Fannie Mae & Freddie Mac : New Independent Dispute Resolution

Posted by Kevin Ryan | Mar 18, 2016 | 0 Comments

Posted on WestlawNext (Copyright Thompson Reuters) Practical Law: posted for information purposes only.
On February 2, 2016, Freddie Mac and Fannie Mae concurrently released statements outlining a new process for the independent dispute resolution (IDR) of seller representation and warranty disputes. This new IDR process allows an independent third party to resolve the small number of disputes that remain unresolved after the current appeals processes are completed. This new system intends to help mortgage servicers effectively manage risks and ease concerns over the mortgage repurchase process.

Existing Appeals Process

The current Government Sponsored Enterprises' (GSE) quality control and appeals process will remain in place. The first step in that process is for Freddie Mac to issue a demand for repurchase or other remedy to a servicer after identifying a significant defect. The servicer can then, within preset time limits, either:
  • Correct the defect.
  • Appeal the demand.
If the dispute is still not resolved, there is a second opportunity for the servicer to either:
  • Appeal.
  • Rebut.
  • Provide evidence that the defect either:
    • does not exist; or
    • has been corrected.
For the small number of mortgages that are still not resolved, there is another opportunity to resolve the dispute through an escalation process. If, after all of these steps, the dispute is still not resolved, the new IDR process is the new final step.

IDR Process

The IDR process involves several key procedural features, which include:
  • Timelines for:
    • commencing the IDR process;
    • selecting an arbitrator; and
    • conducting conference calls.
  • A telephone or video conference hearing with the arbitrator and representatives from both the servicer and Freddie Mac.
  • The ability to create a collective proceeding for a group of mortgages engaged in similar disputes, if agreed to by the servicer and Freddie Mac.
The arbitrator makes the final determination as to whether a defect existed when the IDR commenced. The arbiter's written award is final, binding, and enforceable.

Eligible Participants

The new IDR process is available to all servicers and sellers except those that:
  • Have been suspended, disqualified, terminated, or are otherwise ineligible to participate.
  • Failed to timely comply with:
    • an IDR awarded for any mortgage that went through the IDR process; or
    • any requested remedy after the expiration of the time limit for challenging the remedy request through the appeals and escalation processes.
  • Have any past due outstanding amount due to the IDR administrator.

Practical Implications

Although it is not expected that this process will be frequently used, the new IDR process introduces a way to resolve disputes involving origination defects in a more cost effective and timely manner than the more drawn out and expensive litigation process. This should come as welcome news to both Freddie Mac and mortgage servicers, who can now more effectively manage risk.

About the Author

Kevin Ryan

"I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. And I'll make them go away."  -Kevin Ryan, Attorney at Law Kevin Ryan is a graduate of the College of Wooster and the Cleveland Marshall College of Law. He is admitted to practice before all Alabama State Courts, the United States District Court for the Southern District of Alabama, and the United States Bankruptcy Court for the Southern District of Alabama. The United States Bankruptcy Court is a part of the United States District Court. Since 1998, Mr. Ryan has represented thousands of individual clients in bankruptcy, criminal, divorce, probate, personal injury, and real estate matters.  Attorney Ryan is also a licensed real estate agent in Alabama.  He handles  Bank-owned properties, short sales, and conventional sales in addition to conventional real estate listings.   This wide range of experience enables Attorney Ryan to take a wider look at your legal matter. It is important to consult with an attorney who can see from experience how other legal issues may affect your situation, and advise you accordingly. Personal Info Kevin Ryan is a member of First Baptist Church in Silverhill, Alabama. He resides in Silverhill with his wife Jessica and their three children. Committed to helping our Clients achieve a fresh financial start Our practice focuses primarily on consumer bankruptcy matters under Chapter 7 and Chapter 13 of the United States Bankruptcy Code.  Our law practice also includes matters where bankruptcy litigation, appellate work, or involvement in civil lawsuits is needed by a client.     No representation is made that the quality of any of these legal services is of higher quality than another attorney or law firm.   The United States Bankruptcy Code requires the following notice:  We are a Debt Relief Agency, which means we help people get legal relief from their Debts through the bankruptcy process. Interested in learning more about our bankruptcy attorney near Mobile, Alabama? Contact Us for help with chapter 7 bankruptcy or chapter 13 bankruptcy in Mobile, Baldwin and Washington counties. Education Juris Doctor, Cleveland Marshall College of Law, 1997 Employed full time as a paralegal while attending law school in the evenings. B.A., The College of Wooster, 1994 NCAA Div.III All Conference (N.C.A.C.) Football Team : Defense 1993; Most Inspirational Senior Award 1993; Co-captain 1993; Letterman 1991-1993; Phi Sigma Alapha Fraternity 1991-1994; Athletic Director Jurisdictions Admitted to Practice Alabama


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I'll BE there for you.

I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. - Kevin Ryan, Attorney at Law