Flex Modification ®

A Flex Modification ® is a loss mitigation solution designed to resolve delinquencies and help homeowners remain in their homes. When a borrower is experiencing a hardship that resulted in a permanent or long term decrease in income or increase in expenses, you may evaluate that borrower for a Flex Modification.

A Flex Modification is a written agreement that the Servicer enters into with the borrower that permanently changes one or more of the original terms of the note, such as:

1. An increase in the amount of the unpaid principal balance (UPB) caused by capitalization of interest or non-interest arrearages, escrow advances and/or other advances.
2. A change in the note rate.
3. A change in the monthly payment.
4. A change in the maturity date.
5. A forbearance of a portion of the principal balance (no write-off or permanent reduction of the UPB, delinquent interest or other non-interest arrearages of the mortgage is allowed).
6. Change in the product type (e.g., an adjustable-rate mortgage (ARM) to a fixed-rate mortgage).

On May 29, 2024, Single-Family Seller/Servicer Guide (Guide) Bulletin 2024-E announced updates to the Freddie Mac Flex Modification requirements, with the goal of expanding the eligible population while achieving more equitable payment relief outcomes across all modifications. While Servicers must begin evaluating eligible borrowers for the updated Flex Modification on or after December 1, 2024, we encourage Servicers to begin implementation as early as November 1, 2024.

Eligibility Criteria

The Servicer must ensure that the (a) borrower (b) property and (c) mortgage eligibility requirements are met under Guide Section 9206.5 Eligibility requirements for a Freddie Mac Flex Modification ® :

The Borrower must:

• Complete a Borrower Response Package (BRP).
• Be 60 days or more delinquent OR, if determined to be in imminent default and that at least one borrower occupies the property as a primary residence, may be current or less than 60 days delinquent.
• Have an eligible hardship under Guide Section 9202.2 Verifying a Borrower's hardship.
• Have a stable verified income to support a monthly payment.

Refer to Guide Section 9206.7 Determining imminent default for a Flex Modification ® for a breakdown of the imminent default evaluation and business rules.

Property must be:

• Owner occupied (primary residence) or
• Second home or investment property

• Mortgage must be a conventional first-lien mortgage currently owned in whole or part by Freddie Mac.
• Mortgage must have originated at least 12 months prior to the evaluation date.
• Flex Modification must result in a principal and interest (P&I) payment less than the pre-modification P&I payment. (Refer to Section 9206.10: Determining the terms of a Freddie Mac Flex Modification ® for additional payment reduction requirements that may apply. Refer to Section 9206.5: Eligibility requirements for a Freddie Mac Flex Modification ® for additional P&I considerations.)

Review Guide requirements for more information on exclusions, documentation requirements, determining workout terms and closing a modification.