Freddie Mac's Disaster Relief Policies

(Updated October 6, 2006)

As many of us have witnessed, disasters can dramatically affect the lives of borrowers by damaging their homes, property and places of employment. Fully aware of these serious effects, Freddie Mac is prepared to respond quickly with effective relief measures and guidance to help borrowers and lenders through the aftermath when a major disaster strikes.

When the President of the United States issues a Major Disaster Declaration for a designated area, every Freddie Mac Seller or Servicer who conducts business in that area can immediately use the tools and guidelines provided in our Single-Family Seller/Servicer Guide (the Guide) to provide mortgage relief to help disaster victims protect their credit ratings and financial interests in their homes.

Here's what to do when disaster strikes:

• Identify which specific areas are included in the Major Disaster Declaration. For a list of the communities included in the designated area, including start and end dates for each applicable incident period, check the Federal Emergency Management Agency's (FEMA) website at www.fema.gov.
• Check for special Freddie Mac announcements. Following a disaster, Freddie Mac may make special announcements through press releases, Industry Letters and Guide Bulletins. (For example, because of the extreme and widespread devastation from Hurricanes Katrina and Rita in 2005, we enacted special temporary relief policies for properties impacted by these storms.)
• Consult the Guide's disaster policies. Guide Chapter 68 outlines specific servicing requirements plus options Servicers can consider when dealing with natural and/or man-made disasters. Some of these options include a short-term suspension of collection, foreclosure and eviction proceedings so borrowers can obtain disaster relief and file insurance claims.
  
  Exhibit 52 of the Guide has detailed information regarding FEMA, Small Business Administration (SBA), and Federal Housing Administration (FHA) assistance programs for residents of areas designated in a Major Disaster Declaration. These assistance programs are designed to supplement state or local aid that may be offered. Exhibit 52 also includes useful phone numbers to these and other disaster relief agencies.
  
  Servicers can find educational information on managing distressed properties at FreddieMac.com/learn/service.
• Property damage may affect the acceptability of properties as security for mortgages that Sellers planned to sell to Freddie Mac, or were in the process of delivering when the disaster occurred. Sellers should determine the condition of each property and the degree of any damage to minimize their risk of future liability arising from a warranty violation. Sellers can find information about circumstances that adversely affect the value of a mortgage, including condemnation, in Guide Section 22.20.
  
  Sellers should also review Guide Section 44.2(b) requiring Sellers to warrant that improvements must be undamaged by fire, windstorm and other perils. The requirements apply to all mortgages, including Loan Prospector® Mortgages that have received minimum assessment feedback such as No Appraisal MAF.
  
  Sellers should contact their Freddie Mac Account Manager to get specific guidance on how to proceed with mortgages secured by properties located in disaster-impacted areas that they intend to sell or have already delivered to Freddie Mac.

We are proud and appreciative of our Sellers' and Servicers' disaster-assistance work. Freddie Mac strongly encourages all Sellers and Servicers to extend the highest level of understanding and respect to borrowers coping with hardships related to a disaster, being ever mindful of preserving borrowers' credit reputations.