Freddie Mac Announces Standard Deed-in-Lieu of Foreclosure

Foreclosure Mortgage Servicing

On November 15, Freddie Mac announced the new Freddie Mac Standard Deed-in-Lieu of Foreclosure (DIL), which is designed to serve as a workout option for borrowers for whom neither a home retention alternative to foreclosure nor a Freddie Mac Standard Short Sale is a workable solution. As described in Freddie Mac Bulletin 2012-27, effective for new DIL evaluations conducted on or after March 1, 2013, mortgage servicers will have delegated authority to approve a DIL that meets all Freddie Mac requirements for eligible borrowers who: (i) are 90 or more days delinquent, (ii) are current or less than 90 days delinquent but meet certain hardship criteria, or (iii) do not have an eligible hardship but were previously discharged from the debt obligations in a Chapter 7 bankruptcy. Also effective for new DIL evaluations conducted on or after March 1, 2013, Freddie Mac will offer mortgage servicers a $1,500 incentive for each DIL completed in accordance with Freddie Mac requirements, an increase from the current $275 incentive. Further, effective immediately, mortgage servicers have the authority to postpone any foreclosure sale for mortgages that are more than 12 months delinquent without obtaining Freddie Mac’s prior approval, provided the servicers have determined that doing so will protect Freddie Mac’s interests. The new Standard DIL was developed as part of the Servicing Alignment Initiative and completed under the direction of the Federal Housing Finance Agency.