9401.6: Managing new bankruptcy filings (10/12/16)

Owned by Kacey Olson (Unlicensed)
Nov 24, 2018
2 min read

© Freddie Mac Single-Family Seller Servicer Guide

(a) For Mortgages current at the time of filing If a Borrower is current in his or her Mortgage payments at the time the Borrower files a Chapter 7, 12 or 13 bankruptcy petition, the Servicer is not required to refer the matter to counsel and Freddie Mac will not reimburse the Servicer if the Servicer does so. If the Servicer determines that special circumstances exist that require case management by counsel on a current Mortgage (for example, if the Servicer receives a proposed reorganization plan that includes a bankruptcy cramdown), then the Servicer must obtain Freddie Mac's prior written approval via e-mail (see Directory 5) to obtain counsel and to incur the legal expense by submitting a request for pre-approval via the Freddie Mac Reimbursement System. All Chapter 11 bankruptcy cases must be referred to counsel as soon as the Servicer receives notice that the Borrower has filed for bankruptcy protection, regardless of whether the Mortgage payments are current. If applicable, refer to Section 9401.7 for requirements related to managing Mortgages that become delinquent subsequent to bankruptcy filing.

(b) For Mortgages delinquent at the time of filing, or for bankruptcy filings after a foreclosure sale The Servicer must refer the bankruptcy to counsel, whether a Chapter 7, 11, 12 or 13 bankruptcy petition, within three Business Days of the Servicer's receipt of notice that a petition has been filed if:

  1. The Borrower is at least 30 days delinquent in his or her Mortgage payments at the time bankruptcy is filed
  2. The Borrower files a bankruptcy petition after the foreclosure sale and the bankruptcy filing invalidates the foreclosure sale. (See Section 9301.39 for requirements on requesting a rollback if the Servicer determines that the foreclosure sale is legally invalid or void.)
  3. The Borrower files a bankruptcy petition after the foreclosure sale but prior to the expiration of a redemption, confirmation or ratification period. (See Section 9301.39 regarding circumstances where it may be in Freddie Mac's best interest to process a rollback to allow the Servicer to report applicable information relating to a bankruptcy repayment plan, if applicable.)

Freddie Mac will reimburse the Servicer for expenses the Servicer incurs in accordance with Section 9401.11 and Chapter 9701.

The Servicer must instruct counsel to file a motion for relief from the automatic stay:

  1. In a Chapter 7 case:
  • If the Borrower is at least 60 days delinquent in his or her Mortgage payments at the time of filing, at the same time the Servicer refers the case to counsel
  • If the Borrower is less than 60 days delinquent in his or her Mortgage payments at the time of filing, no later than the 60thday of Delinquency

      2. In a Chapter 11, 12, or 13 case, when the Borrower misses his or her second post-petition and/or plan payment to either the Servicer or the trustee