SUBJECT: SELLING UPDATES€¦ · Guide impact: Chapter 4305 Student loans Effective for Mortgages...

TO: Freddie Mac Sellers October 2, 2019 | 2019-20

SUBJECT: SELLING UPDATES

This Guide Bulletin announces:

Mortgage eligibility and origination and underwriting

• Revisions to our requirements for employed income analysis and calculation – April 2, 2020

• Revisions to Employer Assisted Homeownership (EAH) Benefits that are unsecured loans or secured loans

• New Guide Chapter 4305 with requirements specific to purchase transaction Mortgages

• Updates to our requirements for excluding monthly payments on certain student loans from the monthly debt payment-to-income (DTI) ratio – January 2, 2020

• Revisions to our requirements for calculating the monthly housing expense-to-income and DTI ratios – January 2, 2020

Condominium Projects

• Updates to our requirements for Condominium Projects – Multiple effective dates

Cash-Released XChangeSM

• Changes reflecting that a Transferee Servicer no longer has to first notify Freddie Mac before terminating a Seller’s ability to transfer Servicing Contract Rights to such Transferee Servicer

• Revisions to our requirements for Servicing-Released Premium refunds – November 1, 2019

Quality control

• Revisions to certain Freddie Mac postfunding quality control review requirements

• Updates to Seller in-house quality control program requirements

Document custody

• Changes to our document custody requirements – Multiple effective dates

Additional Guide updates

• Further updates as described in the Additional Guide updates section of this Bulletin

EFFECTIVE DATE

All of the changes announced in this Bulletin are effective immediately unless otherwise noted.

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MORTGAGE ELIGIBILITY AND ORIGINATION AND UNDERWRITING

Income requirements

Effective for Mortgages with Settlement Dates on and after April 2, 2020, but Sellers are encouraged to implement as soon as possible

In response to industry feedback and to provide greater specificity, we are updating our requirements for employed income analysis and calculation, with a focus on base non-fluctuating and fluctuating hourly employment earnings and additional fluctuating employment earnings (e.g., commission, bonus, overtime and tip income). The changes include:

• Updates to our employment history requirements. Currently, we require the Borrower to have at least a two-year history of primary employment, permitting a shorter history in certain instances. We are updating the Guide to require that when the Borrower’s income is derived from fluctuating hourly employment earnings, under no circumstances may the employment history be less than 12 months.

• Adding a requirement that for base hourly earnings to be considered non-fluctuating for the purpose of income calculation, the Borrower must have a documented history of working the same number of hours with the same employer for a minimum of six months

• Clarification that “fluctuating hourly employment earnings” are considered to be wages that are based on an hourly rate of pay and where the number of hours fluctuate each pay period

• Alignment of income calculation requirements for all fluctuating employment income types (hourly base, overtime, bonus, commission and tips). The calculation is based on whether the income trend is determined to be consistent, increasing or declining.

• Adding requirements for additional analysis when income fluctuation between the prior year(s) and year-to-date exceeds 10%. As part of this change, the requirement for additional analysis when earnings show “a high degree of volatility or an irregular pattern” is being removed.

Guide impacts: Guide Sections 5301.1 and 5303.2 through 5303.4

Employer Assisted Homeownership (EAH) Benefit

In response to Seller feedback, we reviewed our requirements for Employer Assisted Homeownership (EAH) Benefits and are revising them as follows:

• Removing the requirement that the EAH Benefit must permit the Borrower to continue making payments on the loan in the event the Borrower no longer works for the employer. This change better aligns with employer benefit programs and applies to EAH Benefits that are both unsecured loans and secured loans.

• For EAH Benefits that are unsecured loans, specifying that those funds may be used only for Down Payment and Closing Costs. We are also removing several requirements specific to repayment terms.

• For EAH Benefits that are secured loans with regular monthly payments, clarifying that those payments must be included in the monthly housing expense-to-income ratio

Guide impacts: Sections 4204.1, 4204.2 and 5501.4

Purchase transaction Mortgages

In response to Seller feedback, we are adding new Chapter 4305 for purchase transaction Mortgages. The new chapter specifies acceptable uses of the proceeds from a purchase transaction Mortgage as well as the circumstances under which the Borrower may receive cash back or a principal curtailment may be made.

Guide impact: Chapter 4305

Student loans

Effective for Mortgages with Settlement Dates on and after January 2, 2020

Currently, Sellers may exclude a Borrower’s monthly student loan payment from the DTI ratio if:

• The student loan has 10 or less monthly payments remaining until the full balance is forgiven, canceled, discharged or paid by an employment-contingent repayment program, or

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• The monthly payment of the student loan is deferred or in forbearance and the full balance will be forgiven, canceled, discharged or paid by an employment-contingent repayment program at the end of the deferment or forbearance period

Additionally, the Seller must document in the Mortgage file that the Borrower currently meets the requirements for

the student loan forgiveness, cancelation, discharge or employment-contingent repayment program.

In response to Seller inquiries, we are requiring that for the monthly student loan payment to be excluded from the DTI ratio as stated above, the Mortgage file must contain documentation indicating that the Borrower is eligible or approved for the student loan forgiveness, cancelation, discharge or employment-contingent repayment program. Evidence of eligibility or approval must come from the student loan program or the employer, as applicable.

Guide impact: Section 5401.2

Monthly housing and DTI ratios

Effective for Mortgages with Settlement Dates on and after January 2, 2020

We are updating the Guide to require that flood insurance and special assessments with more than 10 monthly payments remaining be included in the monthly housing expense-to-income ratio for the subject property and in the monthly DTI ratio for any other property owned, as these items can have a significant impact on the Borrower’s ability to meet his or her monthly obligations.

Guide impacts: Sections 5401.1 and 5401.2

CONDOMINIUM PROJECTS

In response to Seller feedback, we are updating our requirements for Condominium Projects as follows:

Topic New/updated requirements

Effective immediately

Project Waiver Requests (PWRs) via

Freddie Mac Condo Project Advisor® (CPA) - inclusion of

projects with long-term developer-owned units

(Section 5701.1)

Previously, only Condominium Unit Mortgages secured by

units in projects meeting all of the requirements for

Established Condominium Projects were eligible for

PWRs. However, to expand eligibility, a project may still

be considered as an Established Condominium Project

where the developer retained more than 25% of the units

(which otherwise makes the project a New Condominium

Project) if:

• The developer retained those units for rental purposes

• The developer has owned those units for a minimum of 10 years; and

• The Condominium Project otherwise meets the completion and project control requirements to be classified as an Established Condominium Project

Ineligible projects – commercial space

(Section 5701.3)

To provide greater specificity and ease of use, we have consolidated the commercial space requirements from Section 5701.11 into Section 5701.3(d). In addition, we have added an easy-to-follow table showing what must be included and what may be excluded from the commercial or non-residential space calculation.

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Topic New/updated requirements

Manufactured Homes

(Sections 5701.3, 5701.4, 5701.5 and 5701.6)

To provide greater ease of use to Sellers, we have eliminated redundant references to the ineligibility of Manufactured Homes in Chapter 5701 while retaining our requirement in Section 5701.3(l).

New and Established Condominiums – budget

requirements

(Sections 5701.5 and 5701.6)

We are clarifying that the Condominium Project’s budget must be for the current fiscal year.

Effective January 2, 2020

New Condominium Projects – New construction

Section 5701.6

We are specifying that a single building in a Condominium

Project (regardless of whether the project is comprised of

that single building or multiple buildings) may have only

one legal phase and that marketing phases are not

eligible.

Guide impacts: Sections 1301.11, 5701.1, 5701.3 through 5701.6 and 5701.11

CASH-RELEASED XCHANGESM

Transferee Servicer’s termination of a Seller’s ability to transfer Servicing Contract Rights

Previously, a Transferee Servicer wishing to terminate a Seller’s ability to transfer Servicing Contract Rights to that Transferee Servicer had to notify Freddie Mac and Freddie Mac would act to screen out the Seller.

We are updating Section 6101.7(g) to reflect that as a result of system enhancements, the Transferee Servicer may now terminate a Seller’s ability to transfer Servicing Contract Rights to that Transferee Servicer without first notifying Freddie Mac.


Servicing-Released Premium refunds

Effective November 1, 2019

Guide Exhibit 28A currently requires a Seller to refund the Servicer 100% of the Servicing Released Premium (SRP) if a Borrower fails to make the first four monthly payments following the Funding Date.

To align with industry standards, we are revising Exhibit 28A to provide that a Seller must refund the Servicer 100% of the SRP if the Borrower fails to make any of the first four monthly payments following the Funding Date.

Guide impact: Exhibit 28A

QUALITY CONTROL REVIEW

We are making the following revisions to requirements for postfunding quality control review and Seller in-house quality

control programs to add clarity and better align with industry practices.

Freddie Mac's postfunding quality control review

We are updating certain postfunding quality control review requirements regarding:

• Mortgage file documentation required for Mortgages submitted to Loan Product Advisor®, including Mortgages for which the Seller is offered, and accepts, an appraisal waiver in accordance with Section 5601.9, and

• Mortgage file documentation required solely for Manually Underwritten Mortgages

We are also updating the Guide to:

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• Specify that except for trended credit, Freddie Mac will review all documentation sent to Freddie Mac in connection with a quality control review request, even if Freddie Mac does not require that documentation, and

• Clarify our requirements for Mortgage file documentation relating to the final title insurance policy

Guide impacts: Sections 3401.1, 3401.6, 3401.9 through 3401.11, 3401.17 and 3401.18

Seller's in-house quality control program

We are revising Seller in-house quality control program requirements to provide that Sellers may notify Freddie Mac in

writing within 90 days, instead of 60 days, of a determination that a quality control finding affects the eligibility of a

Mortgage sold to us. This excludes fraud or possible fraud, which must still be reported within 60 days of the

determination.

In addition, we are revising the requirements to, among other things:

• Allow Sellers with annual production of less than 5,000 Home Mortgages to house the quality control functions within the origination and underwriting departments

• Require that records of completed quality control reviews be provided to a new Servicer only upon request

• Allow Sellers to choose targeted Mortgage selections that focus on specific characteristic of a Mortgage, such as product, business source or underwriting component

• Clarify that Sellers must pay any fees associated with reverifications in the quality control process

• Remove the requirement that any new credit reports obtained during the quality control process must be ordered from a different source than the original reporting agency

• Remove the requirement for appraisal reviews on Freddie Mac Enhanced Relief Refinance® Mortgages

Guide impacts: Sections 3402.1, 3402.3 through 3402.6, 3402.8, 3402.10 and 3402.11

DOCUMENT CUSTODY

Powers of Attorney

We are updating the Guide to require that the original Power of Attorney (POA) must be delivered to the Document

Custodian with the Note but need not be attached to the Note, as previously stated. To align with the Document Custody

Procedures Handbook, the revised section also specifies that every POA must be notarized and that Document

Custodians may accept a copy of the POA if it was recorded prior to the Note Date and shows the recording information

or if the POA was sent with the Security Instrument to be recorded. In the latter case, when it is returned from the

recording office, the Seller must promptly deliver either the original POA or a copy showing recording information to the

Document Custodian.


New Document Custodians

We are updating the Guide to indicate that Freddie Mac is no longer accepting applications to become or approving new

Document Custodians. The eligibility standards set forth in Section 2202.2 remain in effect for our current Document

Custodians.


Required notice for termination of a Tri-Party Agreement


We are updating the Guide to increase the required notice period for a Document Custodian to terminate a Tri-Party

Agreement from 30 to 90 days.


Additional updates

We are updating the Guide to:

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• Align with current practices for processing new Tri-Party Agreements

• Provide more detail concerning the parties’ responsibilities upon termination of a Tri-Party Agreement

• Describe more specifically the duties and responsibilities of each party to a Transfer of Servicing or a transfer of custody


ADDITIONAL GUIDE UPDATES

Recent Borrower employment gaps

We are clarifying that while the Borrower is not required to provide a letter of explanation of recent employment gaps, the Seller remains responsible for establishing that the Borrower’s employment is stable, which may require analysis of recent employment gaps.


Automated collateral evaluation (ACE) eligibility

Previously, the Guide stated that a Seller may not accept the ACE appraisal waiver offer if the Seller is aware of conditions that it believes warrant an appraisal being obtained.

We are updating the Guide to state that a Seller may not accept the appraisal waiver offer if the Seller is aware of conditions that warrant an appraisal being obtained.


Environmental hazard disclosure to Borrower

Effective December 1, 2019

In Bulletin 2019-16, we noted that we were reviewing Seller feedback related to changes previously announced in

Bulletin 2019-9 concerning disclosure of environmental hazards to the Borrower.

Based on that feedback, we are revising the Guide to provide greater specificity regarding information that must be

disclosed to the Borrower. For purchase transactions, Sellers must disclose information regarding environmental hazards

that directly impact the subject property and have not been mitigated or remediated, if the Seller obtained such knowledge

prior to the Note Date.


Seasoned LIBOR ARMs

In Bulletin 2019-10, we updated the Guide to state that the Settlement Date for a LIBOR-indexed ARM must not be more than six months after the Note Date.

With this Bulletin, we are clarifying that for purposes of Section 4401.3 and Exhibit 17S (footnote 11), the Note Date is equivalent to the Effective Date of Permanent Financing for LIBOR ARMs sold to Freddie Mac as Construction Conversion Mortgages originated with Integrated Construction Conversion Documentation.

Pledged Mortgages

For Cash transactions, to provide greater specificity, we are removing the requirements that all Pledged Mortgages in a

delivery must be financed by the same Warehouse Lender and that each Mortgage must be a Pledged Mortgage if

included in a delivery with Pledged Mortgages.

We are additionally updating Chapter 6305 for clarity and to change certain references from “Funding Date” (which is

used only in the context of Cash transactions) to “Settlement Date,” which applies to all transactions.

Guide impacts: Sections 6305.2, 6305.4, 6305.6 through 6305.9 and 6305.12

Certificate of Incumbency

We are updating the Seller/Servicer Certificate of Incumbency language in Section 2201.1 to specify that all Sellers, Servicers and Seller/Servicers must provide Certificates of Incumbency to Freddie Mac.

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Freddie Mac Relief Refinance MortgagesSM

In Bulletin 2017-17, we extended the expiration date of the Freddie Mac Relief Refinance Mortgage – Same Servicer and Relief Refinance Mortgage – Open Access offerings to Application Received Dates on or before December 31, 2018 and Settlement Dates on or before September 30, 2019. We are now updating the Guide to remove references to these offerings, where applicable, as these Mortgages can no longer be delivered to Freddie Mac.

All applicable Freddie Mac systems were updated to support the expiration of these offerings.

Guide impacts: Chapters 4302, 4303, Sections 2402.7, 3401.27, 4203.1, 4301.8, 4406.2, 4407.2, 4501.3, 4502.3, 4603.3, 4605.2, 4607.2, 5307.1, 5601.9, 6202.3, 6302.16, 8202.3, 8202.5, 8202.6, 9201.2, Exhibits 17S, 19 and 34

GUIDE UPDATES SPREADSHEET

For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, access the Bulletin 2019-20 (Selling) Guide Updates Spreadsheet via the Download drop-down available at https://guide.freddiemac.com/app/guide/bulletin/2019-20.

CONCLUSION

If you have any questions about the changes announced in this Bulletin, please contact your Freddie Mac representative or call the Customer Support Contact Center at 800-FREDDIE.

Sincerely,

Christina K. Boyle Chief Client Officer Single-Family Office of the Client

TO: Freddie Mac Servicers October 9, 2019 | 2019-21

SUBJECT: SERVICING UPDATES


Freddie Mac Servicing Gateway

• An extension of the implementation date for Servicing Gateway

Document custody

• Changes to our document custody requirements

Charge-offs

• Updates to the process of settling charge-offs via Workout Prospector®

Freddie Mac access to Mortgage records

• Updates to requirements regarding Freddie Mac access to Mortgage records pertaining to Mortgages serviced for Freddie Mac that are processed, maintained, stored or held by third parties on behalf of Servicer

Additional Guide updates and reminders

• Further updates as described in the Additional Guide updates and reminders section of this Bulletin

EFFECTIVE DATE


FREDDIE MAC SERVICING GATEWAY IMPLEMENTATION DATE EXTENSION

In response to Servicer feedback, we are extending the implementation of Servicing Gateway and the

mandatory adoption of the Servicing Data Corrections tool from November 25, 2019 to December 9, 2019.

This delay will allow Servicers to process their November 2019 end of month loan level reporting without interruption.

The Guide updates announced in Bulletin 2019-19 with effective dates of November 25, 2019 will now become effective

on December 9, 2019. Servicers still may continue to adopt the Servicing Data Corrections tool prior to the mandatory

effective date if they are operationally ready to do so.

Guide impacts: See the Bulletin 2019-21 (Servicing) Guide Updates Spreadsheet, which is accessed via the Download drop-down available at https://guide.freddiemac.com/app/guide/bulletin/2019-21.

DOCUMENT CUSTODY

Guide Chapter 8107 rewrite

We are substantially rewriting Chapter 8107 to provide more information and specificity regarding the release of Notes and documents by, and their return to, Document Custodians.

https://guide.freddiemac.com/app/guide/bulletin/2019-21

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Release of Notes

Previously, Servicers were required to return Notes and other documents that were no longer required for Servicing to Document Custodians “promptly.” To provide guidance for Servicers, we are updating the Guide to specify that such documents must be returned to Document Custodians within 90 days.

Guide impacts: Guide Sections 8107.1 and 8107.2

Document Custodian notice to Servicers of constructive possession of Notes

Effective January 2, 2020, but Servicers may implement sooner if they are ready to do so

Document Custodians are not currently required to notify Servicers when constructive possession of a Note is transferred to them for foreclosure or similar purposes.

We are updating the Guide to require Document Custodians to notify Servicers promptly when they are in constructive possession of a Note for foreclosure or similar purposes.


Additional Chapter 8107 updates

We are also updating our document custody requirements in Chapter 8107 to:

• Provide additional information on constructive possession to support Servicers in managing legal matters

• Remove requirements for retaining imaged copies of various forms. These requirements will remain in Chapter 1401.

• Reiterate the requirement for Notes in transit to be insured and transported by nationally recognized commercial or bonded carrier services


Document custody updates from Bulletin 2019-20

New Document Custodians

We updated Section 2202.2 to indicate that Freddie Mac is no longer accepting applications to become or approving new

Document Custodians. The eligibility standards set forth in Section 2202.2 remain in effect for our current Document

Custodians.

Termination of a Tri-Party Agreement


We updated Section 2202.6 to increase the required notice period for a Document Custodian to terminate a Tri-Party

Agreement from 30 to 90 days.

Additional Chapter 2202 updates

We updated Sections 2202.3 and 2202.6 to:

• Align with current practices for processing new Tri-Party Agreements

• Provide more detail concerning the parties’ responsibilities upon termination of a Tri-Party Agreement

• Describe more specifically the duties and responsibilities of each party to a Transfer of Servicing or a transfer of custody

Transfers of custody and Subsequent Transfers of Servicing


Currently for Subsequent Transfers of Servicing, Transferor Servicers must verify that Transferee Document Custodians have a Tri-Party Agreement in place with the Transferee Servicer.

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To facilitate Transfers of Servicing, we are updating Section 7101.9 to delete this requirement. In addition, we are adding the following requirements for all transfers of custody (which may result from Subsequent Transfers of Servicing):

• Transferee Servicers must notify Transferee Document Custodians in advance of the Effective Date of Transferthat the transfer of custody is going to occur

• Transferee Document Custodians must notify the Transferor Document Custodian that the shipment of Notes iscomplete within 35 days of the Effective Date of Transfer or custody transfer date

A Servicer transferring custody of documents between Document Custodians must deliver a copy of the executed

Guide Form 1034T, Document Custodial Certification Schedule for Subsequent Transfers of Servicing, to Freddie

Mac prior to the date on which the transfer is to occur.

For Freddie Mac to identify Mortgages for which the original Note is missing or not properly endorsed, we are

clarifying that, for all transfers of custody, Transferee Document Custodians must:

• Certify for each Mortgage that the Note received is an original Note and that the chain of endorsements iscomplete; or

• Verify that Freddie Mac has approved the exception (for example, authorized use of a lost note affidavit)


CHARGE-OFFS

We are updating Section 9210.5 to reduce potential delays associated with settling charge-offs via Workout Prospector. When submitting all required data for settling a charge-off via Workout Prospector, the Servicer must submit it within 30 days of receiving Freddie Mac’s approval letter.

If the Servicer has not submitted the charge-off for settlement within 30 days of receiving Freddie Mac’s approval letter, then the Servicer should provide a status update to Freddie Mac at [email protected] and on a monthly basis thereafter until the charge-off has been submitted via Workout Prospector.

As a reminder, for the Servicer to be reimbursed for any applicable expenses, Freddie Mac must receive, and accept for settlement, the charge-off submitted via Workout Prospector.


FREDDIE MAC ACCESS TO MORTGAGE RECORDS

As a reminder, Section 8101.7 provides that Servicers must cause Servicing Agents, service bureaus and other entities that process, maintain or store Mortgage records for and on behalf of the Servicer to consent in writing to permit Freddie Mac, as requested by Freddie Mac, to have access to all Mortgage records pertaining to any Mortgage serviced for Freddie Mac. Therefore, when a Servicer provides Mortgage data related to Mortgages it services for Freddie Mac to a third party, such as a service bureau or other vendor, the third party may provide the Mortgage data to Freddie Mac without further notice or action required by the Servicer.

We are revising Section 8101.7 to state that the section authorizes Freddie Mac to execute, acknowledge and deliver such instruments and documents on the Servicer’s behalf and take other actions on behalf of the Servicer to effectuate the purposes of the section.


ADDITIONAL GUIDE UPDATES AND REMINDERS

Freddie Mac Flex Modification® streamlined eligibility

As a reminder, the Servicer is required to evaluate any Borrower who becomes 90 days delinquent, or any Borrower with a Step-Rate Mortgage who becomes 60 days delinquent, for a streamlined offer for a Flex Modification and must send an offer to eligible Borrowers within 15 days (i.e., the 105th or 75th day of Delinquency, as applicable).

In response to Servicer questions, we are clarifying that Borrowers who reach the applicable Delinquency threshold for a streamlined offer for a Flex Modification remain eligible for the Flex Modification even if one or more payments subsequently results in the Borrower becoming less delinquent than the eligible Delinquency threshold. In these

mailto:[email protected]

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instances, the Servicer must provide the eligible Borrower with a streamlined offer for a Flex Modification within the required time frame, provided that the Borrower’s payment has not resulted in the full reinstatement of the Mortgage.


Reinstatements

We are updating our requirements to clarify that coupling a partial reinstatement with a repayment plan is considered a best practice but is not mandatory. Servicers that choose not to pair a partial reinstatement with a repayment plan must continue to attempt to resolve the Delinquency and remain responsible for adhering to foreclosure timeline requirements.

Additionally, regarding full reinstatements, we are specifying that Servicers may charge or collect from the Borrower an amount that exceeds the expense limits specified in Guide Exhibit 57A, Approved Attorney Fees and Title Expenses, provided those amounts are legally allowable and recoverable.


Bankruptcy cramdowns

In Bulletin 2019-18, Freddie Mac updated certain bankruptcy cramdown requirements, including when a Servicer must instruct counsel to file for relief from the automatic stay. We are updating Section 9401.3 to more closely align with those requirements.


Updates from Bulletin 2019-20

Freddie Mac's postfunding quality control review

We have updated certain postfunding quality control requirements, including an update to Section 3401.1 to specify

that except for trended credit, Freddie Mac will review all documentation sent to Freddie Mac in connection with a

quality control review request, even if Freddie Mac does not require that documentation.

Seller's in-house quality control program

Among other changes, we have updated Section 3402.3 to state that, for Transfers of Servicing, Sellers are only

required to provide records of completed quality control reviews to the new Servicer upon request.

Certificate of Incumbency

We updated the Seller/Servicer Certificate of Incumbency language in Section 2201.1 to specify that all Sellers,

Servicers and Seller/Servicers must provide Certificates of Incumbency to Freddie Mac.

Freddie Mac Relief Refinance MortgagesSM

We updated the Guide to remove references to Relief Refinance Mortgages as these Mortgages can no longer be

delivered to Freddie Mac.


For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, refer to the Bulletin 2019-21 (Servicing) Guide Updates Spreadsheet via the Download drop-down available at https://guide.freddiemac.com/app/guide/bulletin/2019-21.


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CONCLUSION


Sincerely,

Yvette W. Gilmore Vice President Servicer Relationship and Performance Management

TO: Freddie Mac Sellers November 6, 2019 | 2019-22



Duty to Serve

• New and revised underwriting flexibilities for Mortgages secured by income-based resale restricted properties and for Affordable Seconds®, including Affordable Seconds used to subsidize the purchase of such properties – March 1, 2020

• Guidance concerning property eligibility and appraisal requirements, with a focus on rural markets and property types

Condominium Projects

• Updates to our requirements for Condominium Unit Mortgages with approved Project Waiver Requests (PWRs) – February 6, 2020

Automated Clearing House (ACH) drafting

• Revisions to reflect that Freddie Mac will draft Gold Rush® fees and adjustments, buyup and buydown adjustments and guarantor settlement interest under the daily ACH process – February 6, 2020

Single premium lender-paid mortgage insurance

• Updates to our requirements for the delivery of Mortgages with single premium lender-paid mortgage insurance



EFFECTIVE DATE


DUTY TO SERVE

Promoting housing affordability is fundamental to Freddie Mac's community mission. In our Duty to Serve plan, we committed to increasing our support for affordable homeownership preservation through shared equity homeownership programs. These programs provide homeownership opportunities to families with very low, low and moderate incomes.

Shared equity homeownership programs are managed by subsidy providers or program administrators that make a one-time investment to create homeownership opportunities with lasting affordability for homebuyers who meet certain income requirements. In exchange for participation in the programs, eligible homebuyers agree to certain restrictions that include limitations on returns upon resale or limitations on conveyance of the property. In effect, homeowners “share” some of the proceeds from resale to pay the opportunity forward to the next homebuyer with very low, low or moderate income.

https://sf.freddiemac.com/content/_assets/resources/pdf/other/freddie-mac-ruralhousing-underserved-markets-plan.pdf

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Properties subject to resale restrictions

Effective March 1, 2020

Mortgages secured by properties subject to resale restrictions

We are updating the requirements for Mortgages secured by properties subject to resale restrictions that we announced in Bulletin 2018-16 to:

• Clarify that:

➢ The resale restriction controls may be administered by the subsidy provider or a program administrator

➢ When a Mortgage secured by a resale-restricted property is in foreclosure and/or subject to an approved short sale, the right of first refusal must have a time period not exceeding 90 days

• Provide guidance for appraisal comparable sales selection when resale restrictions terminate and when they survive foreclosure or recordation of a deed-in-lieu of foreclosure

Guide impact: Guide Section 4406.1

Mortgages secured by properties subject to income-based resale restrictions

This Bulletin announces new and revised requirements to facilitate a secondary market for Mortgages secured by income-based resale restricted properties that use deed restrictions, subordinated loans, or similar legal mechanisms that include provisions to keep a home affordable for individuals and households with very low, low, or moderate incomes.

We are expanding Guide Chapter 4406 to provide additional guidance and new requirements for Mortgages secured by properties subject to income-based resale restrictions. These include:

• Allowing the following to be eligible:

➢ 2-unit Primary Residences; and

➢ CHOICEHomeSM Mortgages, provided that the Seller has written approval from Freddie Mac to deliver these Mortgages

• Revising our requirements to permit cash-out refinance transactions and to permit Borrowers to obtain cash proceeds from refinance transactions as long as the subsidy provider or program administrator approved the transaction

• Adding requirements relating to the subsidy provider and program administrator

• Adding guidance regarding how to calculate the Borrower’s required Down Payment based on the subsidized purchase price

• Specifying that subsidy providers may be entitled to obtain “excess proceeds” in certain instances when the income-based resale restrictions survive foreclosure or the recordation of a deed-in-lieu of foreclosure where proceeds remain following the sale or transfer of an REO property

• Permitting the subsidy provider or program administrator of eligible shared equity homeownership programs to be both the source of the Affordable Second and the property seller in certain instances

Guide impacts: Sections 4406.1, 4406.2, 5703.9 and 6302.37

Mortgages with Affordable Seconds®


Mortgages with Affordable Seconds that are used to subsidize the purchase price of resale restricted properties

We are eliminating the limits on the share of appreciation (equity sharing) an Agency or subsidy provider funding an Affordable Second® can receive when the Agency or subsidy provider is managing an eligible income-based resale restriction program and meets other eligibility criteria.

Guide impacts: Section 4204.2 and Glossaries A-I and J-Z

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Additional updates for Mortgages with Affordable Seconds

We are revising our requirements for Mortgages with Affordable Seconds to allow:

• Sellers to be the source of Affordable Seconds under certain circumstances when the First Lien Mortgage is a Home Possible® Mortgage and the Seller has an established Affordable Seconds program that supports Community Reinvestment Act (CRA) mandates

• Affordable Seconds to be funded by a non-profit not affiliated with a Government Agency, provided that the Seller receives Freddie Mac’s prior written approval


Special delivery requirements for Mortgages with Affordable Seconds

We are updating Section 6302.34 to add special delivery requirements for Mortgages with Affordable Seconds from certain allowable sources. If applicable, Sellers must enter the following valid values for ULDD Data Point Investor Feature Identifier (Sort ID 368):

• “J07” for a non-profit not affiliated with a Government Agency Affordable Second

• “J54” for a Home Possible Mortgage with a Seller-funded Affordable Second

Guide impacts: Section 6302.34 and Exhibit 34

Additional resources

We are updating the Freddie Mac Affordable Seconds Checklist and adding a link to it in the Guide for ease of reference. In addition, access our new Affordable Seconds and Gifts, Grants and Affordable Seconds quick references to learn more about these sources of funds and submission to Loan Product Advisor®.

Property eligibility and appraisal requirements

Freddie Mac understands the challenges related to property eligibility and valuation that can result from unique market conditions or the lack of comparable sales, especially in rural markets. In response to Seller and industry stakeholder inquiries and as part of our Duty to Serve plan, we are providing additional guidance for:

• Appraisal adjustments, recognizing that large adjustments are common and acceptable in rural markets. Freddie Mac does not have limitations on gross or net adjustment percentages and recognizes that the income approach, cost analysis and market surveys are appropriate for supporting adjustments.

• The acceptability of non-traditional types of properties (examples include “barndominiums” (barn conversions or barn-style buildings), “shouses” (living-space and work/storage combinations), berm homes, log homes and geodesic dome dwellings)


CONDOMINIUM PROJECTS

Effective February 6, 2020, but Sellers are encouraged to implement on or after November 21, 2019

Currently, Sellers have to deliver Condominium Unit Mortgages with approved Project Waiver Requests (PWRs) within 180 days of the date of the Freddie Mac Condo Project Advisor® Feedback Certificate. This date is indicated as the expiration date on the Feedback Certificate.

In response to Seller feedback and to provide additional flexibility, we are requiring Sellers to deliver Mortgages with approved PWRs within 120 days after the Note Date. In connection with this change, as of November 21, 2019, the Feedback Certificate will no longer indicate an expiration date.


AUTOMATED CLEARING HOUSE (ACH) DRAFTING

Effective February 6, 2020

We are updating the Guide to reflect that the following fees and amounts (which were previously drafted monthly from Seller's ACH account) will be included in the net amount drafted from that account on the fifth Business Day

https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheets/affordable_seconds_guidelines_factsheet.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/as-defined-tips-lpa-datasubm.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/ggas-defined-tips-lpa-submit.pdf

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after the applicable Settlement Date (daily ACH process) for Mortgages sold to Freddie Mac under the Guarantor and MultiLender Swap Programs:

• Gold Rush® fees and adjustments

• Buyup and buydown adjustments

• Guarantor settlement interest

These fees and amounts will be included together with initial Credit Fees in Price, buyup proceeds and buydown fees drafted by Freddie Mac in accordance with the provisions of the daily ACH process described in Guide Section 6303.2(a).

We are also revising Chapter 6303 to clarify references to the Seller monthly invoice and activity statement.


SINGLE PREMIUM LENDER-PAID MORTGAGE INSURANCE

Previously, for single-premium lender-paid mortgage insurance, Freddie Mac required that the originating lender or the Seller pay the entire mortgage insurance premium prior to the Delivery Date.

To provide flexibility and better align with market standards, Sellers may now deliver Mortgages with single-premium lender-paid mortgage insurance regardless of whether the entire mortgage insurance premium is paid by the Seller prior to the Delivery Date, provided that the mortgage insurance for the Mortgage is in full force and effective on the Delivery Date of the Mortgage. The Seller must obtain and be able to produce evidence of any required mortgage insurance (including, but not limited to, a certificate of insurance).



Compliance with State privacy and consumer protection laws

We are updating the Guide to address certain updates in State privacy and consumer protection laws, including the California Consumer Privacy Act that goes into effect on January 1, 2020.


Confidential information

We are restructuring Section 1201.8 by separating it into two subsections:

• Revised subparagraph (a) provides greater specificity regarding requirements for receipt and treatment of Freddie Mac Confidential Information, and

• New subparagraph (b) clarifies Freddie Mac’s commitment to maintaining the confidentiality of certain nonpublic information provided by Seller/Servicers to Freddie Mac, such as financial information and audit reports

We are also retitling and revising Section 8101.8 to clarify the Servicer’s obligations concerning information it obtains regarding the Borrower and the Mortgaged Premises that is not publicly available or that is required to be protected under applicable laws.


Form 1149, Notice About Appraisal of Your Property

We are removing Form 1149 from the Guide. Since the Loan Prospector Property Inspection Alternative (PIA) option was retired in 2014 and the obsolete Form 2070, Loan Prospector Condition and Marketability Report, was removed from the Guide in 2016, Form 1149 is no longer necessary.

Guide impact: Form 1149

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For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, access the Bulletin 2019-22 (Selling) Guide Updates Spreadsheet via the Download drop-down available at https://guide.freddiemac.com/app/guide/bulletin/2019-22.

CONCLUSION


Sincerely,



TO: Freddie Mac Servicers November 13, 2019 | 2019-23

SUBJECT: SERVICING UPDATES


Freddie Mac Servicing Gateway

• Information for accessing Servicing Gateway – December 9, 2019

Resale restrictions and right of first refusal

• Guidance for Servicers when Servicing Mortgages secured by properties subject to resale restrictions or regarding any right of first refusal – March 1, 2020

Reimbursement of legal fees and costs

• Updates to our requirements for the reimbursement of legal fees and costs – January 1, 2020

Flood insurance

• Clarifications of the requirements for continuous monitoring of flood insurance policies and flood zones

Additional Guide updates and reminders

• Further updates as described in the Additional Guide updates and reminders section of this Bulletin

EFFECTIVE DATE


FREDDIE MAC SERVICING GATEWAY


In Bulletins 2019-19 and 2019-21, we announced that, beginning December 9, 2019, Servicing Gateway will provide Servicers with a unified portal to serve as one platform, one login and one doorway to most of our Servicing Tools (applications).

Access for current Servicing Tool users

No action is required for users who currently access the Servicing Tools that will be available in Servicing Gateway. On December 9, 2019, users can reach the Servicing Gateway single sign-on portal via https://sg.freddiemac.com. Users will be able to use their existing Freddie Mac user ID and password to log into the Servicing Gateway portal.

For an interim period, the legacy Servicing URLs will redirect users to the Servicing Gateway. However, to ensure ease of access to Freddie Mac Servicing Tools, we encourage users to update their bookmarks with the Servicing Gateway URL: https://sg.freddiemac.com.

Access for new users

New users do not need to request access to the Servicing Gateway portal. Instead, they will need to request access to individual Servicing Tools as outlined below:

https://sg.freddiemac.com/

https://sg.freddiemac.com/

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• A Servicer’s Freddie Mac Access Manager Administrator may provide access to authorized users for the following Servicing Tools:

➢ Cash Manager*

➢ EDR*

➢ Foreclosure Sale Reporting*

➢ Loan Level Reporting*

➢ Post-Fund Data Corrections

➢ Real Estate Valuation and Pricing*

➢ Servicing Data Corrections

➢ Servicing Transfer Manager*

*Servicers that do not use Access Manager must request access to these Servicing Tools by completing the Servicing Tools Request Form.

Freddie Mac will respond to a Servicer’s request for access within two Business Days.

• For Servicers that do not use Access Manager, there are no changes to the access management requirements for the following additional Servicing Tools available through Servicing Gateway:

➢ Post-Fund Data Corrections: complete and submit Form 907, Post-Fund Data Corrections Tool Authorized User Role Form

➢ Servicing Data Corrections: complete and submit the Servicing Data Corrections Request Form

➢ Workout Prospector®: complete and submit the Workout Prospector Order Form

➢ Freddie Mac Reimbursement System: submit Guide Form 1200, Reimbursement System User Setup Form

➢ Default Fee Appeal System: submit Form 903, Freddie Mac Default Fee Appeal System Authorized User Roles Form, or Form 903A, Addendum to Freddie Mac Default Fee Appeal System Authorized User Roles Form

➢ BPOdirect®: see Guide Section 2406.4

➢ Attorney Data Reporting System: see Section 9501.10

➢ Servicer Performance Profile: complete and submit the Servicing Technology Tools Sign-up Form

Guide impact: Guide Exhibit 88

Additional information and training

Training is currently available. Register for the Entering the Servicing Gateway: Access Your Servicing Tools webinar

to learn all about the new Servicing Gateway.

Additional information about Servicing Gateway, such as frequently asked questions, is available on the Servicing

Gateway web page.

RESALE RESTRICTIONS AND RIGHT OF FIRST REFUSAL


Servicing Mortgages secured by properties subject to resale restrictions

Freddie Mac purchases Mortgages secured by properties subject to resale restrictions including, but not limited to, income-based restrictions. Such resale restrictions either:

• Survive conveyance of the subject property following foreclosure or recordation of a deed-in-lieu of foreclosure; or

• Terminate upon foreclosure (or expiration of any applicable redemption period) or recordation of a deed-in-lieu of foreclosure

In Bulletin 2019-22, Freddie Mac updated Chapter 4406 to provide additional guidance and new requirements for

Mortgages secured by properties subject to income-based resale restrictions, including specifying that subsidy providers

may be entitled to obtain “excess proceeds” in certain instances. We are creating new Section 8104.9 to support these

updates and to provide guidance for Servicers regarding Servicing requirements applicable to Mortgages secured by

properties subject to resale restrictions.

Guide impacts: Sections 8104.9 (new), 8701.1, 9202.16, 9202.17, 9208.2, 9208.5, 9301.31, 9301.32 and 9301.34

https://www4.freddiemac.com/identityiq/

http://freddiemac.com/help/servicing_tool_request/servicing_tool_request_form.html

https://sf.freddiemac.com/content/_assets/resources/pdf/other/form907.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/other/form907.pdf

http://freddiemac.com/help/sdc_form/sdc_form.html

http://www.freddiemac.com/singlefamily/service/wp2order.html

http://www.freddiemac.com/singlefamily/service/forms_template.html

https://learn.freddiemaclearning.com/Saba/Web_spf/NA3P1PRD0123/guest/ledetail/cours000000000008182

https://sf.freddiemac.com/working-with-us/servicing/servicing-gateway/overview

https://sf.freddiemac.com/working-with-us/servicing/servicing-gateway/overview

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Right of first refusal

We are creating new Section 8104.10 to provide guidance for Servicers regarding any right of first refusal, which may include the right to:

• Provide a substitute purchaser

• Have the first option to purchase a property

• Approve a purchaser

Servicers are reminded that, in certain circumstances, they may be required to provide notice to the required parties allowing the timely exercise of certain rights available to a holder (or its designee) and its successors or assigns (the “option holder”) of any right of first refusal.

Guide impact: Section 8104.10 (new)

REIMBURSEMENT OF LEGAL FEES AND COSTS

Effective for all reimbursement claims submitted in the Reimbursement System on and after January 1, 2020

State-imposed mediation

We are removing the requirement that the Servicer receive prior written approval from Freddie Mac for reimbursement of pre-foreclosure mediation attorney fees and additional hearings and court costs amounts for mediations where pre-foreclosure is required by State or local law. We are also adding expense limits for these fees and costs to Exhibit 57A, Approved Attorney Fees and Title Expenses.

Guide impacts: Section 9701.11, Exhibits 57A and 74

Other legal fees

We are establishing maximum reimbursement limits for the following existing expense codes and removing the requirement that Servicers must submit the written request for pre-approval (RPA) in the Reimbursement System:

• Permitting Servicer reimbursement for expense code 043006 (Guardian Ad Litem) up to $350

• Permitting Servicer reimbursement for expense code 014007 (Status/Conciliation/Case Management Conference) up to $350 for the State of Florida and up to $250 for other States in which this process is applicable

As a reminder, Servicers must ensure that the legal fees and costs incurred are reasonable and customary for the area in which the property is located. If amounts exceed current expense limits in Exhibit 57A, Servicers must request Freddie Mac’s approval prior to incurring the expense.

Guide impacts: Exhibits 57A and 74

FLOOD INSURANCE CONTINUOUS MONITORING

We are updating the Guide to highlight that Servicers must have policies, procedures and controls in place to meet the requirements for continuous monitoring of the flood insurance policy and the flood zone of a property securing a Mortgage owned by Freddie Mac.

A flood zone determination must be completed for each property securing a Mortgage sold to Freddie Mac. If the determination identifies the property as located in a special flood hazard area, the Servicer must ensure that a flood insurance policy was obtained at origination and must ensure adequate coverage is maintained throughout the life of the Mortgage. The Servicer must also have processes in place to identify any flood map changes and determine which Mortgaged Premises are required to have flood insurance based on the updated map.


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ADDITIONAL GUIDE UPDATES AND REMINDERS

Investor reporting requirements

Loan simulations

We are updating the Guide to clarify our operational procedures for Servicers that do not report a loan-level

transaction or do not clear all edits on reported loan-level transactions on a monthly basis for all Mortgages it

services for Freddie Mac. If a Servicer does not report a loan-level transaction or does not clear all edits by the end

of the Accounting Cycle, Freddie Mac will simulate a loan-level transaction and account for each unreported Mortgage

as delinquent based on the last reported DDLPI. Additionally, Servicers may be subject to a compensatory fee as

set forth in Section 8303.39.


Updates to Forms 1061, Certificate of Incumbency and Authority to Draft Against Custodial Accounts, and 1062, Sight Draft

To be consistent with the Investor Reporting Change Initiative implemented May 1, 2019, we are updating

Guide Forms 1061 and 1062, which are related to the Servicer’s Eligible Depository honoring Freddie Mac’s

sight drafts that it may present at any time against the Servicer’s Custodial Account and/or related Time Deposit

that the Servicer maintains.

Guide impacts: Forms 1061 and 1062

Updates to Exhibit 33, Acknowledgment Agreement Incorporated Provisions

We are updating Exhibit 33 to add the release forms that may be required in connection with financing transactions

involving Servicing Contract Rights. Adding the release forms to Exhibit 33 will make them readily available to both

Servicers and lenders and will provide greater transparency regarding Freddie Mac’s requirements.

We have also added a contractual provision regarding the Power of Attorney form required for purposes of Exhibit 33.


Lead-based paint reporting requirements

We are updating the Guide to remove specific procedures that require Servicers to proactively identify certain information related to lead-based paint or health code citations or violations on tenant-occupied properties built before 1978 in order to proceed with referral to foreclosure or a deed-in-lieu of foreclosure. Servicers must now report such issues to Freddie Mac only if they are or become aware of outstanding lead-based paint or health code citations or violations on these property types.

Guide impacts: Sections 9202.7, 9301.8 and 9301.26

Deed-in-lieu of foreclosure inspection requirements

We are updating the Guide requirements for closing a Freddie Mac Standard Deed-in-Lieu of Foreclosure to remove

the requirement that the Servicer secure the property at the time of possession and take all necessary actions to

protect the property from waste, damage and vandalism. We are making this change to align with guidance provided

in Bulletin 2019-12.


MI delegation of authority for modifications

We have updated our list of mortgage insurance delegations related to loss mitigation activity to include delegation

agreements for Mortgage modifications where the Servicer no longer needs to receive prior approval from the insurer

before approving the Mortgage modification. This list can be found at https://sf.freddiemac.com/general/delegated-

mortgage-insurance-companies.


https://sf.freddiemac.com/general/delegated-mortgage-insurance-companies

https://sf.freddiemac.com/general/delegated-mortgage-insurance-companies

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Updates to Forms 1065, Report of IRS Form 1099-A and Form 1099-C Filing, and 1065A, Report of IRS Form 1099-A and Form 1099-C Filing for a Senior Subordinate Trust

Freddie Mac Forms 1065 and 1065A are being updated with the following changes:

• Servicers are now required to provide their 5-character IRS Transmitter Control Code on Forms 1065 and 1065A

• The definition of “Fair Market Value” for the purpose of completing IRS Forms 1099-A and 1099-C has been expanded to include valuations in addition to the foreclosure bid price

• Freddie Mac’s mailing address has been updated

Guide impacts: Form 1065 and 1065A

Taxpayer First Act of 2019

Please read our notice (https://sf.freddiemac.com/articles/news/taxpayer-first-act-and-use-of-tax-return-

information) reminding clients about a provision in the Taxpayer First Act effective December 28, 2019, that requires

persons receiving tax return information to obtain express taxpayer consent to share that information.

Compliance with State privacy and consumer protection laws

As announced in Bulletin 2019-22, we have updated Section 1301.2 to address certain updates in State privacy and consumer protection laws, including the California Consumer Privacy Act that goes into effect on January 1, 2020.


Treatment and handling of confidential information

As announced in Bulletin 2019-22, we have restructured Section 1201.8 by separating it into two subsections:

• Revised subparagraph (a) provides greater specificity regarding requirements for receipt and treatment of Freddie Mac Confidential Information, and

• New subparagraph (b) clarifies Freddie Mac’s commitment to maintaining the confidentiality of certain nonpublic information provided by Seller/Servicers to Freddie Mac such as financial information and audit reports

We have also retitled and revised Section 8101.8 to clarify the Servicer’s obligations concerning information it obtains regarding the Borrower and the Mortgaged Premises that is not publicly available or that is required to be protected under applicable laws.

Confidential information and Transfers of Servicing

With this Bulletin, we have re-designated treatment of Transferor Servicer’s Purchase Documents relevant to a Transfer of Servicing from an exclusion under Section 1201.8(a)(iv) to the Transferee Servicer becoming an authorized party under Section 1201.8(a)(iii).


Retirement of Form 1074, Freddie Mac Reset Mortgage Confirmation

In Bulletin 2016-4, we removed Servicing requirements for Balloon/Reset Mortgages from the Guide. We are retiring

Form 1074, which was utilized in connection with the reset of Balloon/Reset Mortgages and is now obsolete.

Guide impact: Form 1074


For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, refer to the Bulletin 2019-23 (Servicing) Guide Updates Spreadsheet via the Download drop-down available at https://guide.freddiemac.com/app/guide/bulletin/2019-23.

https://sf.freddiemac.com/articles/news/taxpayer-first-act-and-use-of-tax-return-information

https://sf.freddiemac.com/articles/news/taxpayer-first-act-and-use-of-tax-return-information


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CONCLUSION


Sincerely,

Yvette W. Gilmore Vice President Servicer Relationship and Performance Management

TO: Freddie Mac Sellers and Servicers November 20, 2019 | 2019-24

SUBJECT: MORTGAGE INSURANCE MASTER POLICY UPDATES

Freddie Mac, under the oversight of the FHFA and in conjunction with Fannie Mae, has worked closely with its approved MIs to update and approve their master policies, related endorsements and other forms (collectively, “Master Policies”), which were last updated in 2014. These Master Policies provide mortgage insurance coverage to Seller/Servicers for individual Mortgages sold to Freddie Mac. Freddie Mac is the beneficiary of the Master Policies and in the event of a Borrower default, Freddie Mac has coverage for certain Mortgage-related losses.

The new Master Policies were improved in a number of key areas to:

• Promote greater certainty of coverage

• Align key terms and features across the MIs, and

• Simplify the policies

The following table lists some of the significant changes to the Master Policies.

Area of improvement Enhancement

Alignment of timelines across all Master Policies Major deadlines and time frames are now aligned across all MIs and Master Policies

Amended and Restated Rescission Relief Principles

Dated September 2018, the principles are consistent with Freddie Mac’s representation and warranty framework to provide rescission relief

Certainty of coverage Master Policy terms were revised to provide greater certainty of coverage

EFFECTIVE DATE AND REQUIREMENTS FOR THE NEW MASTER POLICIES

Every Mortgage sold to Freddie Mac that requires mortgage insurance and has an Application Received Date on and after March 1, 2020 must be insured under one of the new Master Policies. Mortgages insured under any other master policy will not be eligible for sale to Freddie Mac.

Every Mortgage sold to Freddie Mac that requires mortgage insurance and has an Application Received Date prior to March 1, 2020 may be insured under either:

• The new Master Policies, or

• Any pre-existing master policy between the Seller/Servicers and an MI, as long as the Seller/Servicer first confirms with the MI that such policy was approved by Freddie Mac for use as of the Application Received Date

As a reminder, in addition to requiring mortgage insurance to be issued by a Freddie Mac-approved MI, Guide Section 4701.1 requires Seller/Servicers to verify that the insurance coverage is also issued under a Freddie Mac-approved Master Policy.

We will update Guide Exhibit 10, Freddie Mac-Approved Mortgage Insurers, to include the new mortgage insurance Master Policy form numbers in a Bulletin prior to March 1, 2020.

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EXCEPTION FOR FREDDIE MAC ENHANCED RELIEF REFINANCE MORTGAGES®

Enhanced Relief Refinance Mortgages® may continue to be insured under their original master policies, regardless of the new Mortgage’s Application Received Date, subject to the following conditions:

• The new Mortgage must be insured pursuant to a modification of the existing mortgage insurance certificate, which may or may not involve the assignment of a new certificate number by the MI; and

• The MI did not issue an entirely new mortgage insurance certificate

CONCLUSION

Our goal is to review and update the Master Policies from time to time and to provide Seller/Servicers with guidance as they change. If you have any questions about the changes announced in this Bulletin, please contact your Freddie Mac representative or call the Customer Support Contact Center at 800-FREDDIE. If you have any questions specific to the new Master Policies, please contact your MI directly.

Sincerely,


TO: Freddie Mac Sellers December 4, 2019 | 2019-25



Duty to Serve

• New flexibilities and additional guidance for Mortgages secured by properties that have energy and/or water efficiency improvements (GreenCHOICE MortgagesSM) – February 4, 2020

• Updates to our Credit Score requirements for Mortgages secured by Manufactured Homes – April 1, 2020

Income and employment

• Improvements to Loan Product Advisor® feedback messaging for our asset and income modeler (AIM) income offerings – March 8, 2020

• Updates to rental income requirements

• Revisions to our verification of employment requirements for Mortgages using Leave and Earnings Statements

2020 loan limits

• Updates to the Guide to reflect the increases in the 2020 loan limits for both base conforming and super

conforming Mortgages – January 1, 2020

“No cash-out” refinance Mortgage proceeds

• Update to allow proceeds from a “no cash-out” refinance Mortgage to be used to pay down junior liens – February 4, 2020

Credit reports

• Added specificity to our requirements for credit reports

eMortgages

• Integration of third-party eNote custodians for eMortgages

• Addition of Secured Party and Secured Party Delegatee fields for eMortgages with Warehouse Lenders

• Updates to reflect eligibility of eMortgages for sale through Cash-Released XChangeSM

Post-Fund Data Correction tool

• Broad availability of the Post-Fund Data Correction tool for Seller/Servicers to electronically submit correction requests related to Mortgage data submitted by a Seller into Loan Selling Advisor® – July 1, 2020



EFFECTIVE DATE


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DUTY TO SERVE

GreenCHOICE MortgagesSM

Effective for Mortgages with Settlement Dates on and after February 4, 2020

Promoting housing affordability is fundamental to Freddie Mac's mission. In our Duty to Serve plan, which builds on our

mission, we committed to facilitate financing of energy- and/or water-efficient homes and energy- and water-efficiency

home improvements that help reduce home utility costs. Our objective is to help more families preserve affordability over

time. Additionally, Freddie Mac recently published a research paper demonstrating that energy- and water-efficient

homes have higher collateral value and may impose less financial stress on homebuyers than less efficient homes.

Last year, we announced GreenCHOICE MortgagesSM to facilitate the financing of energy- and water-efficiency home

improvements and expand a Borrower’s ability to pay for energy- and water-efficiency improvement projects over time.

Based on our research, and to further support the preservation of affordable housing, among other updates, we are

expanding Guide Chapter 4606 to:

• Introduce a “no cash-out” refinance option to pay off outstanding debt incurred to make energy and/or water efficiency improvements with a GreenCHOICE Mortgage

• Add new requirements for “no cash-out” refinance GreenCHOICE Mortgages for Home Possible® and HomeOneSM Mortgages with loan-to-value (LTV) ratios greater than 95% but less than or equal to 97%

• Add options in lieu of an energy report when determining the cost effectiveness of solar panels

We are also updating Guide Section 5601.12 to expand our collateral valuation guidance for properties with solar panels,

energy-efficiency improvements, and/or water-efficiency improvements, including the option to use the Appraisal

Institute’s Residential Green and Energy Efficient Addendum in the appraisal process.

We are revising Section 6302.23 to update the delivery requirements for GreenCHOICE Mortgages. Sellers must enter

one of the following valid values for ULDD Data Point Investor Feature Identifier (Sort ID 368):

• "J08” to indicate a GreenCHOICE Mortgage, for a purchase or “no cash-out” refinance Mortgage to finance

energy- and/or water-efficiency improvements as described in Section 4606.4(a)

or

• "J28” to indicate a Duty to Serve (DTS) GreenCHOICE Mortgage to pay off outstanding energy debt, for a “no

cash-out” refinance Mortgage as described in Section 4606.4(b)

Guide impacts: Sections 4301.4, 4606.2, 4606.4, 4606.6, 5601.12, 6302.23 and Guide Exhibit 34

Credit Score requirements for Mortgages secured by Manufactured Homes

Effective for Mortgages with Settlement Dates on and after April 1, 2020

As part of our Duty to Serve Underserved Markets Plan, we are providing additional underwriting flexibilities to expand

eligibility for Mortgages secured by Manufactured Homes. This will increase affordable housing opportunities in the

Manufactured Home market.

Loan Product Advisor® Mortgages that are secured by Manufactured Homes where no Borrower has a Credit Score will

no longer be ineligible for purchase by Freddie Mac.

For Manually Underwritten Manufactured Home Mortgages that are secured by Primary Residences and are purchase or

“no cash-out” refinance transactions, the minimum Indicator Score requirements have been reduced as follows:

• From 680 to 640 for LTV ratios ≤ 75%, and

• From 720 to 680 for LTV ratios > 75%


https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/energy_efficiency_white_paper.pdf

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INCOME AND EMPLOYMENT

Asset and income modeler (AIM) income offering enhancements

Effective for Loan Product Advisor® submissions and resubmissions on and after March 8, 2020

After consulting with our Sellers, we are updating the Loan Product Advisor® feedback messages for our AIM income

offerings to provide greater transparency and produce more actionable messaging to help streamline the loan origination

process.

With these changes individual income sources may be eligible for representation and warranty relief even if the Mortgage

receives an income representation and warranty result of “NOT ELIGIBLE.” In such an instance, the Seller is required to

verify and document any supplemental income sources that were not assessed through Loan Product Advisor, but is not

required to further document the assessed income sources that qualify for the relief.

What is not changing

• How we determine whether a Mortgage is eligible for relief from enforcement of certain representations and

warranties

• Our “ELIGIBLE” feedback message indicating that the Mortgage is eligible for relief from enforcement of certain

selling representation and warranties related to the Borrower’s assessed income. As a reminder, for Mortgages

that receive an “ELIGIBLE” feedback message, if the Borrower has income from sources other than those

sources assessed by Loan Product Advisor, the Seller is not required to submit these additional income sources

to Loan Product Advisor. However, if the Seller does submit the additional income sources to Loan Product

Advisor, the Seller must verify and document that income in accordance with the Guide requirements. The Seller

will only receive representation and warranty relief for assessed income source(s).

• Our “NOT ELIGIBLE” feedback message indicating a Mortgage is not eligible for relief from enforcement of

certain selling representation and warranties related to the Borrower’s income.

What is changing

• A Mortgage that receives a Loan Product Advisor income representation and warranty result of “NOT ELIGIBLE”

may be eligible for relief from enforcement of certain representations and warranties for the assessed income

source(s) if:

➢ Loan Product Advisor returns a feedback message stating that the income verification report is sufficient to document that particular income source and no further documentation for that income source is required; and

➢ For all Borrower sources of income submitted to, but not assessed by, Loan Product Advisor, the Seller verifies and documents the income in accordance with the Guide

The new messaging will provide greater clarity as to the representation and warranty relief for which a Mortgage is

eligible, even in instances when Loan Product Advisor does not return an “ELIGIBLE” message.

• In addition, we are making the following enhancements to Loan Product Advisor:

➢ Suppressing inapplicable underwriting messages to better communicate actionable items

➢ Consolidating and retiring certain messages to create a more streamlined Feedback Certificate

Guide and Loan Product Advisor message updates

We are updating the Guide to reflect the impact of these Loan Product Advisor feedback message changes on the

requirements for the AIM income offerings. With these updates we are consolidating Sections 5901.6 and 5901.7 into

Section 5901.5. For ease of reference, Section 5901.5 will include a comprehensive chart for AIM using employer data

that details the available representation and warranty relief and corresponding verification and documentation

requirements. Similarly, Section 5903.5 has also been updated to feature a comprehensive chart concerning AIM using

tax return data.

The Loan Product Advisor message updates will be effective for all Loan Product Advisor submissions and resubmissions

on and after March 8, 2020. The updated Loan Product Advisor feedback messages will be communicated to Sellers prior

to March 8, 2020.

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Guide impacts: Sections 3401.9, 3401.17, 3402.5, 3402.8, 5302.3, 5302.5, 5901.4 through 5901.7, 5902.5 and 5903.3

through 5903.7

Rental income

In certain instances, when rental income is used to qualify the Borrower and a lease is used to determine net rental

income, Form 72 or 1000 is required to support the income reflected on the lease. In response to industry feedback, we

are updating our requirements to allow Sellers to provide bank statements, electronic transfer of rental payments, or

canceled rent checks, supporting two months’ receipt of rental income, in lieu of Form 72 or 1000.

Additionally, to provide enhanced specificity, the following updates have been made:

• Updating format and placement of certain charts to better reflect requirement differences for rental income from

property acquired or placed in service in the current calendar year versus rental income from property owned in

the prior calendar year

• Specifying that non-cash add backs, such as amortization, may be included in calculating net rental income

(when applicable); Form 92 has been revised to reflect this update

In addition, minor editorial changes have been made for ease of use.

Guide impacts: Section 5306.1 and Form 92

Verification of employment

We are revising our requirements to allow Sellers to use a Leave and Earnings Statement (LES) dated no more than 120

days prior to the Note Date to verify the Borrower's employment as part of the 10-day pre-closing verification (10-day

PCV).

This is an expansion of our current requirement that allows for use of an LES dated no more than 30 days prior to the

Note Date (or 31 days for longer months).

Guide impact: Sections 5302.2, 5303.2 and 5303.3

2020 LOAN LIMITS

Effective for Mortgages with Freddie Mac Funding or Settlement Dates on and after January 1, 2020

As announced in our November 26, 2019 Single-Family News Center article, the FHFA has increased the maximum base conforming and designated high-cost area loan limits effective January 1, 2020. Freddie Mac super conforming Mortgages are subject to the loan limits for designated high-cost areas. The loan limits, effective for Mortgages with Freddie Mac Funding or Settlement Dates on and after January 1, 2020, are as follows:

Maximum loan limits

Property type

On and before December 31, 2019 On and after January 1, 2020

Maximum base conforming loan limits1

Maximum super conforming loan limits1, 2



Mortgages secured by 1-unit properties

$484,350 $726,525 $510,400 $765,600


$620,200 $930,300 $653,550 $980,325


$749,650 $1,124,475 $789,950 $1,184,925

https://sf.freddiemac.com/articles/news/loan-limits-for-2020-are-increasing

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Maximum loan limits

Property type

On and before December 31, 2019 On and after January 1, 2020






$931,600 $1,397,400 $981,700 $1,472,550

1Except for Mortgages secured by properties in Alaska, Hawaii, Guam and the U.S. Virgin Islands

2 Actual loan limits for specific counties in high-cost areas, as determined by the FHFA, may be lower than the maximum permitted loan limit listed above. Visit the FHFA loan limits web page for specific loan limits for each high-cost area.

The maximum base conforming loan limits for Mortgages secured by properties in Alaska, Hawaii, Guam and the U.S. Virgin Islands will be 50% higher than those listed above. There are no properties in Alaska, Hawaii, Guam and the U.S. Virgin Islands with loan limits higher than the applicable base conforming limits for 2020. As a result, there are no super conforming limits specific to Alaska, Hawaii, Guam or the U.S. Virgin Islands for 2020.

For super conforming Mortgages, notwithstanding the maximum loan limits shown in the above chart, Sellers must review the 2020 loan limits permitted for the specific county in which the property is located. The FHFA provides this information on its web site.


NO CASH-OUT REFINANCE MORTGAGE PROCEEDS

Effective for Mortgages with Settlement Dates on and after February 4, 2020, but Sellers can implement revisions

immediately

We are revising the Guide to allow proceeds of a "no cash-out" refinance to be used to pay down any junior liens that are

secured by the Mortgaged Premises and were used in their entirety to acquire the subject property. This is an expansion

of our current requirement that allows proceeds of a "no cash-out" refinance Mortgage to be used to pay off any junior

liens used for this purpose.

Loan Product Advisor® feedback messages will be updated by February 4, 2020 to reflect this change.


CREDIT REPORTS

We are updating our requirements to specify that when a Borrower has frozen credit, no more than one national credit

repository can have frozen credit information. This requirement and all requirements related to credit reports apply to both

Manually Underwritten and Loan Product Advisor Mortgages.


EMORTGAGES

Third-party eNote custodians for eMortgages

To address barriers to eMortgage adoption, we developed an industry-first automated certification process and have

performed eNote custodian duties for several years. Some third-party custodians are now able to perform these duties. To

provide a one-stop shop for custodial needs with the benefits of the automated certification process to Seller/Servicers,

we are providing our automated certification logic to third-party eNote custodians and building system-to-system

integrations with them.

Interested third-party custodians should contact the Freddie Mac eMortgage team at

[email protected] to discuss the approval requirements and process.

https://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limits.aspx

https://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limits.aspx

mailto:[email protected]

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Seller/Servicers must execute Form 1035A (a new addendum to Form 1035 for eMortgages) with Freddie Mac and an

approved third-party eNote custodian before delivering eNotes, including Pledged eMortgages, to an approved third-party

eNote custodian.

As a result of these changes, we have updated the Guide to add references to Freddie Mac approved third-party eNote

custodians.

Guide impacts: Sections 1402.2, 1402.8, 1402.10, 1402.11, 1402.16, 1402.17, 2202.3, Form 1034T, Form 1035A and

Form 1036

Addition of Secured Party and Secured Party Delegatee fields

On November 18, 2019, MERS® introduced two additional MERS eRegistry authorized rights holder fields titled “Secured

Party” and “Secured Party Delegatee” (as defined in Section 1402.2) for eNotes. The Secured Party field is meant for the

use of any stakeholder (such as a Warehouse Lender) that has a security interest in an eMortgage but does not want to

be named in the Controller field. The Secured Party Delegatee field allows a Secured Party to authorize another

participant to take certain actions on its behalf with respect to any eNote.

Section 1402.16 has been updated to reflect operational process changes as a result of these MERS enhancements.


Eligibility of eMortgages through Cash-Released XChangeSM

Effective October 21, 2019

As announced on October 21, 2019, Sellers approved to participate in Cash-Released XChange may now deliver

eMortgages through that program if their Purchase Documents include the eMortgage negotiated term of business.

We are updating the Guide to reflect the eligibility of eMortgages and to add specific document custody requirements for

these Mortgages. For deliveries and Transfers of Servicing of eMortgages sold through Cash-Released XChange,

Seller/Servicers must use Freddie Mac as the eNote custodian; for all other Mortgages, Sellers selling through Cash-

Released XChange and Servicers participating in that process must use The Bank of New York Mellon Trust Company,

N.A. (BNYM) as the Document Custodian.

Guide impacts: Section 2202.3, 6101.7, 6301.8, 6304.1, 7101.9, Glossary A-I, Directory 4 and Exhibit 28A

POST-FUND DATA CORRECTION TOOL

Effective July 1, 2020, but Seller/Servicers are encouraged to use the tool beginning on December 9, 2019

On December 9, 2019, Freddie Mac is launching the Servicing Gateway, an all-in-one portal that will provide access to

nearly all Freddie Mac Servicing Tools. One of the tools available in Servicing Gateway will be the Post-Fund Data

Correction tool, a web-based application that allows a Seller/Servicer to electronically submit data correction requests

related to Mortgage data submitted by a Seller into Loan Selling Advisor®.

The Post-Fund Data Correction tool (the “Tool”) has been available to certain Freddie Mac Sellers in a limited release.

With this Bulletin we are making it broadly available, and updating the Guide to add Section 2403.12, which includes

requirements regarding corrections by means of the Tool.

As announced in Servicing Bulletin 2019-23, new users may request access to the Tool by:

• Seller/Servicer’s Access Manager Administrator providing access to authorized users; or

• For Seller/Servicers that do not use Access Manager, by completing and submitting Form 907, Post-Fund Data

Correction Tool Authorized User Role Form, available on the Post-Fund Data Correction Tool page

Effective December 9, 2019, Seller/Servicers already using the Tool will access it through Servicing Gateway. These

Seller/Servicers have been notified of access instructions.

https://sf.freddiemac.com/articles/news/get-ready-for-servicing-gateway-on-december-9

https://sf.freddiemac.com/working-with-us/selling-delivery/post-fund-data-correction-tool



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Transition Period

Seller/Servicers will be required to electronically submit data corrections using the Tool beginning July 1, 2020. Prior to

July 1, 2020, Seller/Servicers not already using the Tool may continue to submit corrections using the Post-Fund Data

Correction Form using the Excel spreadsheet format found on Post-Fund Data Correction Tool page.

Training

For more information regarding Servicing Gateway refer to Bulletins 2019-19, 2019-21 and 2019-23. For detailed training,

view the Post-Fund Data Correction Tool Overview tutorial which provides a detailed look at the Tool. Topics include

login and navigation, searching for existing loan and post-fund data correction records, importing and submitting data

correction requests.



Taxpayer First Act - use of tax return information


In connection with the Taxpayer First Act (the “Act”), which requires the taxpayer’s consent to be obtained prior to any

disclosure of the taxpayer’s tax return or tax return information to a third party, we are adding language to the Guide

requiring that, if a signed consent form is required under the Act, a signed copy must be maintained in the Mortgage file.

Whether the Seller is required to obtain the consent form is based on the language in “the Act” and not on the Settlement

Date of the Mortgage.


Representation and warranty framework reminder

We are updating our payment history requirements to include a reminder that Servicers must report the Borrower’s

payment status of the Mortgage in accordance with Section 8303.3.


CreditSmart® - Steps to Homeownership Tutorial rebranding


The CreditSmart® - Steps to Homeownership tutorial, focused on consumer education and financial literacy will be

relaunched with the name CreditSmart® Homebuyer U effective December 31, 2019. The new tutorial will focus on

homeownership education and seek to build a strong foundation of education and understanding of the

homebuyer/homeowner experience. Any reference to “financial literacy” will change to “homeownership education” with

this rebrand.

Loan Product Advisor® feedback messages will be updated by February 4, 2020. Loan Product Advisor will continue to

display “CreditSmart - Steps to Homeownership” for the interim period.



As announced in Bulletin 2019-22, we have revised requirements relating to treatment and handling of confidential

information in Section 1201.8. In Bulletin 2019-23 we further revised Section 1201.8 to re-designate treatment of

Transferor Servicer's Purchase Documents relevant to a Transfer of Servicing from an exclusion under

Section 1201.8(a)(iv) to the Transferee Servicer becoming an authorized party under Section 1201.8(a)(iii).


For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, access the

Bulletin 2019-25 (Selling) Guide Updates Spreadsheet via the Attachments drop-down available at

https://guide.freddiemac.com/app/guide/bulletin/2019-25.


https://freddiemac.elearningserver.com/7733002707

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CONCLUSION

If you have any questions about the changes announced in this Bulletin, please contact your Freddie Mac representative

or call the Customer Support Contact Center at 800-FREDDIE.

Sincerely,


SUBJECT: SELLING UPDATES€¦ · Guide impact: Chapter 4305 Student loans Effective for Mortgages...

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