FHLMC Rolls Out Automated Investor Recon Reviews
Written by: Heather Papows, Senior Loan Servicing & Secondary Market Consultant
Why This Matters: Servicers of FHLMC portfolios will now deliver recons selected for investor review through an electronic portal, and will likely see a change in the frequency of selection for custodial account reviews.
The June 12th Bulletin released by Freddie Mac announced the official change to an automated custodial account review process- which was initially discussed during the Freddie Mac Connect conference in November of last year.
The custodial account review process validates a servicer’s adherence to the requirements of the servicing guide including that:
All appropriate records are maintained including copies of deposit account statements, detailed trial balances, and completed reconciliations, variance logs, and supporting documentation
A positive daily balance is maintained in all custodial deposit accounts
All accounts are reconciled within 45 days of the close of an accounting cycle
All shortages are identified and funded within 90 days of the close of an accounting cycle, even if the variance source(s) is not yet identified.
Servicers will still be initially notified via email of the selection for review of custodial account reconciliation documents. The change to process is that servicers will submit the package for review via the user interface on the cash manager tool, instead of delivering it via secure email.
Though this change seems insignificant, servicers need to be aware that with this improved use of automation, FHLMC can better track, manage, and speed up the review process on their end, which means it’s more likely they’ll be able to complete more reviews and will call on servicers more regularly than in the past.
If you are unsure how prepared your Freddie Mac investor portfolio is for a reconciliation review, it may be worthwhile to consider SCA’s Streamlined Investor Reconciliation Review product. Poor performance in a review can result in a formalized investor remediation plan and can far exceed the cost of taking proactive steps for a smoother process upfront. Contact our Director, Bill Dolan, at WDolan@scapartnering.com or by phone at (617) 694-2617 to learn more about the programs and services we offer for GSE investor servicing and more!
Source: June 12, 2024 Bulletin, Bulletin 2024-8 (freddiemac.com)
