Top 5 Myths about the Freddie Mac Exclusionary List
Few people understand the Freddie Mac List, what it means to be on that List, and how to come off the List. In the time we’ve been representing clients to come off the List we’ve come across some myths and misconceptions, so we want to dispel some of those:
Being on the Freddie Mac Exclusionary List means I’ve Committed a Crime.
While it is true that there is some criminal conduct that will cause you to be included on the Exclusionary List, being on the List itself is not a crime. Inclusion on the List simply means Freddie Mac (Federal Home Loan Mortgage Corp or FHLMC) believes you did something, or multiple somethings, that hurt the integrity of the loan product backed by Freddie Mac – you created non-investment quality loans. In some cases, we’ve seen Freddie Mac report the conduct to the state or federal licensing board and in other cases, we’ve seen Freddie Mac report the conduct to the Federal Bureau of Investigation (FBI). However, to answer the myth above, it was the conduct that caused you to go on the List that could be criminal, but being on the List itself is not criminal.
Freddie Mac Shares my Information with Other Lenders
The Freddie Mac Exclusionary List is confidential, and only accessible by Freddie Mac and Mortgage Lenders – there is no data list we are aware of that shows the public in general who is on the List. However, in some cases, loan originators and mortgage brokers will check the List in the course of a Freddie Mac closing, see that someone is on the List, and exclude that person from participating in other transactions with that origination company. Freddie Mac does not share the List, but loan originators may make independent decisions to exclude people on the List from doing business with them.
The List Will Expire at Some Point
Unfortunately, we know of no statute of limitations in connection with the Exclusionary List. Once you’re on the List, you’re on the List until Freddie Mac agrees to take you off the List. Theoretically, you could be on the List forever.
Freddie Mac Excluded me without Due Process
If there were any type of cause of action that could be filed against Freddie Mac, it would possibly be the inclusion of people on the List without due process. Unfortunately, in every case we’ve seen, Freddie Mac has given the person on the List the opportunity to explain their actions and describe why they should not be on the List. Typically, the person about to go on the List gets a letter from Freddie Mac about 30 days before they go on the Exclusionary List, with an opportunity to explain the reasons why Freddie Mac should keep them off the List. Thus, there is some due process as they are giving a chance to explain and defend themselves. Interestingly, however, we’ve never seen someone get that initial letter and thereafter not go on the List. In every case that Freddie has issued a letter, in our experience, the accused has ended up on the List. In some cases, the person has moved and the letter is sent to an old address, or the person might ignore the letter until they’re preparing for a closing only to get that awkward call, “we saw your name on the Freddie Mac Exclusionary List, and we have some bad news …” Therefore, they get due process in receipt of the letter, if they’re at the same address and they open and read the letter, but they typically never are able to convince Freddie to keep them off the List.
Being on the Exclusionary List means I Can’t do any Closings
The purpose of the List is to exclude real estate professionals from participating in real estate transactions where Freddie Mac is a party; it is not to exclude real estate professionals from participating in any real estate closing. Someone on the List could participate in a cash deal (no financing), or they could participate in a transaction where the lending is being provided by the US Department of Veterans Affairs (VA), a conventional loan, a private loan, or even a Fannie Mae loan. Further, the mortgage originator could fail to check the Freddie Mac Exclusionary List and let someone slip through the cracks and participate in a closing. I have a suspicion, however, that if that happened too many times, that originator would find themselves on the List. Being on the List does not mean that you cannot participate in a closing, only a Freddie Mac closing.
For more information on the Federal Home Loan Mortgage Corporation (FHLMC) (Freddie Mac) Exclusionary List, please contact us to schedule a free initial consultation to discuss your options at 727-261-0224 or email me directly at shawn@yesnerlaw.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.
