Selling: Disaster Relief Policies FAQ
If I have a loan in process or a closed loan not yet delivered to Freddie Mac and a disaster occurs, is the mortgage eligible for sale to Freddie Mac?
It depends. If the property has sustained minor damage that did not impact the safety, soundness, or structural integrity of the mortgaged premises, the Seller may deliver the mortgage if the Seller ensures all damage is documented and covered by insurance as required by Guide Chapter 4703 prior to delivery to Freddie Mac.
If the property damage impacts the safety, soundness, or structural integrity of the mortgaged premises, the property is not eligible as security for the mortgage. In this case, the mortgage is not eligible for sale to Freddie Mac until all repairs to the property are completed and documented.
Additionally, in either instance the Seller must be able to represent and warrant that the value and marketability of the property have not been adversely affected.
What documentation is necessary to determine the eligibility of a mortgage following a disaster?
Freddie Mac does not prescribe what type of documentation is required to verify the eligibility of a mortgage after a disaster. We recommend that the Seller’s policies and procedures include documentation requirements sufficient for the Seller to represent and warrant the acceptability of the mortgaged premises and eligibility of the mortgage for sale.
Are there special delivery requirements for Mortgages utilizing documentation flexibilities that are secured by properties located in Eligible Disaster Areas?
Yes, Sellers must deliver ULDD Data Point Investor Feature Identifier “H37” in accordance with Guide Section 6302.44(b).
Is the Seller required to establish an escrow account when the property damage is minor but the property requires repairs?
No, an escrow account is not required. However, the Seller must ensure all damage is documented and covered by insurance as required in Guide Chapter 4703.
Does Freddie Mac offer any flexibilities related to age of documentation for mortgages impacted by a disaster?
Yes. When the Federal Emergency Management Agency announces disaster areas that the President of the United States has declared to be eligible for federal aid in the form of individual assistance, Freddie Mac will permit an additional 60 days for age of documentation including property valuation and credit and capacity underwriting documentation. Sellers are required to deliver the Investor Feature Identifier “H37” code in order to use this age of documentation flexibility.
If Loan Product Advisor® automatically pulls new credit on Mortgages that are submitted or resubmitted 120 days or more after the date of the initial/current credit report, how can the age of documentation flexibility be extended to credit reports?
The age of the credit report flexibility can only be used if circumstances exist such that a resubmission to Loan Product Advisor, after the 120-day window, is not necessary. In the event a resubmission is required after 120 days, Loan Product Advisor will automatically pull a new credit report that will be used to assess the borrower(s).
Will Freddie Mac suspend ACE appraisal waiver eligibility and appraised value representation and warranty relief in areas impacted by disasters?
It depends. Freddie Mac may decide to systematically suspend ACE appraisal waiver eligibility and appraised value representation and warranty relief on new Loan Product Advisor or Loan Collateral Advisor® submissions following a disaster, depending on its size and impact. Should such a suspension occur, Freddie Mac will notify Sellers through a Single-Family Seller/Servicer Guide (Guide) Bulletin announcement.Should Freddie Mac decide to not suspend our ACE appraisal waiver eligibility or appraised value representation and warranty relief, Sellers must have policies and procedures in place to assess whether there have been any adverse impacts to the Mortgaged Premises to ensure eligibility prior to delivery to Freddie Mac.
May I accept an ACE appraisal waiver offer if my property is located in a disaster area?
Yes. Sellers may accept an ACE appraisal waiver offer received prior to or following a disaster if they can represent and warrant the value and marketability of the mortgaged premises has not been adversely impacted. Guide Section 4407.1 provides the requirements and flexibilities when the property condition has been impacted.
Does Freddie Mac provide appraised value representation and warranty relief through Loan Collateral Advisor if the property securing the mortgage is located in a disaster area?
Yes, unless there are circumstances or conditions involving the mortgaged premises that would adversely affect the value or marketability of the mortgage. See Guide Section 5602 for ACE appraisal waiver and Loan Collateral Advisor collateral representation and warranty relief eligibility requirements.
Originally Published: December 2019Last Updated: 07/12/2022