Disaster Relief

Getting Started

Freddie Mac is committed to providing assistance to borrowers – especially when their homes have been impacted by disaster-related events. We're prepared to quickly respond with effective relief measures to help borrowers and provide guidance for Sellers and Servicers in the aftermath of a disaster.

When a borrower is impacted by a natural or man-made disaster, your goals are to:

• Assist the borrower in addressing the disaster and their situation.
• Understand the extent of the damage while remaining empathetic toward their state of mind and situation.
• Identify and provide the best and most appropriate relief options to resolve any delinquency resulting from the situation.

Determining Eligibility

An eligible disaster is a disaster, either man-made or natural, which results in an area being designated as an Eligible Disaster Area. The following qualifications must be met:

• A financial hardship (e.g., a loss/reduction of income or increase in expenses) that impacts the borrower’s ability to pay his or her current contractual monthly payment
• One of the following:
  • The property securing the mortgage loan experienced an insured loss.
  • The property securing the mortgage loan is located in a Federal Emergency Management Agency (FEMA)-Declared Disaster Area eligible for individual assistance.
  • The borrower’s place of employment is located in a FEMA-Declared Disaster Area eligible for individual assistance.

Make Contact

As is the case of any delinquency, in a disaster, it’s important to establish contact with the borrower, co-borrower or trusted advisor as soon as possible following an eligible disaster to begin presenting them with options that may be appropriate to protect their mortgage. This is known as Quality Right Party Contact (QRPC).

Standard steps to achieve QRPC can be found in Single-Family Seller/Servicer Guide (Guide) Section 9102.3: Establishing Borrower Contact During Delinquency).

If you are able to make contact:
Determine the number of properties and extent of the damage and take the borrower through the next steps you will perform:

• Make sure the property is secure.
• Monitor and coordinate the insurance claim process and repairs.
• Help the borrower access local, state or federal disaster aid.

For details, see Section 8404.2: Property Protection Activities Following a Disaster.

If you are not able to make contact:
If you can't get in contact with the borrower, you may need to place the borrower into a forbearance plan; see the forbearance section below.

If there is any risk of ownership:
If you determine that the disaster has affected the borrower’s home and may pose a danger to either the borrower’s or Freddie Mac’s ownership of the property, see Section 9202.5 Risk of Property Ownership and accordingly:

• Notify Freddie Mac within five (5) business days of learning about the situation.
• Attach copies of the most recent six (6) consecutive months (or less, depending on level of delinquency) of Form 1013, 1-4 Unit Property Inspection Report and any other relevant information.

Property Inspections

A property inspection is not required in all cases, but it's required if you can't determine the status of the property through borrower contact.

If the status of the property can't be determined based on QRPC, we require, at minimum, an exterior property inspection to assess whether the property has been impacted by the disaster. You may only complete an interior property inspection if you have identified that the property is abandoned or if the interior inspection is required under our insurance loss settlement requirements. These requirements are for all Freddie Mac owned or guaranteed mortgages in eligible disaster areas, regardless of delinquency status. See Section 8404.2: Property protection activities following a disaster.

The property inspector should use Form 1013: 1-4 Unit Property Inspection Report or equivalent to document the results.

Remember that inspection costs may not be reimbursable if the inspection doesn't meet requirements. See Section 9701.9: Reimbursement for Property Inspection and Property Preservation Expenses.

Handling Insurance Claims

Upon notification of loss or damage to a mortgaged property, the Servicer is responsible for monitoring and coordinating the insurance claims process. As detailed in Section 8202.11: Insurance loss settlements, this includes:

• General coordination and facilitation between the borrower and insurer.
• Reporting damages as needed (see Section 8202.11 (b) Reporting damage for qualifications).
• Disbursing loss proceeds without delay but according to specific guidelines (see Section 8202.11 (c) Disbursing loss proceeds).
• Overseeing repair or reconstruction of the mortgaged premises (see Section 8202.11(d)) and ensuring final inspection meets requirements (as found in Section 8202.11(e).

Reporting Delinquency Due to a Disaster

Since delinquency due to a disaster is distinct from a typical delinquency, you must report the status according to Section 8404.5: Disaster Reporting Requirements, which includes:

• Credit agencies
  • Report to credit bureaus according to Section 8101.6, the Fair Credit Reporting Act (FCRA) and any updated guidelines.
• Freddie Mac
  • Report all mortgages affected by a disaster (that are 31 or more days delinquent) via Electronic Default Reporting (EDR) transmission using default reason code 034 (Eligible Disaster Area). See Section 8404.5 for timing requirements.
  • The borrower’s place of employment is located in a FEMA-Declared Disaster Area eligible for Individual Assistance.
• Forbearance or repayment plans to Freddie Mac
  • Report all mortgages subject to forbearance or repayment plan resulting from disaster-caused hardship via EDR, using default code 09 for forbearance or default code 12 for a repayment plan. See Section 8404.5 for timing requirements. Refer to Chapter 9203 for more details.

See EDR Quick Reference Guide and for default codes as well as Exhibit 82: EDR Transmission Code List.

Relief Options

Helping a borrower find the right relief option for them based on their situation is a crucial aspect of managing disaster-related delinquencies. The first step is determining whether relief is required.

If relief is needed, a detailed discussion of available options should follow. This includes:

• Forbearance
• Reinstatement
• Repayment plan
• Disaster payment deferral
• Flex Modification^®
• Short sale
• Deed-in-lieu of foreclosure

For details on how to approach loss mitigation strategies with Freddie Mac, refer to Guide Section 9201.2: Freddie Mac Loss Mitigation Evaluation Hierarchy.

Forbearance

When a disaster occurs, a borrower may need to be placed into a forbearance plan which allows the borrower to make either reduced or no monthly payments for a specific period of time. See Guide Section 8404.4: Delinquency Management Activities Following a Disaster for details.

Disaster Payment Deferral

At the end of a disaster-related forbearance period, if the hardship has been resolved and the eligible borrower is able to resume making payments but unable to afford a reinstatement or repayment plan, you may offer a disaster payment deferral.

See 9203.26 Disaster Payment Deferral for details and requirements, and our guide to Payment Deferral for more information.

Flex Modification^®

After forbearance, if an eligible borrower is no longer able to make their monthly payments due to a disaster, a Flex Modification may be a solution. The goal of a Flex Modification is to achieve a 20% reduction in the monthly payment. A Flex Modification may extend the term out to as many as 40 years.

Flex Modification begins with a Trial Period Plan where the borrower must complete three reduced monthly payments during forbearance to prove their ability to make these payments on a longer basis.

On May 29, 2024, Bulletin 2024-E announced updates to the Freddie Mac Flex Modification requirements, with the goal of expanding the eligible population while achieving more equitable payment relief outcomes across all modifications. While Servicers must begin evaluating eligible borrowers for the updated Flex Modification on or after December 1, 2024, we encourage Servicers to begin implementation as early as November 1, 2024.

See Section 9206.10: Determining the Terms of a Freddie Mac Flex Modification.

Data Entry

Resolve^® is used to identify workout options and submit the information to Freddie Mac.