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The Crushing Debt Podcast, Episode 132: Coming Off of The Freddie Mac Exclusionary List

One of the things that I’ve talked about often on The Crushing Debt Podcast is the Freddie Mac exclusionary list. I’ve also written blogs and made videos about the topic. Interestingly the way that this started was when I was preparing for a seminar for Realtors® on how they could avoid liability in certain situations.

In doing my research I stumbled across something called the Freddie Mac Exclusionary List and what I could tell was that it was a list that if Freddie Mac thinks that you’ve done something that causes you to create an un-saleable or non-investment quality loan, you get put on the List and are no longer allowed to participate in any Freddie Mac transactions, whether you’re the buyer, the seller, if you’re the Realtor®, if you’re the mortgage originator, or the appraiser, or the inspector, the title company, the attorney, etc. It doesn’t matter why you’re on this list, you’re not allowed to participate in a Freddie Mac transaction or a transaction where Freddie Mac is also a party.

I’ve had this happen where a buyer was going to buy a house and the mortgage broker ran the buyer through Freddie Mac’s program. Turns out the buyer was connected to an LLC that had invested improperly property and allegedly did some improper short sale flips and so the company and all the owners of the company including this buyer were put on the List. In other words, Freddie Mac declined to even loan this buyer money!

Back to my Realtor® presentation: I had a videographer friend of mine who I paid capture all the raw footage and then we cut all that raw footage into two and three-minute video clips. Follow this link to my YouTube page for the Freddie Mac List video (it’s the second most popular video on my page next to the rant I went on about Ocwen). After the video was published, I had somebody call me who said they were on the list and asked how they could come off the List. I had never really considered that and so we talked about it and I gave him what I thought was some common-sense advice. A few months later, he called me back he said, “Thank you very much! I wrote a letter just like you said and I got off the List!” I was on to something … so the next person that called I said, “Yeah I charge $X and I’ll write you a letter and submit some supporting evidence and we’ll get you off the List.” That client hired me and I got them off the List! In fact, I got nine or ten people off of the List before I got my first rejection. Interestingly, prior to submitting that letter that got rejected, I said to the client that I didn’t think we had enough supporting documentation before we sent off the letter, and I ended up being correct.

The interesting, or annoying thing, is that Freddie Mac doesn’t say what it is that they liked that got someone off the List or what it was they disliked that kept someone on the List. Freddie Mac just sends a letter that says (paraphrasing) “Thank you for your recent inquiry, you’re still on the List.” or “Thank you for your recent inquiry we’re taking you off the list as of such and such date.” They don’t give us reasons, so we have to guess at what they want to see.  Therefore, part of the process and part of the way that I’ve priced this service is that I use the experience of what has been successful with other clients to determine what will help someone come off the List. Of course, I can’t guarantee anything and each fact pattern is different.

So here are some of the things that I’ve used to help people come off the List:

  • I write a letter that describes all the good things that the person has done and all the lessons that they’ve learned, and why they should come off the List.
  • A written policy manual that talks about your company policies, procedures and processes. In particular, focus on those things that reduce potential harm to the mortgage origination process.
  • A job description, especially if the job description lists things that go to the protection of origination of loans for mortgage clients.
  • Letters of recommendation from superiors, clients, others in the industry. As examples, if you’re a mortgage originator can you get letters of recommendation from Realtors®, from other mortgage people, or from title companies. If you’re an appraiser, you can get letters of recommendation from Realtors®, inspectors, and title companies.
  • Certificates from continuing education, especially if you’ve taught continuing education. In my business I do speaking engagements from time to time that give other practicing attorneys continuing legal education so I would submit those certificates, especially if that continuing education speaks to whatever the reason was that you got put on the List. With that, you can demonstrate to Freddie Mac you are trying to learn what it was that got you on the list so you can avoid getting on the list again.
  • Are there any public record documents you can submit? If you own a corporation or an LLC that was put on the List, let’s pull documents from that corporation or LLC. What other types of public record documents can we show to prove that you should come off the list?

Obviously, everything we submit to Freddie Mac needs to be accurate and truthful, although part of my job is to frame these documents in the best possible light for the client.

One of the great things that a former client of mine did was they created an affidavit and the affidavit went through in detail why they should not be on the List, what they’ve done to prove that they are not a “threat” to Freddie Mac, and what they’ve done to come off the List. I think that affidavit was really powerful. Again I don’t know if that was “the” factor that got the client off the List, but I’ve started to include a similar fact-specific affidavit in many of my submissions.

I’ve attached a resume or a CV (curriculum vitae) in support of the letter to come off the List.  I also had one client submit a YouTube promotional video that she used for her business promoting the virtues of this particular Realtor®.

Do you have any social media promotions, commercials or testimonials? We can include those types of things as well. Did you win any awards in your industry? If so, do you have proof of the awards that you won within your industry, or “Best in the Business” type of awards? Do you have community service awards or anything that we can send as proof to Freddie Mac of your community involvement? Are you involved with your religious organization? Are you involved with a homeowner association or condo association? Are you on the board of a charitable organization? Let’s show Freddie Mac that you are a good person and you support your community. If I were to ever find myself on the List I would probably say how I coach soccer for elementary school kids for my community, and how I coached basketball for seven and eight year old kids at the YMCA. What other things have you done for your community?

A great idea from another client of mine was to submit a credit report or some type of other proof of financial responsibility. In other words show Freddie Mac that you’re not out for every dime you can rub together but you’re actually considering your clients and considering the impact on the Freddie Mac loans that you are creating for them (the client and Freddie Mac)

I once had a client who had his clients send letters that said something to the effect of, “We don’t care that such-and-such Realtor® is on the Freddie Mac List, we are still going to use him for our investment purposes. And Freddie Mac if you don’t want to let us use him then we’re not going to buy your properties.” Now I don’t know if that was the straw that tilted everything in favor of my client or Freddie Mac even cares about that, but threatening to hit Freddie Mac in the pocketbook seemed to work in getting my client an approval letter.

My very first boss in the legal field is an immigration attorney. For those of you that don’t know I practiced immigration law for about three years. Mostly it was a business type visas H1-B worker visas, L-1 executive level visas, even a couple of O visas for artists and performers. One of the things that my boss always used to say in connection with the submission of an immigration petition is “Does it pass the ‘weight test.’” What he meant was have we submitted enough supporting documentation that the INS is going to look at this thing one time and approve it. I think in every case that I can recall we never got an immigration petition denied because we made sure everything was thorough and complete. I think we need to take that same approach when we’re talking about Freddie Mac make sure everything is thorough, complete, and appropriate to the situation. Unfortunately, I can’t say for sure, but the thicker the package and the more documentation that we can submit in support of the request to come off the List, the higher the likelihood that someone will actually come off the List.

If you find yourself on the Freddie Mac Exclusionary List, please reach out to me. If you are a mortgage originator and you’re doing a closing and you find that someone is on that List please point them to this Blog, to The Crushing Debt Podcast, to my YouTube channel, and have them review all the Freddie Mac information that I’ve been accumulating over these last years. Unfortunately, the Florida Bar won’t allow me to say that I have a certain percentage success rate, because that creates in the mind of the potential client that I might be able to achieve a result that I might not otherwise be able to achieve. Plus, I will readily admit that I have had some clients that I’ve submitted a letter and Freddie Mac has refused to take them off the List. I did a podcast episode about what I thought the approvals and the denials all shared. It doesn’t matter what state you’re in, I’ve represented people all over the country in trying to get them off the Freddie Mac List.

If you find yourself on the Freddie Mac Exclusionary List, or know someone who is, please contact us to schedule a free initial consultation to discuss your options at 813-774-5737 or email me directly at shawn@yesnerlaw.com. You can also order Crushing Debt: 9 Strategies to Eliminate Financial Bullies on Amazon.com. Please also subscribe to the Crushing Debt Podcast, on Apple Podcasts, Spotify, and other podcast players, including Amazon Echo (“Alexa”) for more free information about these topics.

Shawn M. Yesner, Esq., is the host of the Crushing Debt Podcast and founder of Yesner Law, P.L., a Tampa-based boutique real estate and consumer law firm that helps clients eliminate the financial bullies in their lives. We assist clients with asset protection, the sale and purchase of real property, Chapter 7 liquidation, Chapter 13 reorganization, bankruptcy, foreclosure defense, debt settlement, landlord/tenant issues, short sales, and loan modifications in Tampa, Westchase, Odessa, Oldsmar, Palm Harbor, Clearwater, Pinellas Park, Largo, St. Petersburg, and throughout the greater Tampa Bay Area.

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