[StBernard] Freddie Mac Changes

[Westley Annis]

some information on homeowners insurance companies, mortgage companies, and
some of your rights or lack of when it comes to collecting insurance
proceeds

J. gu

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Bulletin   
 
TO: All Freddie Mac Sellers and Servicers October 7, 2005 
 

Subject:
Servicing Relief Measures for Mortgages Affected by Hurricane Katrina and
Hurricane Rita, and a change to Selling Requirements for Mortgages Affected
by Hurricane Rita

As the effects of Hurricane Katrina and Hurricane Rita continue to unfold,
Freddie Mac Sellers and Servicers are working hard to meet the challenges
presented by these unprecedented events. Freddie Mac has been working with
its Sellers and Servicers to determine the most effective solutions to meet
the needs of Borrowers who have been affected by these disasters. 

On September 30, 2005, we issued a Bulletin that announced temporary
origination requirements for Freddie Mac Sellers to assist Borrowers whose
lives have been devastated by these disasters. This Bulletin outlines
temporary relief measures to help Servicers assist Borrowers with Mortgages
secured by properties located in "an eligible Disaster Area." These areas
are comprised of counties or municipalities, including parishes, that have
been declared by the President of the United States to be Major Disaster
Areas where federal aid in the form of individual assistance is being made
available. These areas are named by the Federal Emergency Management Agency
(FEMA) on its web site.


With this Bulletin we are:

For Mortgages secured by properties located in eligible Disaster Areas 
Streamlining the underwriting requirements for loan modifications 
Revising our requirements for short payoff approvals 
Requiring an initial distressed property inspection on all delinquent
Mortgages 
Excluding certain criteria from the default management category of the
Servicer Performance Profile 
Adjusting our requirements for Electronic Default Reporting (EDR) 
We are also reminding Servicers of the special relief measures Freddie Mac
previously announced for Borrowers affected by these disasters. These
measures include suspension of Borrower payments, forbearance and the
release of insurance proceeds. We also announced that we are extending the
same Mortgage obligation relief and protections provided under the
Servicemembers Civil Relief Act of 2003 (SCRA) and Chapter 82 of our
Single-Family Seller/Servicer Guide (Guide) to Borrowers who are members of
the National Guard deployed for Hurricane Katrina and Hurricane Rita relief
operations.

For Freddie Mac Sellers, we are removing the LTV/TLTV/HTLTV ratio
limitations for properties affected by Hurricane Rita announced in our
Bulletin dated September 30, 2005 (the "September 30th Bulletin").

Replacement pages to the Guide will not be issued to include the
requirements of this Bulletin. Seller/Servicers should retain a copy of this
Bulletin to ensure compliance with our requirements.

Servicing Requirements
Mortgages secured by properties located in eligible Disaster Areas

Streamlined underwriting requirements for loan modifications - Hurricane
Katrina and Hurricane Rita 
To assist Servicers with the increased volume of relief and workout option
requests, and in an effort to enable Borrowers to keep their homes, Freddie
Mac is streamlining the loan modification process described in our Guide for
Mortgages secured by proprieties located in eligible Disaster Areas.

Mortgages that were delinquent or in foreclosure prior to Hurricane Katrina
or Hurricane Rita are also eligible for these streamlined underwriting
requirements for loan modifications. Before considering a loan modification,
a Servicer must first make every effort to determine if the Borrower wishes
to retain ownership of their home.

To recommend a Borrower for a loan modification, a Servicer must ensure that
all of the following eligibility requirements are met:

Documentation of income
A Servicer must document, on the Workout ProspectorSM notes screen, the
Borrower's stated income and source, and his or her commitment to retain
ownership of the property.

Determination of property value
Servicers do not need to determine the value and condition of the property
in accordance with the requirements in Guide Section 65.25; instead,
Servicers need only use the unpaid principal balance (UPB) of the Mortgage
as the value of the property.

Retention of existing credit enhancements
A Servicer may approve loan modifications on Mortgages with in-place credit
enhancements provided, however, that if the Servicer is not the credit
enhancement provider, the Servicer first obtains written approval from the
entity providing the enhancement. For example, if the Mortgage has mortgage
insurance, the Servicer must first receive approval from the mortgage
insurer.

Extension of the Mortgage term
Servicers may extend the term of the modified Mortgage up to a maximum of
480 months.

Servicer workout compensation
Freddie Mac will compensate Servicers for each loan modification in
accordance with Guide Section 65.42(c). We encourage Servicers to waive the
$300 processing fee they currently charge Borrowers.

Servicing fee
The Servicing fee will remain the same as it was prior to the loan
modification.

Previously modified Mortgages

Mortgages that were previously modified are eligible for a second
modification under the streamlined provisions above, if the first
modification was settled prior to October 1, 2005 
For Mortgages with first modifications settled between October 1, 2005, and
November 1, 2006, any subsequent loan modification must be evaluated in
accordance with the existing requirements in Guide Chapter B65 
Servicers who want to recommend an interest rate reduction must consult
their Freddie Mac Loss Mitigation Specialist for guidance.

Servicers must not decline a loan modification until they contact their
Freddie Mac Loss Mitigation Specialist for guidance.

All other requirements for loan modifications detailed in Guide Chapter B65
remain in effect.

Revising requirements for short payoff approval

Servicers can approve a short payoff of a Mortgage secured by a property in
an eligible Disaster Area if all of the following requirements are met:

At least 95% of the total debt is paid off, 
The source of funds for the payoff is proceeds from the Borrower's
homeowners insurance or flood insurance or from a government agency and 
The Servicer has verified that all available insurance claims have been
filed and proceeds from these claims have been received and will be applied
toward the payoff 
A Servicer may approve short payoffs of Mortgages with in-place credit
enhancements provided, however, that if the Servicer is not the credit
enhancement provider, the Servicer first obtains written approval from the
entity providing the enhancement. For example, if the Mortgage has mortgage
insurance, the Servicer must receive approval from the mortgage insurer.

If the above requirements are not met, Servicers must contact their Freddie
Mac Loss Mitigation Specialist for direction.

Servicers must comply with all other requirements in Guide Sections B65.35
and B65.41.

Requiring an initial distressed property inspection on all delinquent
Mortgages in eligible Disaster Areas

After any natural or man-made disaster, Servicers are required to determine
the extent of losses or damages suffered by properties as a result of the
disaster. Due to the widespread devastation caused by Hurricane Katrina and
Hurricane Rita, Borrowers and insurance providers are having difficulty
providing Servicers with property condition information. Therefore, Freddie
Mac is amending its requirements to require Servicers to complete an initial
distressed property inspection on properties located in eligible Disaster
Areas if the property is accessible and:

The Mortgage is delinquent, including in forbearance, and there has been no
contact with the Borrower or

The Mortgage is delinquent, including in forbearance, there has been contact
with the Borrower and the Borrower has no information about the condition of
the property

The distressed property inspection must be completed between October 15,
2005, and December 31, 2005.

A distressed property inspection includes:

Assessing the levels of damage to the areas and the specific properties 
Providing a full description of wind, water, flood, fire, mold and other
damages 
Making a determination as to whether the property is currently flooded or
has experienced flood damage 
Making a determination as to whether the roof is intact 
If allowed by applicable law, leaving a door hanger at the property with the
Servicer's contact information on it. If contact is made with occupants or
Borrowers, property inspectors should obtain the following information: 
Whether the occupant or Borrower plans to continue to occupy the property 
Whether the Borrower has filed an insurance claim 
The Servicer does not need to submit the inspection report to Freddie Mac
unless:

The insured improvements have suffered a total or near total loss 
The Borrower wishes to apply insurance proceeds to the Mortgage debt instead
of repairing the property and the proceeds are not sufficient to pay off the
existing Mortgage debt, except as provided in section 2, above, for short
payoffs 
If either of the above conditions exist, the Servicer must submit the report
and any recommendation along with the appropriate documentation to us via
Form 105, Multipurpose Loan Servicing Transmittal, within five Business Days
of learning of the situation.

Servicer reimbursement
Freddie Mac will reimburse Servicers for inspections of properties in an
eligible Disaster Area as follows:

For properties affected by Hurricane Katrina - Servicers will be reimbursed
for the cost of the initial distressed property inspection up to a maximum
of $25, and up to three regular monthly delinquent property inspections if
performed in the months of October, November and/or December 2005, up to a
maximum of $24 for each eligible Mortgage regardless of whether the Mortgage
subsequently becomes current or goes to foreclosure

For properties affected by Hurricane Rita - Servicers will be reimbursed for
the cost of the initial distressed property inspection up to a maximum of
$25, and up to two regular delinquent property inspections if performed in
the months of November and December 2005, up to a maximum of $16 for each
eligible Mortgage regardless of whether the Mortgage subsequently becomes
current or goes to foreclosure

We will communicate the instructions for filing for reimbursement when the
process is finalized.

Servicers must continue to conduct regular monthly inspections as required
in Section 64.7 of the Guide on all delinquent Mortgages, even if a
distressed property inspection is conducted.

Excluding certain criteria from the default management category of the
Servicer Performance Profile

Accurate EDR using the correct Default Action Codes and Reason for Default
Codes described below will allow Freddie Mac to exclude Mortgages secured by
properties located in eligible Disaster Areas from the Servicer Performance
Profile. This exclusion will affect the Early Collections, Late Collections,
Inventory Past Standard Severity and any impacted days from the Foreclosure
Timeline metrics for all delinquent Mortgages secured by property located in
the eligible Disaster Areas from September 30, 2005, through December 31,
2005. The exclusion will continue for up to eight additional months if the
Mortgage remains in forbearance and the Servicer continues to report the
Default Action Code "09-Forbearance" and Reason for Default Code
"019-Casualty Loss." 
Adjusting our requirements for EDR
Accurate default reporting is critical, particularly for Mortgages in
forbearance secured by properties located in any of the Major Disaster Areas
as designated by FEMA as a result of Hurricane Katrina and Hurricane Rita.

If a Mortgage is in a designated Major Disaster Area and payments are
suspended, the Servicer must report Default Action Code "09-Forbearance" and
Reason for Default Code "019-Casualty Loss." These codes apply for:

Borrowers with whom you have not had contact and 
Borrowers with whom you have had contact and who want the special suspension
of payments 
If a Mortgage is not secured by property located in a designated Major
Disaster Area but the Borrower is indirectly affected by Hurricane Katrina
or Hurricane Rita (e.g., is experiencing loss of employment, or is caring
for additional family members) and the Servicer has granted forbearance, the
Servicer must report Default Action Code "09-Forbearance" and Reason for
Default Code "011-Property Problem."

Servicers must continue to report these codes each month until the
Delinquency is resolved. If you have questions about EDR codes, please
contact your Freddie Mac Loss Mitigation Specialist.

Previously announced Servicing requirements
In our August 30 and September 7 Single-Family Advisories, Freddie Mac
announced temporary relief for Borrowers who suffered property damage from
Hurricane Katrina. In our September 27 Single-Family Advisory, we announced
that we are expanding temporary relief to Borrowers who suffered property
damage from Hurricane Rita. The previously announced requirements include
the following and are summarized below:

Release of insurance loss proceeds - Hurricane Katrina and Hurricane Rita 
Forbearance for Mortgages secured by properties in eligible Disaster Areas
as a result of Hurricane Katrina 
Forbearance for Mortgages secured by properties in eligible Disaster Areas
as a result of Hurricane Rita 
Special relief for all other Borrowers negatively affected by Hurricane
Katrina or Hurricane Rita 
Relief for Borrowers who are members of the National Guard deployed for
Hurricane relief efforts 
Release of insurance loss proceeds - Hurricane Katrina and Hurricane Rita
To help Borrowers who suffered property damage from Hurricane Katrina and
Hurricane Rita and need upfront insurance proceeds to repair or rebuild
their homes, Freddie Mac has temporarily revised its insurance guidelines to
expedite getting insurance money into the hands of Borrowers. Under this
temporary exception, in locations declared Major Disaster Areas due to
Hurricane Katrina and Hurricane Rita, Freddie Mac Servicers can immediately
release insurance funds as follows:

For Mortgages that are current, the Servicer, at its discretion, may release
insurance proceeds without limitation for the repair of damaged properties,
provided that when the amount of the insurance proceeds to be released is: 
$20,000 or less, the Servicer may release the proceeds directly to the
Borrower 
Greater than $20,000, the Servicer must release the proceeds payable jointly
to the Borrower and the contractor 
For Mortgages that are 30 to 90 days delinquent, the Servicer, at its
discretion, may release up to $40,000 of the total insurance loss proceeds
for the repair of damaged properties, provided that when the amount of the
insurance proceeds to be released is: 
$20,000 or less, the Servicer may release the proceeds directly to the
Borrower 
Greater than $20,000, the Servicer may release the proceeds up to a maximum
of $40,000 payable jointly to the Borrower and the contractor 
At the Servicer's option, rather than disburse the funds jointly to the
Borrower and the contractor, the Servicer may choose to maintain the funds
in an interest-bearing account and disburse the proceeds in accordance with
the requirements for disbursement in Section 58.10(b) of the Guide.

Other than as provided above, Servicers are expected to comply with all
other provisions of Sections 58.10, 58.11 and 67.29 of the Guide including,
but not limited to, requirements for reviewing the qualifications of the
contractor, monitoring repairs to the property and compliance with all
applicable building codes and regulations governing residential repair or
reconstruction.

While we are not requiring that the Borrower provide an affidavit to receive
insurance proceeds, insurance proceeds must be used specifically to repair
hurricane damage to the Borrower's home to ensure that the property is
returned to its prior condition. Borrowers should be reminded that insurance
proceeds are not designed for other general use.

As always, if Servicers have a unique situation that warrants special relief
consideration, Freddie Mac will review individual circumstances on a
case-by-case basis. Servicers may contact their Freddie Mac Loss Mitigation
Specialist or Servicer Account Manager if they have questions.

Forbearance for Mortgages secured by properties in eligible Disaster Areas
as a result of Hurricane Katrina
We are suspending Mortgage payments for three months for all Borrowers whose
properties are located in eligible Disaster Areas. As a result, effective
September 7, 2005, for single-family Mortgages secured by property located
in a Hurricane Katrina eligible Disaster Area, Freddie Mac Servicers:

Must have suspended the Automated Clearing House (ACH) process for payments
due for September, if not yet drafted, and also for October and November.

If a Borrower notifies a Servicer not to suspend ACH drafting, the Servicer
must comply with the Borrower's request 
By the end of September, Servicers must have made a reasonable attempt to
contact Borrowers to determine if any Borrower wishes to have the ACH
drafting resumed 
At their discretion, may reverse September payments already made via ACH and
credit the payment back to the Borrower's draft account. If the payment has
already been reported to Freddie Mac, Servicers should contact us for
further guidance. Servicers must return the payments to a Borrower when
contacted by the Borrower and specifically requested to return the payment.
In addition, unless a Borrower contacts the Servicer to make other
arrangements, the Servicer must consider the Borrower to have accepted a
forbearance of the September payment.

At their discretion, may return to a Borrower any non-ACH monthly payments
(as well as partial prepayments of principal) received, from the Borrower
and not yet reported to Freddie Mac for September, October and November.
This is provided that the Servicer has confirmed directly with the Borrower
that the Borrower is in hardship and desires to have the payment returned.
If the payment has already been reported to Freddie Mac, Servicers should
contact us for further guidance.

Must return to the Borrower non-ACH monthly payments (as well as partial
prepayments of principal) received, if the Borrower contacts the Servicer
and specifically requests the payment be returned. If the payment has
already been reported to Freddie Mac, Servicers should contact us for
further guidance.

Must report and remit full prepayments of principal to Freddie Mac in
accordance with current Guide requirements. Full prepayments of principal
may not be returned to the Borrower.

Must suspend all payment collection activities, including automated dialers
and collections calls through November 2005. Instead, Servicers should focus
efforts on ascertaining Borrowers' current situations and the extent of
property damage. In addition, Servicers should suspend all foreclosure
proceedings, including foreclosure referrals and eviction proceedings,
during September, October and November, even if the Mortgage was in default
prior to Hurricane Katrina.

Must not assess late charges or report Borrowers to credit repositories for
payments suspended or reversed for September, October and November.

At the end of the three-month suspension of payments, Servicers should
perform an individual assessment of each Mortgage to determine if
forbearance in the form of a suspension or reduction of payments should be
extended for an additional nine months. If the Servicer believes forbearance
beyond a total of 12 months is warranted, the Servicer should make that
recommendation to us for consideration. Servicers may also use existing
workout options to reinstate Borrowers ready to resume Mortgage
responsibilities.

Forbearance for Mortgages secured by properties in an eligible Disaster Area
as a result of Hurricane Rita
We are suspending Mortgage payments for two months for all Borrowers whose
properties are located in eligible Disaster Areas. As a result, effective
September 27, for single-family Mortgages secured by property located in a
Hurricane Rita eligible Disaster Area, Freddie Mac Servicers:

Must suspend the ACH process for payments due for October and November.

If a Borrower notifies a Servicer not to suspend ACH drafting, the Servicer
must comply with the Borrower's request 
By the end of October, Servicers must make a reasonable attempt to contact
Borrowers to determine if any Borrower wishes to have the ACH drafting
resumed. 
At their discretion, may reverse October payments already made via ACH and
credit the payment back to the Borrower's draft account. If the payment has
already been reported to Freddie Mac, Servicers should contact us for
further guidance. Servicers must return the payments to Borrowers when
contacted by the Borrower and specifically requested to return the payment.
In addition, unless the Borrower contacts the Servicer to make other
arrangements, the Servicer must consider the Borrower to have accepted a
forbearance of the October payment.

May return to a Borrower, at their discretion, any non-ACH monthly payments
(as well as partial prepayments of principal) received, from the Borrower
and not yet reported to Freddie Mac for October and November. This is
provided that the Servicer has confirmed directly with the Borrower that the
Borrower is in hardship and desires to have the payment returned. If the
payment has already been reported to Freddie Mac, Servicers should contact
us for further guidance.

Must return to the Borrower non-ACH monthly payments (as well as partial
prepayments of principal) received, if the Borrower contacts the Servicer
and specifically requests the payment to be returned. If the payment has
already been reported to Freddie Mac, Servicers should contact us for
further guidance.

Must report and remit full prepayments of principal to Freddie Mac in
accordance with current Guide requirements. Full prepayments of principal
may not be returned to the Borrower.

Must suspend all payment collection activities, including automated dialers
and collections calls through November 2005. Instead, Servicers should focus
efforts on ascertaining Borrowers' current situations and extent of property
damage. In addition, Servicers should suspend all foreclosure proceedings,
including foreclosure referrals and eviction proceedings, through November,
even if the Mortgage was in default prior to Hurricane Rita.

Must not assess late charges or report Borrowers to credit repositories for
payments suspended or reversed for October and November.

At the end of the two-month suspension of payments, Servicers should perform
an individual assessment of each Mortgage to determine if forbearance in the
form of a suspension or reduction of payments for up to an additional 10
months should be extended. If the Servicer believes forbearance beyond a
total of 12 months is warranted, the Servicer should make that
recommendation to us for consideration. Servicers may also use existing
workout options to reinstate Borrowers ready to resume Mortgage
responsibilities.

Special relief for all other Borrowers negatively affected by Hurricane
Katrina or Hurricane Rita
Freddie Mac strongly encourages Servicers to provide the following
additional relief to Borrowers affected by Hurricane Katrina and Hurricane
Rita who are in Major Disaster Areas other than those qualifying for
"individual assistance" as designated by FEMA, or who are outside of a Major
Disaster Area and have been negatively affected by Hurricane Katrina or
Hurricane Rita (i.e., loss of employment, additional dependants in
household, etc.):

Waive the assessment of penalties or late fees against Borrowers 
Not report forbearance or Delinquencies to the credit repositories 
Affected Borrowers may qualify to have their Mortgage payments reduced or
suspended for up to 12 months. Each case must be individually assessed to
determine which alternative best fits the Borrower's circumstances.

Relief for Borrowers who are members of the National Guard
To help mitigate the challenging circumstances facing many in the wake of
Hurricane Katrina and Hurricane Rita, we are extending Mortgage relief
options to all National Guard members on active State duty involved in
Hurricane Katrina or Hurricane Rita response efforts. Currently, Borrowers
who are members of the National Guard on active State duty deployed for
Hurricane Katrina or Hurricane Rita response efforts are not eligible for
Mortgage relief under the SCRA. Freddie Mac is extending the same type of
Mortgage obligation relief and protections provided under SCRA and Guide
Chapter 82 to National Guard members on active State duty deployed for
Hurricane Katrina or Hurricane Rita response efforts.

To take advantage of these relief options, Borrowers must request the
interest rate relief from their Servicer and provide their Servicer with
copies of the applicable documentation evidencing the Borrower/National
Guard member's deployment for Hurricane Katrina or Hurricane Rita.
Additionally, Servicers must comply with all other requirements set forth in
Guide Chapter 82. For complete requirements on our special servicing and
reporting requirements, we encourage you to review Guide Chapter 82.

Additional reporting information and guidance for Servicers

Specific information on areas declared Major Disaster Areas are listed on
FEMA's web site at www.fema.gov.

For all affected Mortgages, Servicers must ensure that all applicable FHA,
VA, RHS and MI requirements are satisfied so Freddie Mac receives full
benefit of the FHA insurance, VA guaranty or RHS guaranty or mortgage
insurance, as applicable.

Servicers are also required to assist Borrowers in applying for federal and
State disaster relief and filing insurance claims as currently outlined in
Sections 58.11 and 67.29 of the Guide.

Selling Requirements
After further review of the counties located in the Hurricane Rita eligible
Disaster Area, Freddie Mac is lifting the LTV/TLTV/HTLTV ratio limitations
as stated in Section 1(g) of the September 30th Bulletin, for properties
located in the Hurricane Rita eligible Disaster Area. If a property is
located in both the Hurricane Rita and Hurricane Katrina eligible Disaster
Areas, then the LTV/TLTV/HTLTV requirements of the September 30th Bulletin
still apply. We expect Sellers to take appropriate steps to address property
damage issues and determine the value, condition and marketability of
severely damaged properties located in the Hurricane Rita eligible Disaster
Area. All other requirements in the September 30th Bulletin remain
unchanged.

Freddie Mac encourages its Sellers to carefully evaluate each Borrower and
property securing Mortgages contemplated for sale to Freddie Mac from all
areas impacted by Hurricane Katrina and Hurricane Rita.

Conclusion
We believe the temporary relief offered under this Bulletin will help
Freddie Mac Seller/Servicers meet the needs of Borrowers in the aftermath of
these unprecedented natural disasters. We again request that
Seller/Servicers extend the highest level of understanding to Borrowers
coping with Hurricane Katrina- and Hurricane Rita-related hardships.

Both Selling and Servicing requirements for Hurricane Katrina and Hurricane
Rita are available at
www.FreddieMac.com/corporate/about/how_we_help/katrina.html.

For answers to questions about the requirements contained in this Bulletin,
Seller/Servicers should call their Freddie Mac Account Manager or (800)
FREDDIE.

Sincerely, 

James J. Cotton
Vice President
Single-Family Marketing