Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 57

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 15
Chunk 57
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 discover that the representations or warranties related to a loan were breached (i.e., that contractual standards were not followed), we can exercise certain contractual remedies to mitigate our actual or potential credit losses. These contractual remedies may include, but are not limited to, the ability to require the seller or servicer to repurchase the loan at its current UPB, reimburse us for losses realized with respect to the loan after consideration of any other recoveries, and/or indemnify us. Our current remedies framework provides for the categorization of loan origination defects for loans with settlement dates on or after January 1, 2016. Among other items, the framework provides that "significant defects" may result in a repurchase request or a repurchase alternative, such as recourse or indemnification. We implemented a pilot program in 2024 that provides participating sellers with a fee-based alternative to performing loan repurchases. The pilot program continues to maintain the protections related to delinquent loans outlined in the selling and servicing representation and warranty framework for mortgage loans.

Under our current selling and servicing representation and warranty framework for our mortgage loans, we relieve sellers of repurchase obligations for breaches of certain selling representations and warranties for certain types of loans, including:

n    Loans that have established an acceptable payment history for 36 months (12 months for relief refinance loans) of consecutive, on-time payments after purchase, subject to certain exclusions and

n    Loans that have satisfactorily completed a quality control review.

Solely for the purpose of determining whether the acceptable payment history requirements are met, payments due during the COVID-19-related forbearance period are considered to have been made on time, provided that the mortgage was reported by the servicer as having entered into a COVID-19-related forbearance plan between March 13, 2020 and October 31, 2023 and met certain other criteria as described in our Guide.

An independent dispute resolution process for alleged breaches of selling or servicing representations and warranties on our loans allows for a neutral third party to render a decision on demands that remain unresolved after the existing appeal and escalation processes have been exhausted.

Quality Control Practices

We employ a quality control process to review underwriting documentation and decision-making for compliance with our standards using both statistical random and targeted sampling. Pursuant to Guide requirements, we initiate these sampling reviews to timely identify breaches of representations and warranties. Sellers may appeal our ineligible loan determination.

We also perform quality control reviews on loans that have defaulted and have not obtained representation and warranty