Freddie Mac Single-Family Seller/Servicer Guide 9401.3 — Servicing bankruptcy counsel and other Servicing requirements

Freddie Mac Single-Family Seller/Servicer Guide 9401.3 — Servicing bankruptcy counsel and other Servicing requirements

Effective 2025-09-10 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Servicing bankruptcies on Mortgages secured by income-producing properties ■ Selecting bankruptcy counsel, bankruptcy referrals and the Servicer’s responsibility to work with bankruptcy counsel (a) Servicing bankruptcies on Mortgages secured by income-producing properties If a Borrower on a Mortgage secured by income-producing property files a bankruptcy petition and Freddie Mac has an assignment of rents, the Servicer must take action to prohibit the Borrower from using any income from the property for any purpose other than making payments on the Mortgage by instructing counsel to: ■ File a motion for sequestration of rental income, or ■ Obtain an adequate protection order Freddie Mac Single-Family Seller/Service Guide (b) Selecting bankruptcy counsel, bankruptcy referrals and the Servicer’s responsibility to work with bankruptcy counsel (i) Selecting bankruptcy counsel For requirements applicable to Freddie Mac Default Legal Matters, which include bankruptcy matters, refer to Chapter 9501. (ii) Bankruptcy referrals If the Borrower is referred to foreclosure after the bankruptcy referral, the Servicer is not required to refer the foreclosure to the same law firm that handled the bankruptcy matter. However, the Servicer should give preference to the law firm that handled the bankruptcy matter if the Servicer determines it is in Freddie Mac’s best interest. If the Borrower is in foreclosure at the time of the bankruptcy referral or files a bankruptcy petition after the foreclosure sale (see Section 9401.2(c) regarding managing bankruptcy filings after a foreclosure sale), the Servicer is not required to refer the bankruptcy case to the same law firm handling the foreclosure. However, the Servicer should give preference to the law firm handling the foreclosure if the Servicer determines it is in Freddie Mac’s best interest. If the Servicer does not refer the bankruptcy case to the law firm handling the foreclosure, then the Servicer must ensure that it periodically updates the foreclosure counsel regarding the status of the bankruptcy matter. Once the bankruptcy matter is resolved, the Servicer is responsible for transitioning the foreclosure back to the law firm handling the foreclosure for any further required proceedings immediately upon release of bankruptcy but no later than one Business Day after the resolution of the bankruptcy matter. When referring a bankruptcy case to counsel, the Servicer must provide all documentation and/or information required to handle the bankruptcy matter and work with the bankruptcy attorney to facilitate either timely reinstatement or relief from the automatic stay. (iii)Servicer’s responsibility to work with bankruptcy counsel When the Servicer refers a bankruptcy case to counsel, the Servicer must provide complete written reinstatement or payoff figures to the attorney, trustee, workout specialist or outsourcing vendor, as applicable, at the time of referral unless the Borrower is in foreclosure at the time of the bankruptcy referral and the Servicer refers the bankruptcy case to the law firm handling the foreclosure. Also, the Servicer must respond to any additional requests for reinstatement and/or payoff figures after referral within two Business Days of the date on which the Servicer receives a written request. The Servicer Freddie Mac Single-Family Seller/Service Guide may provide the written reinstatement or payoff figures via a paper document, facsimile or e-mail. If the bankruptcy counsel requests any additional information and/or documentation at any time, the Servicer must provide such requested information and/or documents within three Business Days after receipt of the request or such earlier time frame if necessary to comply with timing requirements under applicable law or court orders and procedures. A Servicer must maintain communication with the bankruptcy attorney so that the Servicer can manage the bankruptcy case effectively. No less than one time per month, the Servicer must require the bankruptcy attorney to report the status of the case, request any documentation needed from the Servicer and report any relevant information to the Servicer. The Servicer must maintain this information in the Mortgage file or on its Mortgage system.

Source: Freddie Mac Single-Family Seller/Servicer Guide 9401.3 — Servicing bankruptcy counsel and other Servicing requirements · source URL · snapshot 4c94f67729042dd6