8404.6: Transition following disaster-related forbearance (09/18/18)

Owned by Kacey Olson (Unlicensed)
Nov 23, 2018
5 min read

© Freddie Mac Single-Family Seller Servicer Guide

Refer to Bulletin 2018-14 which announced updates to evaluation notices and Borrower solicitation letters. The revisions may be implemented prior to the mandatory implementation of the January 1, 2019 version of this section.

If the Borrower was placed on forbearance as a result of an Eligible Disaster, the Servicer must contact the Borrower on a periodic basis and prior to the end of the forbearance period to determine whether the hardship has been resolved and the most appropriate relief or workout option to cure the Delinquency. The Servicer must consider a number of factors including, but not limited to, the Servicer's ability to achieve quality right party contact, the Borrower's current financial circumstances and ability to resume making monthly payments, and the status of the Mortgage at the time of the disaster.

If, at the end of the disaster-related forbearance period, the Servicer is evaluating the Borrower for a foreclosure prevention alternative based on a Borrower Response Package, the documentation cannot be more than 180 days old as of the date of the evaluation for the foreclosure prevention alternative.

(a) Transition requirements when quality right party contact is achieved If the Servicer has been able to achieve quality right party contact with the Borrower at the end of the disaster-related forbearance period, the Servicer must evaluate the Borrower for the most appropriate relief or workout option to cure the Delinquency in accordance with the evaluation hierarchy set forth in Section 9201.2. However, for Borrowers who were current or less than 31 days delinquent at the time of the Eligible Disaster and who are able to resume making the contractual monthly payments on the Mortgage, the Servicer must consider the Borrower for a Capitalization and Extension Modification for Disaster Relief ("Disaster Relief Modification"), if a reinstatement or repayment plan is not a viable option. (Refer to Section 9206.4 for the requirements for a Disaster Relief Modification.)If the Borrower is not eligible for or declines a Disaster Relief Modification and the Borrower:

  • Has provided a Borrower Response Package, the Servicer should evaluate the Borrower in accordance with the evaluation hierarchy in Section 9201.2
  • Has not provided a Borrower Response Package, the Servicer must evaluate the Borrower for a streamlined offer for a Freddie Mac Flex Modification®, provided the Borrower is 90 or more days delinquent

Additionally, if the Servicer is unable to achieve quality right party contact at the end of the disaster-related forbearance period to determine financial status and eligibility for a Disaster Relief Modification, the Servicer must evaluate the Borrower to determine if he or she is eligible for a streamlined offer for a Flex Modification, provided the Borrower is 90 or more days delinquent.

(b) Transition requirements when quality right party contact is not achieved If the Servicer is unable to achieve quality right party contact at the end of the disaster-related forbearance period, and the Servicer has determined that the Borrower is eligible for a streamlined offer for a Flex Modification in accordance with Section 9206.5, then the Servicer must send the Borrower a Streamlined Modification Trial Period Plan Notice, after amending it, as necessary, to conform to the Flex Modification program terms, as provided in Exhibit 93, Evaluation Model Clauses. The Trial Period Plan Notice should be amended as set forth in Exhibit 93 for post-disaster forbearance modification and at the Servicer's discretion as it deems necessary to meet the requirements of this section and Chapter 9206, and to comply with disclosure and other requirements under applicable law. In addition, the Servicer must continue with collection and foreclosure proceedings in accordance with Section 9102.4, unless one of the exceptions set forth in Sections 9301.6 and 9301.7 applies.

(c) Transition requirements for Borrowers who were on a Trial Period Plan at the time of the Eligible Disaster If a Borrower who was performing in accordance with the terms of a Trial Period Plan is placed on forbearance as a result of an Eligible Disaster, then within 30 days prior to the end of the forbearance period, the Servicer must determine whether the Borrower's financial circumstances continue to be adversely impacted by the disaster based on verbal confirmation with the Borrower about his or her current financial condition and the most recent property inspection. The Servicer must then apply the following rules:

  • If the Borrower was performing on a Home Affordable Modification Program (HAMP®) Trial Period Plan at the time of the disaster and the Borrower's financial circumstances have not adversely changed (e.g., the Borrower's income is not less than it was at the time of the pre-forbearance Trial Period Plan evaluation), then the Servicer must offer the Borrower a new HAMP Trial Period Plan which includes the same Trial Period payment as the pre-forbearance Trial Period Plan. The Servicer must not conduct a new net present value (NPV) or Forbearance Limit analysis. For reporting purposes, the Servicer should utilize the NPV determined for the pre-forbearance (or pre-disaster) Trial Period Plan analysis and may report anticipated forbearance amounts in excess of the Forbearance Limit, but only to the extent necessary to achieve the Target Payment. All other HAMP eligibility rules continue to apply, including that the complete Borrower Response Package used for the evaluation was submitted on or before December 30, 2016, and that the HAMP Modification Effective Date is on or before December 1, 2017.Additionally, the Servicer must not cancel the previous Trial Period Plan in Workout Prospector®but must instead keep the Borrower's previous Trial Period Plan in approved status in order to avoid re-underwriting the Borrower. When preparing the modification agreement, the Servicer must calculate the modification terms using updated delinquent interest and non-interest arrearage amounts that must be capitalized (i.e., up through the day prior to the modified interest rate change date), as applicable, and in this instance only, the Servicer may forbear principal beyond the Forbearance Limit, but only to the extent necessary to achieve the Target Payment.
  • If the Borrower was performing on a HAMP Trial Period Plan at the time of the disaster but the Borrower's financial circumstances have adversely changed (e.g., the Borrower's income is less than it was at the time of the pre-forbearance Trial Period Plan evaluation), then the Servicer must obtain an updated Borrower Response Package from the Borrower and re-evaluate the Borrower for all alternatives to foreclosure in accordance with the evaluation hierarchy set forth in Section 9201.2
  • If the Borrower was performing on a Freddie Mac Flex Modification at the time of the Eligible Disaster, the Servicer must make a new streamlined offer to the Borrower for a Flex Modification Trial Period Plan meeting the requirements of Section 9206.5

Regardless of the Borrower's financial circumstances, the Borrower must complete a new three-month Trial Period Plan that begins immediately following the forbearance plan in order to be eligible for a permanent modification.