Tips for Delivering Early Funding Contracts

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1 This reference provides tips and instructional information for contracts delivered to Freddie Mac in the Selling System with the Early Funding Option under a negotiated term of business included in your Pricing Identifier Terms. The following topics are included: How the Early Funding Contract Option Works Complete the Early Funding Set-Up Process Create a Contract and Add Loans Complete the Loan Delivery Process Finalize the Contract Modify the Contract (Optional) How the Early Funding Contract Option Works The Early Funding (EF) contract option lets you settle your Guarantor and MultiLender pools up to 45 days before the Security Settlement Date (defined below). When you create a contract in the Selling System and select the Early Funding Indicator, there are two important dates to consider: The EF Target Date is the business day you select on which you expect to receive cash proceeds from Freddie Mac in exchange for the sale of the mortgages. EF contracts must reflect a Selling System Ready to Fund status on or before the EF Target Date. For example, if you select an EF Target Date of July 14, 2017, the contract must reflect a Ready to Fund Status on or before this date. Note that while EF contracts can move to a Ready to Fund Status on the same day as the EF Target Date (referred to as same-day funding ), Freddie Mac encourages you to complete all delivery requirements by 8 PM the business day before the EF Target Date. A same-day funding occurs when a contract moves to a Ready to Fund Status before 12 PM on the same business day as the Early Funding Target Date. When this occurs, Freddie Mac will make its best effort to fund the EF contract, but there is no funding guarantee. For assistance with same-day funding, please contact your Operations and Technology Manager in advance. The Security Settlement Date is the date in which the security is issued and Freddie Mac delivers the security to the Dealer per the Assignment of Trade (AOT) and/or retains the security if purchased by Freddie Mac. Similar to standard Guarantor and MultiLender contracts, in order for EF contracts to enter the Settlement Cycle, they must be in a Ready to Fund State by close of business on the Final Delivery Date per the contract terms. For information on the Early Funding Settlement Date, refer to your Pricing Identifier Terms for the negotiated term of business titled Provisions Relating to Early Funding. Note: In the Selling System, the Final Delivery Date will continue to be based on the Security Settlement Date and not the Early Funding Target Date. Early Funding contracts will move to a Ready to Fund Status after the following delivery requirements are met: Loans are evaluated and critical evaluation edits are cleared The applicable wire instructions (self-funded or Warehouse Lender wire instructions) have been assigned to the allocated loans in the Enter Settlement Details screen Notes are certified by the Document Custodian in the Selling System If loans will be delivered subject to a Warehouse Lender s interest, the Form 996EF is completed, executed and submitted by the Warehouse Lender to Freddie Mac and Freddie Mac has received, recorded and approved the Form 996EF in the Selling System Security Wire Instructions (a function known as View/Assign Wire Instructions) are set up in the Selling System for delivery of the PCs to Freddie Mac per the negotiated Early Funding term of business The Pool Valid status in the Selling System is Yes After the delivery requirements (noted above) are met, you must click the Finalize Early Funding Contract function to notify Freddie Mac that you are ready for funding. If you click Finalize the Early Funding Contract function before delivery requirements are met, you will receive error messages and the contract [pool] will not fund or advance to a Ready to Fund status. If delivery requirements are met and you fail to click Finalize Early June

2 Funding Contract, the contract will not fund early. It is important to monitor and manage your Early Funding contracts for timely contract fulfillment and funding. Note: The differences between delivery requirements for EF contracts and non-ef contracts is the accelerated timing for completion of Form 996EF, Form 1034E and Finalizing the EF contract. All requirements must be completed before the contract can advance to a Ready to Fund status, and completion must occur on or before 12:00 PM on the Final Delivery Date. Complete the Early Funding Set-Up Process The Set-Up Process must be complete before you create a contract in the Selling System with the Early Funding Option. The Set-Up Process provides that Freddie Mac has the information required to accept and process your Early Funding Contracts. It includes the following: Your acceptance of the Early Funding negotiated Term of Business titled Provisions Relating to Early Funding. If you use a Warehouse Lender, for each Warehouse Lender you must have: A Mortgage Warehousing Agreement relationship in accordance with Single-Family Seller/Servicer Guide Chapter A current approved Form 987E, Wire Transfer Authorization for a Warehouse Delivery on file with Freddie Mac, and if there is a change in the Warehouse Lender s wire instructions, you must provide Freddie Mac with a new Form 987E before the contract status changes to Ready to Fund. You must set up wire instructions in the Selling System for delivery of the PCs to Freddie Mac as follows: Selling System Data Field Name Completion Instructions Security Wire Instructions Name Freddie Mac Early Funding ABA Routing Number Abbreviated Bank Name FHLMC WASH Third Party/FRB Sub-Account Name 2BD1 Effective Date Enter the current date Expiration Date Leave this field to the default option, Indefinite, Further Instructions FFC TO ACCOUNT P61947 FED-TFS Setting up Security Wire Instructions in the Selling System is a two-step process that involves different levels of controls for distinct functions. Each organization must assign Selling System user roles of Set Up Administrator (sets up wire instructions) and Set Up Manager (approves the wire instructions) to separate individuals. Refer to: Selling System Security Wire Instructions for helpful information and step-by-step instructions on how to set up Security Wire Instructions; or Access Form 900, Selling System Authorized User Identification and Certification Form, to request user roles. If you do not intend to enter into Forward Trades with Freddie Mac, you must establish a relationship with one or more Dealers approved by Freddie Mac. You must designate your Points of Contact and the contact information, including the address, for each such individual to: EARLY_FUNDING_GROUP@freddiemac.com. o Freddie Mac will to your Points of Contact, a Term Sheet specifying the terms applicable to the Early Funding transactions. The Term Sheet will remain in effect for all Early Funding transactions initiated after the Effective Date specified in the Term Sheet unless/until it is modified by Freddie Mac. For more information on the Early Funding Set Up Process, refer to your Pricing Identifier Terms for the negotiated term of business titled Provisions Relating to Early Funding. Create a Contract and Add Loans To initiate an Early Funding transaction, you create a Guarantor or MultiLender contract in the Selling System. The example below illustrates how to create a contract manually: 1. From the Selling System s left navigation, go to the Guarantor menu and click Pricing & Contracts. 2. On the Request Price screen, complete the fields that display in the Request Price panel. Select the Pricing Identifier that contains your Early Funding terms of business, the Price Request Type of Contract, the Creation Method for the contract of Manual or Import and click Next. June Page 2

3 3. The Product Options panel displays. This panel contains several fields and includes the Early Funding Indicator, the Early Funding Target Date and the Settlement Date (Security Settlement Date). Complete all required data fields and click Next. In this example, we selected an Early Funding Target Date of May 26, To receive timely funding, this contract must reflect a Ready to Fund Status on or before12:00 PM, May 26, Exceptions to this requirement may be granted on a case-by-case basis. Contact your COTS Operations and Technology Manager for assistance. We also selected five Settlement Cycle Days and a Settlement Date (Security Settlement Date) of May 31, Please be aware that the Settlement Cycle Days applies to the Security Settlement Date only. With Early Funding contracts, it is important to pay close attention to the Early Funding Target Date so that all delivery requirements are met for timely funding. June Page 3

4 4. In the Servicing Options panel, complete all required fields and click Next. 5. THE BUBD Options panel displays. Select the Buyup/Buydown Program of Loan Level or Note Level, select the Buyup/Buydown Option and click Request Price. June Page 4

5 6. The Price Results screen displays. Review the price results information. If the pricing information is acceptable, click the acknowledgment checkbox and click Accept. June Page 5

6 The Contract Details screen displays. It contains summary level information on the contract terms and actionable Contract Options. In the example below, the Loan Summary Information section shows there are no loans allocated to the contract. 7. If you are ready to add loans to the contract, go to the Contract Options box and click: a. Add Loan(s) to Contract to select the loans you want to allocate to the contract, or b. Import Loans to import and simultaneously add loans to the contract. 8. After loans are added to the contract, the Contract Details screen will update with additional actionable options for the contract and the loans. June Page 6

7 For example, the Contract Options box will refresh and you will see the additional functions of Validate Pool and Finalize Early Funding Contract. In addition, a Loan Options box will display. It contains the functions you will use to prepare your loans for delivery and finalization. In the example below, the Loan Summary Section reflects the number of loans allocated and whether they have cleared edits, have been certified, etc. When loans are allocated to the contract, the Selling System automatically validates the pool. However, you will be required to re-validate the pool during the contract finalization process. For more information on the steps to Validate Pool, refer to the section titled Finalize the Contract. June Page 7

8 Complete the Loan Delivery Process You are now ready to finalize the loans for delivery using the functions in the Loan Options box. Note: The same functions are available on the left navigation; however, when you access these functions from the left navigation, you must first search for the loans. Follow the steps below to finalize the loans and prepare them for delivery: 1. Click Evaluate Loans to: a. Evaluate the loans against your Purchase Documents b. Clear all critical edits Refer to The Loan Summary section of the Contract Details to verify that all loans cleared edits. 2. Click Enter Settlement Details to make the selections noted in a, b & c below, then Click Update Loans a. Select Cash Wire Instructions if self-funded, or select the Warehouse Lender s Wire Instructions b. Select the Document Custodian c. Identify the loans you want to assign to the Warehouse Lender 3. Click Back to Contract. 4. Click Build Form 1034E and print Form 1034E, Custodial Certification Schedule. June Page 8

9 Finalize the Contract You are now ready to complete the remaining steps for contract finalization and fulfillment. With Early Funding contracts, the contract must reflect a Ready to Fund status before it can be funded. The functions to finalize the contract are in the Contract Options and the Loan Options boxes. Follow the steps below to complete contract finalization: 1. Assign Security Wire Instructions by clicking the View/Assign Wire Instructions link located in the Contract Options box. Select the Freddie Mac Wire Instructions, then click Add Wire and click Save Security Wire Instructions to receive the Assign Security Wire Instructions Confirmation. After receiving the confirmation, click the Back to Contract Details link. June Page 9

10 2. Click Back to Contract Details. 3. Go to the Loan Options box, click Build Form 996E to build and print Form 996EF and Appendix 1. Note: If there are loans in the contract that are assigned to different Warehouse Lenders, repeat the steps above to generate a separate Form 996EF for each Warehouse Lender. Note: The ULDD Data Points to identify the Warehouse Lender for Pledged Mortgages are shown below: Data Point Name Sort ID# Import Data or Manually Enter Data Warehouse Lender Indicator Sort ID Both Party Role Type Sort ID Import only Party Role Identifier Sort ID Both If you import these data points, you will not need to assign the Warehouse Lender on the Enter Settlement Details screen. If you import data, be sure to add these data points to your current ULDD delivery file. For more information on importing data, refer to tab 9 of Appendix D [XLS] Freddie Mac XML Data Requirements Reference Tool V Also, refer to Guide Section for delivery instructions. June Page 10

11 You can also export settlement details by individual Warehouse Lenders to simplify your reconciliation process. For more information and tips on delivering Warehouse Lender information and Form 996E, refer to Form 996E Tips and Best Practices [PDF] 4. Forward Form 996EF and Form 1034E to the Warehouse Lender and Document Custodian, respectively, for processing. Manage and monitor the contract to verify whether Form 996EF has been processed and the Notes are certified in the Selling System. 5. Before you initiate the final step to finalize the contract, Form 996EF must be processed and the Notes must be certified in the Selling System. You can easily verify the status of both forms in the Loan Summary Information section of the Contract Details screen or by viewing your Contract Pipeline. See the examples below. To view the contract status, go to the left navigation and click View Contract Pipeline. In the View Freddie Mac Pipeline screen, you can search for EF contracts by clicking the checkbox for the Early Funding Indicator and then click List Contracts. Use this view to manage your EF Contract pipeline. 6. Go to the Contract Options box and click Validate Pool, even if the Pool status already displays a Yes. 7. If delivery requirements are met and you do not intend to modify the contract, for example, to add or delete loans, you are ready to proceed to funding. Click the Finalize Early Funding Contract link to move the contract to a Ready to Fund status. By clicking the Finalize Early Funding Contract link, you are notifying Freddie Mac you are ready to proceed to funding. If you do not click this function, the contract will not fund, even if all delivery requirements are met. If you are not ready to finalize the contract and want to modify it, for example, to add or delete loans, go to the section titled Modify the Contract (Optional) before completing this step. June Page 11

12 The example below depicts a Contract Status of Ready to Fund. Notice certain functions in the Contract and Loan Options boxes are no longer available; for example, View/Assign Wire Instructions or Evaluate Loans are disabled due to the change in the contract status. In this example, the contract is Ready to Fund and will fund on the Early Funding Target Date of May 26, Tip: Before finalizing the EF Contract, make sure the Final Delivery Date displays a date that is on or after the date you click or plan to click the Finalize Early Funding Contract link. If the Final Delivery date is before the date in which you click Finalize Early Funding Contract, the contract status will not change to Settlement Locked, the pool will not settle and the Security will not be issued. We encourage you to actively manage and monitor your EF contracts to ensure timely funding. June Page 12

13 Modify the Contract (Optional) All Early Funding contract terms can be modified until the contract status is Ready to Fund. After the contract status is Ready to Fund, you cannot modify contract terms, except for the Early Funding Target Date and the Contract Name. (This includes modifying the contract to add or remove loans or void the contract.) For questions, assistance about voiding a contract or to obtain an exception, contact your Operations and Technology Manager. Resources See below for additional resources to assist you with Early Funding transactions: Delivery Standards for Guarantor and MultiLender Form 996E Tips and Best Practices Understand and Resolve Early Funding Error Messages Selling Mortgages to Freddie Mac Guarantor and MultiLender Swap User Guide Go to the Early Funding web page to access job aids, FAQs and more. For general questions and assistance, contact Customer Support, (800-FREDDIE). This document is not a replacement or substitute for the information found in the Freddie Mac Single-Family Seller/Servicer Guide and/or terms of your Master Agreement and/or other Pricing Identifier Terms Freddie Mac June Page 13