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Representation and Warranty Framework FAQ

The selling representation and warranty framework introduced in 2012, and enhanced in 2014, helps address Sellers concerns around loan repurchase risk.

Under the framework, Freddie Mac will not exercise its remedies, including the issuance of a repurchase request, for breaches of certain selling representations and warranties if a mortgage meets certain eligibility criteria. 

The following Q&As provide supplement information about the representation and warranty framework.

Implementation

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  1. If a mortgage undergoes a quality control (QC) review and as a result of such QC review is granted a repurchase alternative, such as five year credit enhancement, when will the mortgage be eligible for representation and warranty relief?

    The mortgage would be eligible for relief upon the date of expiration of the credit enhancement, regardless of whether the acceptable payment history requirements are satisfied. In this example, the relief would be granted at the end of the five-year period.

  2. If Freddie Mac granted representation and warranty relief, but the mortgage insurance (MI) was later rescinded, does the relief that was granted still apply?

    MI is not one of the items covered under Guide Section 1301.11 as eligible for representation and warranty relief. As a result, if the MI is rescinded, the mortgage could be subject to a repurchase request or if certain requirements are met, Sellers may be eligible for MI stand-in as an alternative to repurchase.

  3. Is a mortgage subject to a forbearance agreement eligible for representation and warranty relief?

    It may not be eligible for relief based on an acceptable payment history, but it could be eligible based on a satisfactory conclusion of a Freddie Mac QC review.

  4. If a mortgage was granted relief based on an acceptable borrower payment history but was subsequently called in for a QC review and was determined to be not acceptable, does the relief still apply?

    Yes, however, the loan may be subject to a repurchase request for a breach of one of the life-of-loan representations and warranties, as outlined in Guide Section 1301.11(c).

  5. If a loan is granted relief based on a satisfactory conclusion of a QC review, but the borrower later becomes delinquent, does the relief still apply?

    Yes, however, the loan may be subject to a repurchase request for a breach of one of the life-of-loan representations and warranties, as outlined in Guide Section 1301.11(c).

Quality Control Practices

  1. Where can I learn more about the QC process?

    QC timelines and enforcement processes in support of the representation and warranty framework were announced in Guide Bulletin 2012-22 and outlined in our October 19, 2012, Industry Letter. To address alleged loan-level breaches of selling representations or warranties that remain unresolved after existing appeals and escalation processes have been exhausted, you can use the updated Independent Dispute Resolution (IDR) process, as announced in Guide Bulletin 2016-14.

Repurchase Alternatives

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  1. If the MI was rescinded and have "MI stand-in" as an alternative to repurchase, what happens to the MI premium?

    You will need to reach out to your mortgage insurer to determine what their process is.

  2. Is MI stand-in an available repurchase alternative when the primary MI was cancelled or terminated?

    Under the selling representation and warranty framework, MI stand-in is an available repurchase alternative only when primary MI is rescinded.

  3. I received a repurchase request, but would like to see if the mortgage is eligible for a repurchase alternative. Who do I contact to find out if this is an option?

    Please contact your Freddie Mac Remedy Underwriter to determine if the mortgage(s) are eligible for an alternative remedy.