This reference provides information for contracts delivered to Freddie Mac in Loan Selling Advisor SM using the Early Funding (EF) contract option (under a negotiated term of business included in a Seller s Pricing Identifier Terms), and addresses the following topics: How the Early Funding Contract Option Works... 1 Complete the Early Funding Set-Up Process... 2 Creating a Contract and Adding Loans... 3 Complete the Loan Delivery Process... 7 Finalizing the Contract... 13 Modify the Contract (Optional)... 16 Resources... 16 How the Early Funding Contract Option Works The EF contract option lets Sellers settle their Guarantor and MultiLender pools up to 45 days before the Security Settlement Date (defined later in this document). When creating a contract in Loan Selling Advisor and selecting the Early Funding Indicator, consider two important dates: EF Target Date. This is the day a Seller expects to receive cash from Freddie Mac from the sale of mortgages. EF contracts must reflect a Loan Selling Advisor Ready to Fund status on or before the EF Target Date. If an EF contract moves to a Ready to Fund Status before 12 p.m. on the same (business) day as the EF Target Date (referred to as same-day funding), Freddie Mac makes its best effort to fund the EF contract, but there is no funding guarantee. Furthermore, Freddie Mac encourages Sellers to complete all delivery requirements by 8 PM the business day before the EF Target Date. For assistance with same-day funding, please contact your Operations and Technology Manager in advance. Security Settlement Date. This is the date 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 Freddie Mac purchases it. Similar to standard Guarantor and MultiLender contracts, in order for EF contracts to enter the Settlement Cycle, the contracts 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 Loan Selling Advisor, the Final Delivery Date is based on the Security Settlement Date, not the Early Funding Target Date. Early Funding contracts move to a Ready to Fund Status after the following delivery requirements are met: Loans are evaluated and critical evaluation errors are cleared. Security Wire Instructions are created and approved in Loan Selling Advisor for delivery of the Participation Certificates (PCs) to Freddie Mac per the negotiated EF term of business. Notes are certified in Loan Selling Advisor by the Document Custodian. The applicable wire instructions (self-funded or Warehouse Lender wire instructions) have been assigned to the allocated loans. If loans will be delivered subject to a Warehouse Lender s interest, 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 Loan Selling Advisor. The Pool Valid status in Loan Selling Advisor is Yes. After those delivery requirements are met, you must click Finalize Early Funding Contract to notify Freddie Mac that the contract (or contract pool) is ready for funding. (Clicking this before delivery requirements are met generates error messages and the contract (or contract pool) does not fund or advance to a Ready to Fund status.) If delivery December 2017 www.freddiemac.com/learn/
requirements are met but you fail to click Finalize Early Funding Contract, the contract does not fund early. Therefore, it is important to monitor and manage your EF 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 and Form 1034E, as well as 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 p.m. on the Final Delivery Date. Complete the Early Funding Set-Up Process The set-up process, which provides Freddie Mac with the information required to accept and process an EF contract, must be complete before creating a contract in Loan Selling Advisor with the Early Funding Option. This process includes the following: The Seller acceptance of the EF negotiated Term of Business titled Provisions Relating to Early Funding. If one or more Warehouse Lenders are used, the following document are required (for each): A Mortgage Warehousing Agreement relationship in accordance with Single-Family Seller/Servicer Guide (henceforth referred to as Seller/Servicer Guide) Chapter 6305. A current approved Form 987E, Wire Transfer Authorization for a Warehouse Delivery, on file with Freddie Mac. 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. Crate and approve wire instructions in Loan Selling Advisor for delivery of the PCs to Freddie Mac as follows: Loan Selling Advisor Data Field Name Security Wire Instructions Name Completion Instructions Freddie Mac Early Funding ABA Routing Number 021033205 Abbreviated Bank Name Third Party/FRB Sub-Account Name Effective Date Expiration Date Further Instructions FHLMC WASH 2BD1 Enter the current date Leave this field to the default option, Indefinite, FFC TO ACCOUNT P61947 FED-TFS Setting up Security Wire Instructions in Loan Selling Advisor is a two-step process; each organization must assign a Set Up Administrator (who sets up wire instructions) and a Set Up Manager (who approves the wire instructions) to separate individuals. To set up wire instructions and establish the users who will set up and approve the instructions, use the following resources: Loan Selling Advisor Security Wire Instructions. Provides helpful information and step-by-step instructions on setting up Security Wire Instructions. Form 900. The Loan Selling Advisor Authorized User Identification and Certification Form, used to request user roles. Additionally, consider the following: 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 points of contact and email their contact information, including the email address, for each individual, to early_funding_group@freddiemac.com. Freddie Mac will email your points of contact a Term Sheet December 2017 www.freddiemac.com/learn/ Page 2
specifying the terms applicable to the Early Funding transactions, and 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. Creating a Contract and Adding Loans To initiate an EF transaction, create a Guarantor or MultiLender contract in Loan Selling Advisor using the following instructions: 1. From the main menu, click Contracts, and then click Guarantor Pricing & Contracts. 2. The Request Price screen appears. Select the Pricing Identifier that contains your EF terms of business, and then select appropriate values for the other fields. Then click Next. 3. The Product Options section displays. Enter all required information. December 2017 www.freddiemac.com/learn/ Page 3
In this example, the Early Funding Target Date is 12/21/2017. To receive timely funding, the contract must be in a Ready to Fund Status on or before12:00 p.m., of that day. Exceptions to this requirement may be granted on a case-by-case basis. Contact your Customer Operations & Technology (COTS) Manager for assistance. Note: 4. Click Next. The Settlement Cycle Days applies to the (Security) Settlement Date only. With EF contracts, it is important to pay close attention to the Early Funding Target Date so that all delivery requirements are met for timely funding. 5. In the Servicing Options section, complete all required fields and click Next. 6. The BUBD Options section appears. Make appropriate selections, and click REQUEST PRICE. December 2017 www.freddiemac.com/learn/ Page 4
7. The Price Results screen displays. Review the price results information. If the pricing information is acceptable, select the I acknowledge that I have read checkbox, and then click ACCEPT. 8. The Contract Details screen appears and displays summary level information on the contract terms, as well as Contract Options. In the example that follows, the Loan Summary Information section shows there are no loans allocated to the contract. If you are ready to add loans to the contract, from the Contract Options section do one of the following: a) Click Add Loan(s) to Contract to select the loans you want to allocate to the contract. b) Click Import Loans to import and simultaneously add loans to the contract. December 2017 www.freddiemac.com/learn/ Page 5
9. In this example, we clicked Add Loan(s) to Contract. When the screen refreshes, enter information and click LIST LOANS to find loans to add to the contract. 10. Select the loans you wish to add, and click ADD LOANS. December 2017 www.freddiemac.com/learn/ Page 6
11. After loans are added to the contract, the Contract Details screen updates and presents you with additional options for the contract and the loans, including a refreshed Contract Options section that now allows you to Validate Pool and Finalize Early Funding Contract, as well as a Loan Options section that contains the functions needed to prepare loans for delivery and finalization. In the example that follows, the Loan Summary Information section shows that there are five loans allocated where they all need edits cleared and none have been certified. When loans are allocated to the contract, Loan Selling Advisor automatically validates the pool. However, you need to re-validate the pool during the contract finalization process. For more information on this, see Finalizing the Contract on page 13. Complete the Loan Delivery Process To finalize loans for delivery, you must return to the contract details screen. Do the following: 1. From the main menu, click Contracts, and then click View Contract Pipeline. December 2017 www.freddiemac.com/learn/ Page 7
2. From the Guarantor tab, select Yes for Early Funding Indicator, and then click List Contracts. 3. Click the Investor Contract Identifier of the contract you wish to use. 4. From the Contract Details screen, refer to the Loan Summary Information to verify that all loans have cleared critical edits. If one or more loans have not been cleared, click Evaluate Loans to evaluate the loans against your Purchase Documents and Guide requirements. December 2017 www.freddiemac.com/learn/ Page 8
5. The following example shows a loan that has not cleared critical edits. When a loan doesn t clear, edit the loan information, and then click SAVE & EVALUATE. 6. Correct and re-evaluate each loan as needed, until all critical errors (edits) are cleared, as in the following figure. Then click Back to Contract. December 2017 www.freddiemac.com/learn/ Page 9
7. The Contract Details screen appears again, this time showing that all errors have been cleared. Click Enter Settlement Details. 8. Perform the following steps: a) Select Cash Wire Instructions if self-funded. Otherwise, select the Warehouse Lender s wire instructions. b) Make the rest of your selections shown above the list of the loans. c) Select the loans you want to assign to the Warehouse Lender d) Click UPDATE LOANS. December 2017 www.freddiemac.com/learn/ Page 10
9. Click Back to Contract. 10. Click Build Form 1034E. 11. Select the loans and then click PRINT LABELS if you would like labels, because you will not be able to print them after building Form 1034E. December 2017 www.freddiemac.com/learn/ Page 11
12. The labels appear in a new window. Use the print command of your browser to generate a hard copy of them. 13. From the original window, click Build Form. 14. Save or print the form generated. December 2017 www.freddiemac.com/learn/ Page 12
Finalizing the Contract If the previous steps in this document have been completed, the contract is ready for finalization and fulfillment. With EF contracts, the contract must be in a Ready to Fund status before it can be funded. To complete contract finalization, do the following from the Contract Details screen: 1. To assign Security wire instructions, from the Contract Options section, click View/Assign Wire Instructions. 2. Perform the following steps: a) Select the Wire Instructions. b) Click ADD WIRE. c) Click SAVE SECURITY WIRE INSTRUCTIONS. December 2017 www.freddiemac.com/learn/ Page 13
3. After receiving the confirmation, click Back to Contract Details. 4. In the Loan Options section, click Build Form 996E to build both the form and Appendix 1. Note: Note: If there are loans in the contract that are assigned to different Warehouse Lenders, repeat the previous steps to generate a separate Form 996EF for each Warehouse Lender. The ULDD Data Points to identify the Warehouse Lender for Pledged Mortgages are shown in the table that follows: Data Point Name Sort ID# Import Data or Manually Enter Data Warehouse Lender Indicator Sort ID 398.1 Both December 2017 www.freddiemac.com/learn/ Page 14
Party Role Type Sort ID 650.2 Import only Party Role Identifier Sort ID 650.1 Both If you import these data points, you will not need to assign the Warehouse Lender on the Enter Settlement Details screen but you will need 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.4.0.1. Also, refer to Guide Section 6302.38 for delivery instructions. Sellers can simplify their reconciliation process by exporting settlement details by individual Warehouse Lenders. For more information and tips on delivering Warehouse Lender information and Form 996E, refer to Form 996E Tips and Best Practices. 5. Forward Form 996EF to the Warehouse Lender and Form 1034E to the Document Custodian for processing. 6. Form 996EF must be processed and the Notes must be certified in Loan Selling Advisor before finalizing the contract. Verify the status of these forms using the Loan Summary Information section of the Contract Details screen (as in the image that follows) or by viewing your Contract Pipeline. 7. Next, from the Contract Options section, click Validate Pool even if the Pool Valid value is Yes. 8. If you are not ready to finalize the contract but instead want to modify it (for example, by adding or deleting loans), see Modify the Contract (Optional) on page 16 before proceeding. If delivery requirements are met and you do not intend to modify the contract, proceed to funding by clicking Finalize Early Funding Contract. Note: Clicking Finalize Early Funding Contract notifies Freddie Mac you are ready for funding. Without performing this action, the contract does not fund, even if all delivery requirements are met. December 2017 www.freddiemac.com/learn/ Page 15
9. The screen refreshes and confirms that the EF contract has been finalized. Click Back to Contract Details. The example that follows shows a Contract Status of Ready to Fund, and the contract will fund on the Early Funding Target Date. Before finalizing the EF Contract, make sure the Final Delivery Date displays a date that is on or after the date you have chosen or will choose when clicking Finalize Early Funding Contract. Failure to do this results in the following: Contract status not changing to Settlement Locked. Pool not settling. Security not being issued. Modify the Contract (Optional) All EF contract terms can be modified until the contract status is Ready to Fund. After that point, except for the Early Funding Target Date and the Contract Name, contract terms cannot be modified (which includes modifying the contract to add or remove loans or to void the contract.) For questions, assistance about voiding a contract, or to obtain an exception, contact your Operations and Technology Manager. Resources The following additional resources may assist you with Early Funding transactions: Delivery Standards for Guarantor and MultiLender Contracts. Form 996E Tips and Best Practices. December 2017 www.freddiemac.com/learn/ Page 16
Understanding and Resolving Early Funding Error Messages. Selling Mortgages to Freddie Mac: Guarantor and MultiLender Swap User Guide. The Early Funding Webpage, which has access to job aids, FAQs, and more. Customer Support (800-FREDDIE) for general questions and assistance. 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. 2017 Freddie Mac December 2017 www.freddiemac.com/learn/ Page 17