Freddie Mac is in the final stages of changing how its 1,400 mortgage servicing companies handle its loans, and will implement a new scorecard measuring their performance. Furthermore, the government-sponsored enterprise is announcing that it will case review the way servicers treat delinquent borrowers, in order to ensure quality control. Executives unveiled the plan at the Mortgage Bankers Association Servicing Conference & Expo in Grapevine, Texas, Wednesday. Mortgage servicing is under considerable scrutiny ever since processing problems arose during the last two quarters of 2010, sparking investigations from federal regulators and the attorneys general from all 50 states. The Federal Housing Finance Agency announced in January that the government is working with the industry to develop a new national mortgage servicing standard, which will change the way fees are structured and how delinquent loans are treated. In June, Freddie executives began planning changes to how they oversee their servicers. They have begun piloting new programs for how the government-sponsored enterprise assigns loans to these companies and are implementing new technology. A borrower call center has been established where homeowners can contact Freddie employees to put them in touch with their particular mortgage servicer and a new Web-based portal, through which Freddie will communicate with those servicers, will replace antiquated modems and legacy systems. “We want to enable the servicers’ success,” said Anthony Renzi, the executive vice president of Freddie’s single-family portfolio management. “They’ve been getting lost lately.” One of the biggest changes will be a new scorecard put in place that will give the new Freddie Mac team a chance to evaluate these companies. The system is in the final stages of development, and Freddie will begin testing in the second quarter for implementation in the third quarter of 2011. Starting then, servicers will be graded on how they apply loss mitigation efforts on these loans, when and how often they contact borrowers in the delinquency or on the verge of it. But the biggest implementation will be what Renzi called a “game tape.” Freddie will take a sample of a mortgage servicer’s loans and review every step that servicer took in every stage of delinquency through whatever loss mitigation solution comes out of it or foreclosure. This scorecard and review will determine incentives and punishments, in the form of fines or reduced business. “We will be setting goals and objectives that will preserve homeownership and preserve taxpayer dollars,” Renzi said. Currently, it takes 450 days on average for a Freddie Mac servicer to foreclose on a property. In states with a judicial process, the timeline is 100 to 150 days longer. Renzi said the amount of REO and foreclosures will continue peaking through 2011, but most of those loans went delinquent in 2008 and 2009 and could be the “tail end of the pig in the python.” In addition to the new oversight, Freddie is putting in other pilots to treat these loans. These include a new “ownership structure” for select servicers. Over the last 90 days, Freddie has been establishing single point of contacts at these servicing shops, capping the amount of loans a single employee handles at 200 per person. Renzi summed up Freddie’s efforts and how the changes will affect the servicing of these loans in the future. “We’re moving servicing from the conveyor belt model to a more ownership structure for these servicers,” Renzi said. Write to Jon Prior. Follow him on Twitter: @JonAPrior

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