virginia, West Virginia and Wyoming, in addition to Washington, DC.
In these states servicers will have up to 300 days from the due date of the last payment to the foreclosure sale in these states to “seek aggressive and sustainable workout solutions for the borrowers and still meet the standards set in Freddie Mac’s Servicer Performance Profiles.”
To read Freddie Mac’s full statement on these changes, click here.