Issues such as calculating housing expense-to-income (HTI) ratios and updates to previous servicing bulletins were addressed in Freddie Mac’s recently published Bulletin 2020-22.
Freddie Mac announced that with respect to calculating a borrower’s monthly HTI, project escrow shortages should be omitted from this calculation when evaluating a borrower for imminent default or when making a determination as to the borrower’s ability to make a cash contribution towards a short sale or deed-in-lieu of foreclosure. However, servicers are to continue including any escrow shortages that were already considered as a part of the borrower’s contractual monthly payment.
In addition, minor updates were made for clarification to property insurance requirements, including requirements regarding the insurer’s licensing and ratings, the type and amount of the insurance coverage and lastly, flood insurance requirements.
With the exception of the provision on calculating HTI (which becomes effective on September 1, 2020) and third-party business continuity planning requirements (which become effective on October 1, 2020), all other changes noted in this Bulletin are effective immediately.