Fannie and Freddie Get Handed New Mortgage Servicing Guidelines from FHFA

By Kyle Chezum Updated on 4/29/2011

 

Fannie Mae and Freddie Mac, the two large government sponsored entities that currently manage the bulk of the nation's mortgages, have been directed by the Federal Housing Finance Agency to revise how they handle mortgage delinquencies.  Up until now, the two firms have followed different methodologies when dealing with borrowers in default.  The FHFA has laid down guidelines for the two firms to adhere to that will proactively assist struggling homeowners.

The new guidelines were implemented by the FHFA with the goal of keeping homeowners in their homes as often as possible while relegating foreclosure to a secondary, last-resort position.  Servicers for Fannie and Freddie can no longer work with a homeowner while simultaneously preparing to foreclose on the property.  This dual track approach has been replaced with a single track approach, in which servicers must either work to repair a mortgage or simply begin foreclosure.

FHFA Acting Director Edward DeMarco believes the change is a good one that will allow servicers to offer more cutomized solutions to better assist homeowners.  "FHFA's directive to align Enterprise policies for servicing delinquent mortgages should result in earlier servicer engagement to identify the best solution available for homeowners, given their individual circumstances," he said.

Fannie Mae CEO Michael Williams agreed and had his own positive opinions to share about the change.  Rather than feeling that the new servicer guidelines had been forced upon the GSE from the outside, WIlliams believes the new rules are a major step forward.  "This initiative will direct servicers to reach families earlier, communicate more frequently and clearly, and provide relief," he said.