Freddie Mac is an outlier among the three primary secondary market investors with its mid-month investor reporting cycle. In an effort to standardize the marketplace, Freddie Mac is joining Fannie Mae and Ginnie Mae by shifting its investor reporting cycle to the beginning of each month. In this regard, Freddie Mac is implementing the following changes: (i) the investor reporting cycle will run from the first day of each calendar month to the last day of such month; (ii) Freddie Mac is encouraging daily loan-level reporting, with reporting of at least one loan level-transaction detailing activity submitted no later than the 15th calendar day of each month (or next business day) (the “P&I Determination Date”); (iii) servicers will report the actual principal received and the forecasted scheduled interest based on unpaid principal balance reported at the end of the current one-month period; (iv) Freddie Mac will draft principal and interest from the servicer’s custodial account two business days after the P&I Determination Date; (v) on the fifth business day following a payoff, Freddie Mac will draft payoff proceeds, provided such payoff was reported within two business days of the payoff date, subject to certain requirements; and (vi) Freddie Mac will process and settle loan modifications on a daily basis.
Freddie Mac has released several bulletins outlining the transition (2016-15, 2017-4, 2017-15, and 2018-14), summarized in the following timeline:
- There is a moratorium on servicing transfers during the months of May and June, 2019. The final date available for a servicing transfer under the current system is April 16, 2019. (Note that concurrent transfers and loans sold servicing-released are not affected.)
- Servicing transfers will resume under the new system on July 1, 2019.
- Between April 16 and April 30, 2019, servicers should continue to report loan level transactions in accordance with the current existing accounting cycle, interest calculations and investor reporting requirements, and remit principal and interest and payoff proceeds to Freddie Mac in accordance with the current applicable remittance process.
- Between May 1 and May 15, 2019, servicers should report payoffs to Freddie Mac, but should not report other loan level transactions.
- On May 13, 2019, Freddie Mac will begin accepting requests for servicing transfers with an effective date on or after July 1, 2019. All future requests must be submitted at least forty-five days but not more than sixty days prior to the requested effective date of the transfer, which must be the first day of the month.
- Between May 14 and June 2, 2019, Freddie Mac will not process any loan modification updates. Beginning on June 3, 2019, Freddie Mac will process loan modifications daily.
- Between May 16 and May 20, 2019, servicers should report principal and interest payments and non-payment activity for each loan in accordance with current investor reporting requirements. Servicers must remit any principal and interest payments reported to Freddie Mac during this time by 4:00 p.m. ET on May 20, 2019, less any adjustments. If a payment is received on a newly funded mortgage, the servicer should report the principal collected.
- Beginning May 21, 2019, servicers should begin loan level reporting in accordance with the new investor reporting requirements and timeline. If a payment is received on a newly funded mortgage, the servicer should report the principal and the forecasted scheduled interest.
- By June 3, 2019, servicers must clear any edits to previously reported activity.
These changes in Freddie Mac’s reporting cycle will simplify reporting to Freddie Mac and will largely align with Fannie Mae and Ginnie Mae reporting requirements. These changes have the added benefit of standardizing transfer dates in the mortgage servicing rights market, and pave the way for the anticipated “Single Security” initiative of Fannie Mae and Freddie Mac (the joint Fannie Mae and Freddie Mac initiative to develop a single mortgage-backed security for issuance by both to finance fixed-rate mortgage loans backed by one- to four-unit single-family properties).