Freddie Mac Updates Short Sale, Deed-In-Lieu Of Foreclosure Requirements

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On November 25, Freddie Mac issued Bulletin 2013-24, which revises numerous short sale and deed-in-lieu of foreclosure (DIL) requirements. The bulletin updates, among other things, eligibility requirements for exceptions to borrower documentation for short sales and DILs by (i) permitting a borrower whose mortgage debt has been discharged in a Chapter 7 bankruptcy to be eligible for an exception to documentation, regardless of FICO score; and (ii) removing mortgages that were originated as investment properties from eligibility for an exception to documentation. The bulletin also requires servicers to: (i) submit a short sale or DIL recommendation to Freddie Mac for approval when the borrower’s cash reserves exceed $50,000; and (ii) delay, or ensure that foreclosure counsel delays, the next legal action in the foreclosure process when such servicers receive a first complete borrower response package (BRP) more than 37 days prior to a scheduled foreclosure sale date, and the evaluation results in an offer to proceed with a short sale or DIL. Further, the bulletin states that servicers no longer are required to conduct an expedited review when a completed BRP with a short sale purchase offer is received greater than 37 days prior to a scheduled foreclosure sale date. Finally, the bulletin updates trial period plan requirements to provide that if a borrower accepts an original trial period plan offer after receiving an appeal decision, and the borrower remains eligible for the original offer, servicers must reissue the original offer with a new trial period plan due date.