Fannie Mae and Freddie Mac Announce New Guidelines for Management of Law Firms

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On November 9, Fannie Mae and Freddie Mac announced new, coordinated requirements with respect to the management of law firms for default servicing, bankruptcies, and related litigation. As described in Freddie Mac Bulletin 2012-25, effective June 1, 2013, servicers (i) will be permitted to choose their own attorneys, create their own processes for managing foreclosure processing, and maintain direct relationships with their law firms, (ii) will be required to establish procedures to manage and monitor all aspects of the law firm’s performance and compliance with applicable requirements, and (iii) upon request, will be required to perform a due diligence review and provide Freddie Mac with the results. Fannie Mae Servicing Guide Announcement SVC-2012-22 similarly details new servicer requirements with regard to the use of outside law firms. Both Fannie Mae and Freddie Mac will accept and respond to servicer recommendations of law firms beginning March 1, 2013, and will begin conducting new firm training in April 2013. Law firms that are currently in the retained attorney network are not exempt from the new selection and retention processes.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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