SUBJECT: SUBSEQUENT TRANSFERS OF SERVICING AND INTRA-SERVICER PORTFOLIO MOVES

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1 TO: Freddie Mac Servicers July 6, SUBJECT: SUBSEQUENT TRANSFERS OF SERVICING AND INTRA-SERVICER PORTFOLIO MOVES In Guide Bulletin , we announced the automation of the following via the Freddie Mac Service Loans application: Requests for Subsequent Transfers of Servicing (STOS) Requests by a Servicer that wishes to move the Servicing related to specific Mortgages from one Seller/Servicer number to another ( Intra-Servicer Portfolio Move ) Updates to the Service Loans application for these changes that were scheduled to be made on July 23, 2018 have been postponed and will now be implemented on August 13, Due to this delay, we are also postponing the temporary STOS moratorium previously scheduled for July 9, 2018 through July 20, To facilitate the transition to the new process for STOS requests via the Service Loans application, we will implement a temporary moratorium on STOS and Intra-Servicer Portfolio Move requests from July 30, 2018 through August 12, If a Servicer intends on requesting Freddie Mac approval for an STOS or Intra-Servicer Portfolio Move request prior to the new moratorium taking effect, Servicers must submit such STOS requests via Guide Form 981 and Intra-Servicer Portfolio Move requests via Form 982, as applicable, until July 29, The retirement of these forms has now been postponed to August 13, All STOS requests submitted prior to July 30, 2018 will be reviewed and, if applicable, approved no later than 2:00 p.m. Eastern time on August 10, We are in the process of updating the Service Loans User Guide to reflect the STOS and Intra-Servicer Portfolio Move request processes via the Service Loans application. We will announce its availability in a future communication. Guide impacts: Guide Sections through , , through , , , , , Forms 902, 902SA, 981, 1034T, Directory 3 and Glossaries A-I and R-Z 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, Yvette W. Gilmore Vice President Servicer Performance Management

2 TO: Freddie Mac Sellers July 25, SUBJECT: SELLING UPDATES This Guide Bulletin announces: Lender credit Updates to our lender credit requirements, including permitting Sellers to apply excess lender credit as a principal curtailment of the Mortgage Leasehold estates Updates to our leasehold estate requirements Delivery instructions Updates to our delivery requirements for automated collateral evaluation appraisal waivers Updates to our homeownership education delivery instructions Updates to align the Guide with the Uniform Loan Delivery Dataset (ULDD) specification addendum 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. LENDER CREDIT Currently, the Guide requires that the amount of a lender credit not exceed the Borrower s Closing Costs. To assist Sellers when the amount of lender credit exceeds the Borrower s Closing Costs we will now allow Sellers to apply any excess lender credit as a principal curtailment toward the Mortgage. This includes situations where regulatory requirements do not permit reduction of the amount of the lender credit without re-disclosure to the Borrower, which may delay closing. Additionally, we are updating the Guide to state the following requirements: The lender credit must be derived from an increase in the interest rate (i.e., premium pricing) or be funded directly by the Seller The lender credit must not require repayment The Seller must not use funds from a third party to provide a lender credit For lender credit applied as a principal curtailment, see Guide Section for existing delivery instructions for ULDD Data Point Aggregate Loan Curtailment Amount (Sort ID 438). For Home Possible Mortgages, Section has been updated with delivery instructions to address lender credit in ULDD Data Points Closing Cost Source Type (Sort ID 152) and Closing Cost Funds Type (Sort ID 154). The applicable Loan Product Advisor feedback message has been updated to align with this change. Guide impacts: Sections , and

3 LEASEHOLD ESTATES Currently, the leasehold estate language in Guide Chapter 5704 includes numerous requirements for lease provisions, project eligibility and ground lease specifications. We conducted a comprehensive review of our leasehold estate requirements and as a result are streamlining our policies to make it easier for Sellers to determine eligibility for leasehold Mortgages. Key highlights of the changes include: Eliminating requirements specific to nondisturbance and attornment agreements. Although we no longer have specific requirements related to the nondisturbance and attornment agreements, such an agreement is part of the lease and must comply with all lease related requirements. Focusing on lease provisions commonly required in the industry, and removing those terms that apply to leasehold ownership situations that are more unique due to lack of standardization of leasehold estate lease provisions Removing some elements of the Seller s review of the lease provisions for determining increases in the basic rents and amounts due under the lease such as taxes, insurance and utilities, and use fees and operating expenses Simplifying our requirements for projects on leasehold estates by eliminating redundancies and referring to the applicable sections of the Guide No longer requiring Guide Form 461, Ground Lease Analysis, to be maintained in the Mortgage file, resulting in the form being deleted from the Guide Guide impacts: Sections , , , , , , , , and Form 461 DELIVERY INSTRUCTIONS Automated collateral evaluation appraisal waiver In response to Seller questions, we are updating the delivery instructions for ULDD Data Point, Property Structure Built Year (Sort ID 67) to note the allowable value of 9999 for Mortgages with an automated collateral evaluation appraisal waiver. Guide impacts: Sections and Homeownership education Effective July 29, 2018 We are updating the delivery instructions for homeownership education to describe more clearly when to enter the valid values of ULDD Data Points, Counseling Confirmation Type/Counseling Confirmation Type Other Description (Sort IDs 576/577) and Counseling Format Type/Counseling Format Type Other Description (Sort IDs 578/579). Guide impacts: Sections , and Uniform Loan Delivery Dataset specification addendum As announced in the July 10, 2018 Single-Family News Center article, Freddie Mac published the Uniform Loan Delivery Dataset (ULDD) specification addendum included in Appendix A Freddie Mac XML Data Requirements V Sellers should review the ULDD Addendum in its entirety to determine its impacts to their systems or processes and for applicable effective dates. We are making the following updates in Chapter 6302 to align with implementation note clarifications in the ULDD Addendum: ULDD Data Points Total Monthly Income Amount (Sort ID 291), Total Monthly Proposed Housing Expense Amount (Sort ID 292) and Borrower Qualifying Income Amount (Sort ID 573) Page 2

4 ULDD Data Points, Down Payment Amount (Sort ID 172), Down Payment Source Type, (Sort ID 173) and Down Payment Type (Sort ID 175) for all Mortgages including affordable Mortgages We are also incorporating changes into the ULDD Addendum that are announced in this Bulletin as well as in Bulletins , , and Guide impacts: Sections , , and ADDITIONAL GUIDE UPDATES Contingent liabilities and assigned debt Currently, a mortgage debt that is a contingent liability may be excluded from the Borrower s monthly debt payment-to-income ratio if it meets certain requirements and the Seller confirms the Borrower is not on the title for the mortgaged property. Additionally, a secured debt, including a Mortgage, that has been assigned to another by court order, such as divorce decree, may be excluded from the Borrower s monthly debt payment-to-income ratio when the Seller documents the court order and the transfer of title. To provide Sellers with additional flexibility and to address Seller requests, we are no longer requiring the Seller to document: That the Borrower is not on the title for the mortgaged property, or The transfer of title of the mortgaged property Guide impact: Section Form 1077 alternative Currently, a completed Form 1077, Uniform Underwriting and Transmittal Summary, must be included in the Mortgage file for each Mortgage sold to Freddie Mac. To provide additional flexibility for Sellers, we are updating the Guide to permit an alternative equivalent form (e.g., a Feedback Certificate) to be included in the Mortgage file in lieu of Form Although a signature field is included on the Form 1077, the contact signature is not required on Form 1077 or an equivalent form submitted to Freddie Mac. Guide impact: Section Unfulfilled Best Efforts Contracts and Mortgages and Seller recordkeeping responsibility In response to Seller requests to support pipeline management, Loan Selling Advisor will be updated to automatically delete all Best Efforts Contracts and Mortgages that are in a contract status of Unfulfilled for six months from contract expiration date. To ensure all applicable cash Best Efforts Contracts and Mortgages are deleted from the system, Mortgages must not have a Form 1034E, Custodial Certification Schedule, built. The new deletion process will be retroactive and apply to all existing pipeline Best Efforts Contracts and Mortgages with both an Unfulfilled contract status and the absence of a built Form 1034E as of August 27, Existing obsolete pipeline Best Efforts Contract and Mortgages will be deleted over time and not all at once upon implementation of this change. We are also updating Section (k)(iv) to clarify Sellers responsibility for recordkeeping with respect to data, information and other Output (as defined in Section ). Guide impact: Section ARM Note Rate In response to Seller inquiries, we are clarifying the requirements for limits on Note Rate adjustments in Section and adding a reference to Section for information on ARM underwriting requirements and permissible teaser rates. Guide impact: Section Page 3

5 GUIDE UPDATES SPREADSHEET For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, refer to the Bulletin (Selling) Guide Updates Spreadsheet available at 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 Senior Vice President Single-Family Sales, Marketing and Relationship Management Page 4

6 TO: Freddie Mac Sellers August 29, SUBJECT: SELLING UPDATES This Guide Bulletin announces: Home Possible Mortgages Enhanced credit flexibilities and simplified Home Possible Mortgage requirements through the consolidation of Home Possible and Home Possible Advantage into a single offering October 29, 2018 Mortgage eligibility and credit underwriting Updates to our payment calculation requirements for student loans November 1, 2018 Flexibilities to our cash back requirements for no cash-out refinance Mortgages October 27, 2018 Updates to the time frame for evaluating inquiries on the credit report September 9, 2018 Removal of special delivery requirements for Mortgages with Borrower income commencing after the Note Date An extension of the effective date for rental income requirements announced in Bulletins and March 1, 2019 Guide Form 71, Market Conditions Addendum to the Appraisal Report The deletion of the requirement that Form 71 be provided with all appraisal reports Condominium Project insurance Updates to our property, flood, liability and fidelity or employee dishonesty insurance requirements An increase to the allowable deductible for Condominium Projects 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. HOME POSSIBLE MORTGAGES Effective October 29, 2018 In response to Seller feedback, we evaluated our requirements for Home Possible and Home Possible Advantage Mortgages and are combining Home Possible and Home Possible Advantage into one offering in an effort to better help Sellers originate Home Possible Mortgages. The revised Home Possible Mortgage offering will: Provide Sellers with ease of use and operational efficiencies by eliminating the need to maintain two separate offerings

7 Continue to meet the needs of low- and moderate-income Borrowers looking for a 3% down payment option by offering the same loan-to-value (LTV) and total LTV (TLTV) ratio flexibilities currently offered for Home Possible Advantage. Certain requirements and permissible loan attributes will continue to vary depending on LTV and TLTV ratios. Expand access to credit by providing new flexibilities that will help increase homeownership opportunities for more Borrowers The following chart compares the current requirements for Home Possible and Home Possible Advantage Mortgage offerings to the revised requirements for the consolidated Home Possible Mortgage offering: Category Non-occupant Borrower Ownership of other property Current requirements for Home Possible and Home Possible Advantage Mortgages offerings Not permitted Permitted if the Borrower doesn t occupy the property and: The Borrower inherited the property and shares ownership, or The Property is owned with another party and debt for the property was assigned to another party (e.g., a divorce decree), or The Borrower is cosigner/guarantor on the Mortgage debt and someone other than the Borrower is making payments on the debt for the most recent 12 months New requirements for the consolidated Home Possible Mortgage offering Permitting non-occupant Borrower(s) on Mortgages secured by 1-unit properties when the: LTV/TLTV*/ Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratio is less than or equal to 95% for Loan Product Advisor Mortgages LTV/TLTV*/HTLTV ratio is less than or equal to 90% for Manually Underwritten Mortgages Debt payment-to-income (DTI) ratio is less than or equal to 43% based on the occupying Borrower s income for Manually Underwritten Mortgages *A TLTV ratio of less than or equal to 105% is permitted for Mortgages with Affordable Seconds Permitting ownership of other property without any restrictions Page 2

8 Category Super conforming Mortgages Secondary financing 5/5, 5/1, 7/1 and 10/1 ARMs for Mortgages secured by 3- to 4-unit properties Verification of rental income payments from the subject 1-unit property Maximum debt payment-toincome ratio for Manually Underwritten Mortgages Current requirements for Home Possible and Home Possible Advantage Mortgages offerings Not permitted All secondary financing is permitted for Home Possible Mortgages with LTV/TLTV ratios less than or equal to 95%. Secondary financing for Home Possible Advantage Mortgages with LTV/TLTV ratios greater than 95% must be an Affordable Second. Since the Affordable Second cannot be a HELOC, HELOCs are only permitted for Mortgages with HTLTV ratios less than or equal to 95% Not permitted Evidence of receipt of regular payments of rental income for the past 12 months is required 45% for Home Possible Mortgages 43% for Home Possible Advantage Mortgages New requirements for the consolidated Home Possible Mortgage offering Permitting super conforming Mortgages, when the Mortgage: Is submitted through Loan Product Advisor and receives an Accept Risk Class Has an LTV/TLTV/HTLTV ratio less than or equal to 95% (A TLTV ratio of less than or equal to 105% is permitted for Mortgages with an Affordable Second) Permitting standard secondary financing, including HELOCs, for a Mortgage with a TLTV/HTLTV ratio of less than or equal to 97% (when the TLTV ratio is greater than 97%, the secondary financing must be an Affordable Second) Permitting these products for Home Possible Mortgages with LTV/TLTV/HTLTV ratios less than or equal to 75% Evidence of receipt of regular payments of rental income for at least nine of the past 12 months, is required The income must be averaged over 12 months when fewer than 12 months of payments are documented 45% for all Manually Underwritten Home Possible Mortgages Credit Fees in Price for Home Possible Mortgages are not changing; however, due to the additional flexibilities, certain Credit Fees in Price may now apply to the Home Possible Mortgage Cap. Refer to Guide Exhibit 19 for all Credit Fees in Price. Page 3

9 Loan Product Advisor Beginning on October 29, 2018, Sellers can submit Home Possible Mortgages through Loan Product Advisor with either the Offering Identifier for Home Possible Mortgages or Home Possible Advantage Mortgages with the same experience and requirements. Sellers may continue to use the Home Possible Advantage Offering Identifier until its retirement, which will occur on or after September 30, Delivery requirements For Home Possible Advantage Mortgages originated before October 29, 2018 and delivered on and after October 29, 2018, Sellers may enter either the valid value Home Possible Mortgage or Home Possible Advantage for ULDD Data Point Loan Program Identifier (Sort ID 404). On or after September 30, 2019, Loan Selling Advisor will be updated to retire the valid value Home Possible Advantage. Additional resources and Guide updates Sellers are encouraged to register for our What s New with Home Possible webinar and visit The Learning Center for additional resources. We are updating Guide Sections , through , through , , , , , , , , Exhibits 19 and 25 to reflect these changes. MORTGAGE ELIGIBILITY AND CREDIT UNDERWRITING Student loans Effective for Mortgages with Settlement Dates on and after November 1, 2018; however, Sellers may implement immediately Currently, student loans that are in repayment are subject to different requirements than those that are in deferment or forbearance. In response to Seller feedback, we reviewed our requirements for liabilities included in the monthly debt payment-to-income ratio, specifically student loan liabilities, and are aligning our requirements for student loans that are in repayment, deferment or forbearance, providing one simplified approach for the calculation of student loan debt. For student loans in Repayment Deferment Forbearance Previous requirements Use the greater of: The payment amount on the credit report 0.5% of the original loan balance 0.5% of the current loan balance Use the greater of: The payment amount on the credit report 1% of the original loan balance 1% of the outstanding balance New requirements If the monthly payment amount is greater than zero, use the monthly payment amount reported on the credit report or other file documentation, or If the monthly payment amount reported on the credit report is zero, use 0.5% of the outstanding balance, as reported on the credit report Loan Product Advisor feedback messages will be updated by November 1, 2018 to reflect these changes. Guide impact: Section Page 4

10 Cash back requirements for no cash-out refinance Mortgages Effective for Mortgages with Settlement Dates on and after October 27, 2018; but Sellers may implement immediately Previously, for a no cash-out refinance Mortgage, proceeds could be used to disburse cash to the Borrower (or other payee) not to exceed 2% of the new refinance Mortgage, or $2,000, whichever was less. To provide flexibility in the disbursement of cash back to the Borrower, we are revising our requirements to permit cash back up to the greater of 1% of the Mortgage amount or $2,000. Guide impacts: Sections , and Inquiries on the credit report Effective September 9, 2018 In response to Seller feedback and requests, we are reducing the required time frame for evaluating inquiries on the credit report from 120 days to 90 days. Guide impact: Section Income commencing after the Note Date Currently, Sellers are required to deliver ULDD Data Point Investor Feature Identifier (Sort ID 368) of H57 if a Mortgage is originated using income commencing after the Note Date to qualify the Borrower. In response to Seller feedback, we are removing the requirement that Investor Feature Identifier (IFI) H57 be delivered for these Mortgages. As a result, delivery requirements for income commencing after the Note Date will be removed from the Guide. Loan Selling Advisor will be updated on November 29, 2018 to prevent the delivery of IFI H57. Guide impacts: Sections , and Exhibit 34 Extension of effective date for rental income requirements announced in Bulletins and Effective for Settlement Dates on and after March 1, 2019 In Bulletin , we extended the effective date for the revised rental income requirements announced in Bulletin to Settlement Dates on and after November 30, The reason for the extension was to give us the opportunity to further review the Seller feedback we had received and consider if the requirements, format and/or language could be fine-tuned through additional specificity and/or revision for Seller ease of use. After the extended effective date was announced, we continued to receive feedback. To ensure all feedback is reviewed and considered, we are further extending the effective date to Settlement Dates on and after March 1, If, after reviewing the feedback we received, we determine further revisions will be made to the rental income requirements, the revisions will be announced in an October Bulletin and will be effective for Mortgages with Settlement Dates on and after March 1, Sellers may continue to originate, underwrite and deliver Mortgages based on either the rental income requirements announced in Bulletin , in their entirety, or those in effect prior to Bulletin , in their entirety. Guide impacts: Sections , , , , , , , Forms 91, 92, 998 and Glossary J-Q Page 5

11 FORM 71, MARKET CONDITIONS ADDENDUM TO THE APPRAISAL REPORT As part of our appraisal modernization efforts, we are no longer requiring that Form 71, Market Conditions Addendum to the Appraisal Report, be provided with all appraisal reports. The expected scope of work is not changing as the appraiser is still required to perform the analysis necessary to report and consider neighborhood and market conditions. If Sellers continue to require the use of Form 71, we will accept the form and there will be no operational impact. Guide impacts: Section and Form 71 CONDOMINIUM PROJECT INSURANCE Property, flood, liability and fidelity or employee dishonesty insurance In response to Seller/Servicer inquiries, we are updating our requirements for property, flood, liability and fidelity or employee dishonesty insurance to: Allow a Condominium Unit, including a Condominium Unit in a 2- to 4-unit Condominium Project, to be insured through an individual property insurance policy, in lieu of the condominium homeowners association (HOA) policy, if the condominium governing documents require. Common elements must be covered through the condominium HOA policy. Allow a Condominium Unit in a 2- to 4-Unit Condominium Project to be insured through an individual policy, in lieu of the condominium HOA policy for flood insurance, if the condominium governing documents require. Waive the liability insurance requirements for: Condominium Projects reviewed under the streamlined project review type Detached Condominium Unit Mortgages reviewed under the Detached Condominium Project review type Freddie Mac-owned no cash-out refinance Condominium Unit Mortgages meeting the requirements of Section (c) 2- to 4-Unit Condominium Projects that meet certain requirements Freddie Mac Relief Refinance Mortgages SM Same Servicer, Freddie Mac Relief Refinance Mortgages SM Open Access and Freddie Mac Enhanced Relief Refinance Mortgages Waive the fidelity or employee dishonesty insurance requirements for: Condominium Projects reviewed under the streamlined project review type Detached Condominium Unit Mortgages reviewed under the Detached Condominium Project review type Freddie Mac-owned no cash-out refinance Condominium Unit Mortgages meeting the requirements of Section (c) Freddie Mac Relief Refinance Mortgages Same Servicer, Freddie Mac Relief Refinance Mortgages Open Access and Freddie Mac Enhanced Relief Refinance Mortgages Guide impacts: Sections , , and Increased deductible for Condominium Projects Previously, the condominium homeowners association s policy deductible for damage due to fire, water (not caused by flooding) or wind could not exceed 5% of the limit maintained for building coverage. We will now allow Condominium Projects to have a higher deductible if it exceeds 5% due to a per unit deductible for named perils specific to a geographic area provided that the unit owner s HO-6 policy meets certain requirements. Page 6

12 Guide impact: Section ADDITIONAL GUIDE UPDATES Functions performed by third-party originators In response to Seller questions, we are specifying that it is acceptable for third-party originators to perform certain incomplete improvement requirements that are identified as obligations of the Seller. Additionally, Section has been updated to recognize functions that may be performed by third-party originators throughout the origination process. Sellers remain responsible for compliance with all Freddie Mac Purchase Documents. Guide impacts: Sections and Multiple contracts used to determine the purchase price For a purchase transaction, we define value as the lesser of the appraised value of the Mortgaged Premises on the Note Date or the purchase price of the Mortgaged Premises. In response to Seller questions, we are specifying that it is acceptable for multiple contracts to be combined when determining the purchase price of a Mortgaged Premises for a newly constructed property. Guide impact: Section General requirements for verifying documents In response to Seller questions, we are specifying that a picture of a document may be provided by the Borrower to provide verification of income, employment and assets. Guide impact: Section Lender gifts and grants for Home Possible Mortgages Effective May 20, 2019 We are updating the delivery instructions for Home Possible Mortgages originated with gifts and grants from the Seller as the originating lender to align the implementation note guidance with what was previously announced in Bulletin The note guidance instructs Sellers to deliver the valid value of Originating Lender for ULDD Data Point, Down Payment Source Type (Sort ID 173), and Grant for ULDD Data Points, Down Payment Type/Down Payment Type Other Description (Sort IDs 175/176). Loan Selling Advisor was updated on March 5, 2018 to accept the new valid values, which allows Sellers to begin delivering them as soon as they are able. Sellers will be required to deliver the new valid values on and after the ULDD Phase 3 mandate on May 20, Guide impact: Section Automation of Warehouse Lender release and transfer We have postponed the August 13, 2018 Loan Selling Advisor enhancements automating Warehouse Lenders release and transfer of their interests in Pledged Mortgages (previously announced in Bulletin ) until September 10, We are updating the Guide to reflect the new date. All Warehouse Lenders must use the new process announced in Bulletin to release Pledged Mortgages through Loan Selling Advisor for Forms 996E created on and after September 10, 2018; those created prior to that date may be submitted according to the requirements in effect prior to September 10, For additional information, please visit our Warehouse Financing Arrangements web page. Guide impacts: Sections , , , , , , , , , , through , through , , Forms 475, 900WHL, 996E, Glossaries A-I, J-Q and R-Z Page 7

13 Form 1077 alternative Effective July 25, 2018 In Bulletin , we announced an alternative equivalent form (e.g., a Feedback Certificate) could be included in the Mortgage file in lieu of Form 1077, Uniform Underwriting and Transmittal Summary. We are updating Section to align with this change. Guide impact: Section GUIDE UPDATES SPREADSHEET For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, refer to the Bulletin (Selling) Guide Updates Spreadsheet available at 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 Senior Vice President Single-Family Sales, Marketing and Relationship Management Page 8

14 TO: Freddie Mac Servicers September 18, SUBJECT: SERVICING UPDATES This Guide Bulletin announces: Borrower evaluation and solicitation Updates to our Borrower evaluation notices and solicitation letters January 1, 2019 Property inspections related to insurance loss settlements A new temporary reimbursement process for property inspections related to insurance loss settlements Investor Reporting Change Initiative Updates to the Servicer Success Scorecard July 1, 2019 We will not settle mortgage modifications on the first Business Day of the month May 1, 2019 Reporting third-party foreclosure sale redemptions Updates to our reporting requirements for third-party foreclosure sale redemptions December 1, 2018 Additional Guide updates and reminders Further updates and reminders as described in the Additional Guide Updates and Reminders section of this Bulletin EFFECTIVE DATE All of the changes announced in this Bulletin are effective immediately unless otherwise noted. BORROWER EVALUATION NOTICES AND SOLICITATION LETTERS Servicers are encouraged to begin using the revised evaluation notices and solicitation letters immediately, but must implement these updates by January 1, At the direction of the FHFA, under the Servicing Alignment Initiative and jointly with Fannie Mae, we are announcing revisions to our evaluation notices in Guide Exhibit 93 as well as our Borrower solicitation letters in Exhibits 1145, 1191, 1191A and 1191B. In response to industry feedback and to promote a better Borrower experience, we are improving the solicitation and evaluation processes by: Reducing the content for ease of Borrower consumption Simplifying and clarifying content and titles Reformatting for improved Borrower readability and understanding Removing redundancies and ambiguity Consolidating: Evaluation notices related to the same workout option (i.e., forbearance plans and modifications) Non-approval evaluation notices Adding housing counseling resources for Borrowers and information on how Borrowers can avoid foreclosure, including help for military servicemembers

15 Retiring the Home Affordable Modification Program SM (HAMP ) evaluation notices As a reminder, use of the evaluation notices and solicitation letters is optional; however, they illustrate the level of specificity that is deemed to be in compliance with the requirements of Guide Section The evaluation notices and solicitation letters may be altered in the Servicer s discretion as it deems necessary to meet the requirements of Guide Chapters 9203, 9206, 9208 and 9209, and to comply with disclosure and other requirements under applicable federal, State or local law. Guide impacts: Sections , , , , , , , , , Exhibits 93, 1145, 1191, 1191A and 1191B PROPERTY INSPECTIONS RELATED TO INSURANCE LOSS SETTLEMENTS Effective for all property inspections related to insurance loss settlements conducted on and after September 1, 2018 In Bulletin , we announced a temporary process that Freddie Mac uses to reimburse Servicers for property inspections related to insurance loss settlements in Eligible Disaster Areas. We are announcing a new temporary process (see below) that Freddie Mac will use to reimburse Servicers for expenses incurred for any property inspection related to insurance loss settlements ( Insurance-Related Property Inspection ) as required in Section , including those in Eligible Disaster Areas. With this change: Servicers must discontinue using the temporary reimbursement process announced in Bulletin for inspections ordered in accordance with Section The process announced in Bulletin must only be utilized for disaster-related exterior property inspections completed in accordance with Section We will reimburse Servicers for actual expenses incurred not to exceed $40 per required property inspection, including those in Eligible Disaster Areas and regardless of whether the property inspection is internal or external. Servicers may request reimbursement of expenses incurred for Insurance-Related Property Inspections above $40, but must provide documentation as to the reason for the additional expense. We will reimburse Servicers for expenses incurred for Insurance-Related Property Inspections completed on both current and delinquent Mortgages. For delinquent Mortgages, Servicers should use the new temporary process for reimbursement requests for expenses incurred for Insurance-Related Property Inspections in lieu of the Expense Reimbursement system s request for pre-approval (RPA) functionality. Required Insurance-Related Property Inspections In accordance with Section , a Servicer is only required to complete an Insurance-Related Property Inspection under the following scenarios: Mortgaged Premises not located in an Eligible Disaster Area If And the Mortgage is current And the Mortgage is delinquent Total insurance proceeds are less than or equal to $10,000 The Servicer does not need to complete a final property inspection The Servicer must complete at least one final property inspection Page 2

16 Mortgaged Premises not located in an Eligible Disaster Area If And the Mortgage is current And the Mortgage is delinquent Total insurance proceeds are greater than $10,000 but less than or equal to $40,000 The Servicer must complete one final property inspection The Servicer must complete at least one final inspection + additional inspections each time additional funds are disbursed beyond the initial insurance loss draft distribution Total insurance proceeds are greater than $40,000 The Servicer must complete at least one final property inspection + additional inspections each time additional funds are disbursed beyond the initial insurance loss draft distribution The Servicer must complete at least one final property inspection + additional inspections each time additional funds are disbursed beyond the initial insurance loss draft distribution Mortgaged Premises located in an Eligible Disaster Area If And the Mortgage is current And the Mortgage is delinquent Total insurance proceeds are less than or equal to $20,000 Total insurance proceeds are greater than $20,000 but less than or equal to $40,000 Total insurance proceeds are greater than $40,000 The Servicer does not need to complete a final property inspection The Servicer must complete one final property inspection The Servicer must complete at least one final property inspection + additional inspections each time additional funds are disbursed beyond the initial insurance loss draft distribution The Servicer must complete at least one final property inspection The Servicer must complete at least one final property inspection + additional inspections each time additional funds are disbursed beyond the initial insurance loss draft distribution The Servicer must complete at least one final property inspection + additional inspections each time additional funds are disbursed beyond the initial insurance loss draft distribution New temporary reimbursement process The new temporary process for reimbursement of expenses incurred for required Insurance-Related Property Inspections is as follows: Servicers may temporarily submit reimbursement requests for expenses incurred for Insurance-Related Property Inspections once per month via an Excel spreadsheet to NPL_Invoices@freddiemac.com. The subject line should reference "Insurance-Related Property Inspection expense reimbursement request," and the spreadsheet must include the following information for all Mortgages that the Servicer is seeking property inspection expense reimbursement for that month: Freddie Mac loan number Seller/Servicer payee code Page 3

17 Expense code (Interior Property Inspection) Amount of Total Insurance Proceeds Reimbursement request amount Property inspection expense date paid Vendor name If a Servicer is unsure of its Seller/Servicer Payee code, it may request that code by sending an to 104_Expense@freddiemac.com. INVESTOR REPORTING CHANGE INITIATIVE Servicer Success Scorecard Effective July 1, 2019 In previous Bulletins, we announced the Investor Reporting Change Initiative ( Initiative ) will convert our Single- Family investor reporting requirements to be closer to an industry standard and update our remittance cycles. Through the Initiative, Servicers will be encouraged, but not required, to report daily and Freddie Mac will draft principal and interest as well as payoff proceeds, via Automated Clearing House (ACH) transactions, directly from a Servicer s designated Custodial Account. With the implementation of the Initiative in May 2019, we will rename one of the existing metrics in the Investor Reporting section of the Servicer Success Scorecard and add a new metric. These changes will become effective on July 1, 2019 with the results and impacts reflected on the Servicer s July 2019 scorecard, which will be published at the end of August The Investor Reporting section of the Servicer Success scorecard will be suppressed on the June 2019 and July 2019 scorecards, which reflect the Servicer s May 2019 and June 2019 performance, respectively. Refer to Sections and and the Servicing Success Program web page for additional information about the Servicer Success Scorecard. Loan Level Reporting Compliance metric Although we believe the introduction of daily reporting will streamline investor reporting and increase operational efficiencies, we must have full reporting prior to drafting principal and interest due to Freddie Mac each month. To this end, we are introducing the Loan Level Reporting Compliance metric to the Servicer Success Scorecard. This pass/fail metric will measure the number of loans not reported as of the last loan level reporting on the P&I Determination Date divided by the number of total loans serviced. Any loans with outstanding edits will be excluded. The Servicer will receive a PASS or FAIL on this metric based on the following: Rank group 1 ( 100,000 loans serviced): less than 1% not reported, then PASS; equal to or greater than 1% not reported, then FAIL Rank group 2 (20,000-99,999 loans serviced): less than 2% not reported, then PASS; equal to or greater than 2% not reported, then FAIL Rank group 3 (10,000-19,999 loans serviced): less than 3% not reported, then PASS; equal to or greater than 3% not reported, then FAIL Rank group 4 ( 10,000 loans serviced): less than 4% not reported, then PASS; equal to or greater than 4% not reported, then FAIL Cash Deficiency metric Beginning in June 2019, Freddie Mac will draft monthly principal and interest payments and payoff proceeds directly from the Servicer s designated Custodial Account on the P&I Draft Date or Payoff Draft Date. In Page 4

18 recognition of the transition from Servicers remitting funds to Freddie Mac drafting, we are renaming the Cash Shortage metric as Cash Deficiency. Servicers should be mindful that notwithstanding the Cash Shortage metric on the Servicer Success Scorecard, they are still subject to the Draft Delay compensatory fee described in Section when they fail to have sufficient funds available for Freddie Mac to draft on the P&I Draft Date or the Payoff Draft Date. The pass/fail rules for the renamed metric are not changing. The pass/fail metric will measure the worst failed draft event in the current month as follows: If an attempted draft fails due to insufficient funds for more than two consecutive Business Days AND the draft amount is > $2,500, then FAIL If an attempted draft fails due to insufficient funds for more than two consecutive Business Days AND the draft amount is $2,500, then PASS If an attempted draft fails due to insufficient funds for less than two consecutive Business Days, regardless of the draft amount, then PASS This table summarizes the Investor Reporting metrics that will be included in the Servicer Success Scorecard after the Initiative is implemented: Current Metrics Future Metrics Changes Cash Shortage Cash Deficiency Renamed to reflect the change from remittance to draft No change to pass/fail rules Average Number of Days to Report Payoffs Aged Edits Past 30+ Days Average Number of Days to Report Payoffs Aged Edits Past 30+ Days Loan Level Reporting Compliance No change Exclude loan modifications with loan level reporting edits that settled in the current Accounting Cycle New metric introduced Additional resources Prior to implementation of the Initiative, the Freddie Mac Servicing Success Program Reference Guide will be updated to reflect these changes as well as other minor changes to other Investor Reporting Metrics due to the Initiative. Daily processing and settlement of mortgage modifications Effective May 1, 2019 When the Initiative is implemented, Freddie Mac will process and settle mortgage modifications daily, except on the first Business Day of each month. We are updating the Guide to reflect this exception. However, Servicers will still have the ability to report daily, including on the first Business Day of the month. Guide impact: Section REPORTING THIRD-PARTY FORECLOSURE SALE REDEMPTIONS Effective December 1, 2018 As result of the automation of settlement for third-party foreclosure sale transactions via Workout Prospector, we are removing the requirement that Servicers report a third-party foreclosure sale redemption transaction via Page 5

19 Guide Form 105. The Servicer will no longer be required to report these transactions to Freddie Mac and the following mailboxes will be retired: Guide impacts: Section and Directory 5 ADDITIONAL GUIDE UPDATES AND REMINDERS Form 479A, Single-Family Servicing Agent Certification and Agreement With the increase in market adoption of emortgages, they will become a larger portion of a Servicer s portfolio. Therefore, we are updating Form 479A to incorporate references to emortgages and the emortgage Guide. We are additionally: Changing the title of Form 479A to add Agreement to emphasize that a Master Servicer and its certified Servicing Agent are agreeing to various terms and conditions set forth in the form Updating the language governing the agreement s expiration date Guide impacts: Sections , , , and Form 479A Instructions for payment of fees from insurance loss proceeds to public adjusters or other third parties To align our requirements with uniform security instruments, we are updating the Guide to expressly prohibit payment of fees out of the insurance loss proceeds to any public adjuster or other third party retained by the Borrower to assist with the recovery of those proceeds, unless agreed to by Freddie Mac in writing. Guide impact: Section Condominium Project insurance updates from Bulletin We are notifying Servicers of the following Condominium Project insurance changes announced in Bulletin Servicers may apply these changes to all Mortgages that they currently service for Freddie Mac, including those purchased prior to the effective date of Bulletin Property, flood, liability or employee dishonesty insurance In response to Seller/Servicer inquiries, we have updated our requirements for property, flood, liability and fidelity or employee dishonesty insurance in Sections , , and to: Allow a Condominium Unit, including a Condominium Unit in a 2- to 4-unit Condominium Project, to be insured through an individual property insurance policy, in lieu of the condominium homeowners association (HOA) policy, if the condominium governing documents require. Common elements must be covered through the condominium HOA policy. Allow a Condominium Unit in a 2- to 4-unit Condominium Project to be insured through an individual policy, in lieu of the condominium HOA policy, for flood insurance, if the condominium governing documents require Waive the liability insurance requirements for: Condominium Projects reviewed under the streamlined project review type Detached Condominium Unit Mortgages reviewed under the Detached Condominium Project review type Freddie Mac-owned no cash-out refinance Condominium Unit Mortgages meeting the requirements of Section (c) Page 6

20 2- to 4-Unit Condominium Projects that meet certain requirements Freddie Mac Relief Refinance Mortgages SM Same Servicer, Freddie Mac Relief Refinance Mortgages SM Open Access and Freddie Mac Enhanced Relief Refinance Mortgages Waive the fidelity or employee dishonesty insurance requirements for: Condominium Projects reviewed under the streamlined project review type Detached Condominium Unit Mortgages reviewed under the Detached Condominium Project review type Freddie Mac-owned no cash-out refinance Condominium Unit Mortgages meeting the requirements of Section (c) Freddie Mac Relief Refinance Mortgages Same Servicer, Freddie Mac Relief Refinance Mortgages Open Access and Freddie Mac Enhanced Relief Refinance Mortgages Increased deductible for Condominium Projects Previously, the condominium homeowners association s policy deductible for damage due to fire, water (not caused by flooding) or wind could not exceed 5% of the limit maintained for building coverage. We have updated Section to allow Condominium Projects to have a higher deductible if it exceeds 5% due to a per unit deductible for named perils specific to a geographic area provided that the unit owner s HO-6 policy meets certain requirements. GUIDE UPDATES SPREADSHEET For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, refer to the Bulletin (Servicing) Guide Updates Spreadsheet available at 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, Yvette W. Gilmore Vice President Servicer Relationship and Performance Management Page 7

21 TO: Freddie Mac Sellers September 19, SUBJECT: SELLING UPDATES This Guide Bulletin announces: Authorized user accounts Updates to our requirements for authorized user accounts October 4, 2018 Super conforming Mortgages A revision to our requirements for super conforming Mortgages December 19, 2018 Automated cash specified payups process enhancements Automation of cash payups for fixed-rate Mortgages with specified loan attributes and removal of special delivery requirements October 15, 2018 Self-employment income The elimination of the requirement to obtain additional documentation or evaluate the income or loss from secondary self-employment when none of the income from self-employment is considered for qualification purposes 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. AUTHORIZED USER ACCOUNTS Effective for all submissions and resubmissions to Loan Product Advisor on and after October 4, 2018 Currently, for all Loan Product Advisor Accept Mortgages, the Seller must review the Selected Borrower credit report to determine if it includes Tradelines for which the Borrower is not the primary account holder, but is listed as an authorized user. If the report contains authorized user accounts, the Loan Product Advisor decision is considered valid only if additional requirements are met. As a result of enhancements being made to Loan Product Advisor, Sellers will only be required to meet additional requirements if the Feedback Certificate contains a feedback message instructing them to do so. If the Seller receives a feedback message regarding authorized user account(s), the message will indicate the following requirements: The Mortgage file must contain documentation evidencing that for each authorized user account: Another Borrower on the Mortgage owns the Tradeline in question, or The Tradeline is owned by the Borrower s spouse, or The Borrower has been making the payments on the account for the last 12 months OR