Freddie Mac Doubles Financial Incentives to Servicers Who Help Borrowers Avoid Foreclosure

Freddie Mac Doubles Financial Incentives to Servicers Who Help Borrowers Avoid
Foreclosure

MCLEAN, Va., July 31 /PRNewswire-FirstCall/ -- Freddie Mac (NYSE: FRE)
today told mortgage servicers it was doubling the amount of money it pays for
each workout that keeps a delinquent borrower with a Freddie Mac-owned
mortgage out of foreclosure.
One of the nation's largest investors in residential mortgages, Freddie
Mac also announced it will start reimbursing servicers for the cost of
door-to-door outreach programs, give servicers more time to negotiate workouts
in states with fast foreclosure processes, and make administrative changes
intended to streamline the workout process.
"We are taking these steps because we want to reinforce the tremendous
importance of workouts and reward their use," said Freddie Mac Vice President
of Servicing and Asset Management Ingrid Beckles. "Giving our servicers more
time and greater compensation to help troubled borrowers is fundamental to
preserving homeownership and maximizing our efforts to minimize foreclosures."
Freddie Mac's 0.86 percent single-family delinquency rate is a fraction of
the most recent national single-family delinquency rate (6.35 percent)
calculated by the Mortgage Bankers Association of America.
According to Beckles, starting August 1, 2008, compensation for repayment
plans will rise from $250 to $500 while loan modification compensation will
increase from $400 to $800. For short sales or pre-foreclosure sales, where
Freddie Mac agrees to accept less than the full amount owed on a borrower's
loan, compensation will go from $1,100 to $2,200. (The higher amount
recognizes the greater servicer staff time involved when negotiating property
sales.)
Freddie Mac also said it will now reimburse the cost of leaving a door
hanger up to $15 per mortgage and up to $50 per mortgage for a door knocking
that results in the borrower contacting their servicer. Freddie Mac will
also reimburse servicers up to $200 for additional fees paid to vendors for
door knocking that results in successful alternatives to foreclosure. This
policy is effective from August 1, 2008, through March 31, 2009.
To qualify for the reimbursement, the servicer must show that the mortgage
was at least 90 days delinquent, the servicer had no prior contact with the
borrower, and that the outreach was done by an independent third party vendor.
Giving Borrowers Who Call More Time in Fast Foreclosure States
Freddie Mac also announced it is extending the time for foreclosures so
servicers will have more time, if needed, to negotiate workouts with
delinquent borrowers in Washington, DC, and 20 states with relatively fast
foreclosure processes.
In addition to Washington, DC, the affected states include 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.
Specifically, starting August 1, 2008, servicers are allowed up to 300
days (10 months) 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. The company uses the Servicer Performance Profiles to
measure and reward the quality of a servicers' investor reporting and default
management.
Even though the laws in these states permit a lender to foreclose in less
than 300 days, this announcement means Freddie Mac will permit its servicers
more time to complete foreclosures. The new policy won't affect borrowers in
states where the foreclosure process already exceeds 300 days.
Freddie Mac is a stockholder-owned corporation established by Congress in
1970 to provide liquidity, stability and affordability to the nation's
residential mortgage markets. Freddie Mac raises capital on Wall Street and
throughout the world's capital markets to finance mortgages for families
across America. Over the years, Freddie Mac has made home possible for one in
six homebuyers and more than five million renters. http://www.FreddieMac.com
SOURCE Freddie Mac

Patti Boerger, +1-703-903-2445, or Brad German, +1-703-903-2437, both of
Freddie Mac