Freddie Mac Single-Family Seller/Servicer Guide Chapter 8104 — Special Servicing

Freddie Mac Single-Family Seller/Servicer Guide Chapter 8104

8104.1: Special Servicing requirements (09/10/25) ■ Servicing Texas Equity Section 50(a)(6) Mortgages ■ Biweekly payment plans ■ FHA, VA, RHS and MI Servicing requirements ■ Incomplete improvements ■ Servicing Mortgages secured by properties subject to resale restrictions (a) Servicing Texas Equity Section 50(a)(6) Mortgages The Servicer must have adequate procedures in place to promptly receive and respond to Borrower inquiries, claims of defects and other complaints (whether or not the Borrower specifically references Article XVI Section 50(a)(6) of the Texas Constitution) received in connection with a Texas Equity Section 50(a)(6) Mortgage. If the Servicer receives a Borrower notification of the lender’s failure to comply, or otherwise discovers that the lender or Servicer has failed to comply, with the provisions of Article XVI of the Texas Constitution with respect to a Texas Equity Section 50(a)(6) Mortgage, it must notify Freddie Mac within seven Business Days of receipt (see Directory 5) of the notification or discovery and provide Freddie Mac with a copy of the notification and/or related information. The Servicer must cure all curable defects related to the origination of the Mortgage or, for Borrowers in a Trial Period Plan, the terms of the Trial Period Plan, in accordance with the provisions of Section 50(a)(6) of Article XVI of the Texas Constitution within the time period specified in Section 50(a)(6). Refer to Section 9206.2(d) for additional notification and other requirements with respect to a complaint or objection to a mortgage modification. (b) Biweekly payment plans A Borrower may choose to enter into a biweekly payment plan to accelerate the reduction in principal on a Mortgage by applying the equivalent of one or more extra monthly payments each year, thereby reducing total interest costs. Page 8104-2 Biweekly payment plans do not change the conditions and terms of the Note regarding the amount of monthly payments, when monthly payments are due, the application of payments, the assessment of late charges and the calculation of Delinquencies, nor do they change the way payments are reported or remitted to Freddie Mac or the way Delinquencies are reported If the Borrower asks about using a third party’s biweekly payment plan and this third party is not a vendor who administers the plan for the Servicer, then the Servicer should advise the Borrower that the: ■ Conditions and terms of the Mortgage still apply and will be enforced ■ Borrower can make the extra payments directly to the Servicer without a formal plan and without the cost and potential risks of using a third party to administer such a plan (or the Servicer may offer such a plan to the Borrower if the Servicer has such a plan available) ■ Borrower will be responsible for any late charges or payment shortages if the third party fails to make timely and sufficient payments to the Servicer ■ Borrower should check the type of safeguards that will be in place to protect the Borrower’s money from misuse by the third party before it is transferred to the Servicer ■ Mortgage could be subject to foreclosure action if the third party fails to remit the Borrower’s payment to the Servicer and the Mortgage becomes delinquent, even if the Borrower has taken legal action to recover any payments made to the third party that were not remitted to the Servicer If the Servicer chooses to enter into a biweekly payment plan with a Borrower after the Mortgage has been sold to Freddie Mac, the Servicer must ensure that the following requirements for the administration of the plan are met: 1. A Servicer may offer or advertise the availability of a biweekly payment plan for Mortgages in the Servicer’s portfolio, so long as the Servicer does not specifically target the offer or advertisement to Mortgages that are serviced for Freddie Mac 2. The Servicer must establish the biweekly payment plan pursuant to a separate agreement between the Borrower and the Servicer. The agreement must allow for cancelation by either the Borrower or the Servicer at any time, at which point the monthly payment schedule would be reinstated. The Borrower cannot be charged a fee for canceling the 3. Any fee that is charged to the Borrower for this service must be allowable under applicable law and be reasonable compared to other providers’ fees in the market 4. The Servicer may administer the plan or contract with a third-party vendor to administer the plan Page 8104-3 5. The plan must provide that two biweekly payments equate to one monthly payment due under the terms of the Note and that payments collected in a given month are applied as a monthly payment on the first day of the month following the month in which the payments were received. In any month in which a third payment is received, that payment is applied as a principal curtailment in the month following the month in which the payment was received. 6. All biweekly principal and interest payments received from the Borrower must be placed in an Escrow Custodial Account that meets the requirements of Chapter 8302. If the Servicer administers the plan, then the payments must be placed into the Escrow Custodial Account no later than the first Business Day after their receipt by the Servicer. If the Servicer administers the plan through a third party, then the payments must be placed into the Escrow Custodial Account no later than the second Business Day after the date on which the third party deposits the payments into the Servicer’s payment clearing On the payment due date, sufficient funds to equate to one monthly payment must be posted to the Mortgage record and the funds transferred into the Principal and Interest Custodial Account. The Servicer may use the Escrow Custodial Account that is established for Escrow items such as property taxes and property and mortgage insurance premiums so long as the biweekly payment funds can be identified and accounted for separately for each Borrower using the plan, or the Servicer may set up a separate Escrow Custodial Account that meets the requirements of Chapter 8302. 7. If the Borrower does not pay the third biweekly payment in a month when a third payment is due under the plan, the Borrower may not be charged a late charge or reported as delinquent 8. The Servicer must be able to identify which Mortgages have biweekly payment plans and provide this information to Freddie Mac if asked to do so (c) FHA, VA, RHS and MI Servicing requirements The Servicer must comply with and use its best efforts to obtain compliance by the original Borrower and any transferee of the Borrower with all requirements of the FHA, VA, RHS or MI for Mortgages serviced for Freddie Mac. References to FHA, VA, RHS and MI requirements are made elsewhere in this Guide, and some guidance is given as to the nature of these requirements. The Servicer must ensure that all applicable FHA, VA, RHS and MI requirements are satisfied, so that Freddie Mac receives full benefit of the FHA insurance, RHS guaranty, VA guaranty or mortgage insurance. (d) Incomplete improvements In addition to all other Servicing requirements of the Servicing Contract, Servicers that service any Mortgage that was permitted to be delivered to Freddie Mac prior to completion Page 8104-4 of repairs and/or improvements (e.g., pursuant to GreenCHOICE Mortgages® in Chapter 4606 or Mortgages with Settlement Dates before completion of renovations in Sections 4607.1(b) and CHOICEReno eXPress® Mortgages in 4607.1(c) or eligibility of a property with incomplete improvements in 5601.3) must comply with the Servicing requirements related to completion of such repairs and/or improvements. This includes, but is not limited ■ Processing, management and performance of draw inspections and/or maintenance and management of disbursements of the completion escrow account (and application of any remaining funds) ■ Retention of certain documentation in the Mortgage file, such as the costs of the repairs and/or improvements, appraisal(s) and a certification of completion ■ Receipt of a completion report, including photographs of the completed items and, as applicable, evidence that the Mortgage remains a valid First Lien on the Mortgaged Premises in accordance with Section 4201.2, and ■ Meeting the requirements for CHOICERenovation® Mortgages delivered pursuant to Mortgages with Settlement Dates before completion of renovations (as described in Section 4607.1(b)), maintaining the Renovation Funds in their respective Custodial Account for Renovation Funds (as described in Section 4607.12), managing the contingency reserve requirements (as described in Section 4607.11(b)) and requesting removal of recourse (as described in Section 4607.14) For specific Servicing requirements related to post-delivery completion of repairs and/or improvements, see GreenCHOICE Mortgages in Chapters 4606 and CHOICERenovation Mortgages in 4607 and eligibility of a property with incomplete improvements in Section 5601.3, as applicable. Note: These Servicing requirements, which may be fulfilled by the Seller in its capacity as Seller/Servicer, are considered selling obligations. (e) Servicing Mortgages secured by properties subject to resale restrictions (i) Properties subject to resale restrictions Freddie Mac purchases Mortgages secured by properties subject to resale restrictions, including, but not limited to, income-based resale restrictions. Such resale restrictions ■ 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 legally required foreclosure redemption period) or recordation of a deed-in-lieu of foreclosure Page 8104-5 Refer to the following Guide provisions for additional information related to Servicing Mortgages secured by properties subject to resale restrictions: Other Guide provisions related to Servicing Mortgages secured by properties subject to resale restrictions Resale restrictions included in the Community Land Trust Ground Lease (as described in Chapter 4502) Section 8701.1(f) Property values and Mortgages secured by properties subject to Sections 9202.4(a) and 9202.4(b) requirements for Mortgages secured by properties subject to Sections 9208.1(b)(iii) and 9208.2(a) Sections 9301.8(a), 9301.8(b) and 9301.8(d) (ii) Income-based resale restrictions Pursuant to requirements related to excess proceeds for Mortgages secured by properties subject to income-based resale restrictions in Section 4406.9, the subsidy provider may be entitled to any applicable excess proceeds when there is a transfer of title on a property subject to income-based resale restrictions that occurs as a result of such property being sold by: ■ The Borrower for an amount exceeding the resale-restricted price; or ■ Freddie Mac after acquiring title through a completed foreclosure sale or deed-in-lieu Excess proceeds on properties subject to income-based resale restrictions are those proceeds that are over and above the amount that is required to satisfy the total indebtedness, including any additional liens, claims or encumbrances, in addition to any amount(s) incurred during an REO holding period if title was acquired by Freddie Mac via a completed foreclosure sale or deed-in-lieu of foreclosure. Upon satisfaction of the total indebtedness as outlined above, any excess proceeds should be distributed as outlined below: Page 8104-6 ■ For properties that are sold by the Borrower for an amount exceeding the resalerestricted price agreed upon in the resale-restricted covenants: ❑ First to the Borrower and subsidy provider for equity due as agreed upon in the resale-restricted covenants, and ❑ All remaining excess proceeds to the subsidy provider when the resale-restricted covenants include terms for excess proceeds to be distributed to the subsidy provider ❑ All remaining excess proceeds to the subsidy provider when the resale-restricted covenants include terms for excess proceeds to be distributed to the subsidy provider (f) Right of first refusal In certain circumstances, the Servicer 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 (e.g., right to provide a substitute purchaser, right to have the first option to purchase a property or the right to approve a purchaser) if the right of first refusal has been retained by the option holder. Note that, pursuant to requirements for acceptable exceptions to the title insurance policy or to the attorney’s opinion of title letter in Section 4702.4(d) regarding acceptable exceptions to the title insurance policy or to the attorney’s opinion of title covering each Mortgage purchased by Freddie Mac, exceptions for restrictive agreements or restrictive covenants of record related to a right of first refusal are acceptable, provided that certain conditions are met. This includes that such restrictive agreements or restrictive covenants do not create or provide for any lien that would be prior to the lien of the Home Mortgage nor provide for the elimination of the lien of the Home Mortgage. Refer to the following Guide provisions for additional information related to right of first refusal: Page 8104-7 Other Guide provisions related to right of first refusal Right of first refusal for Mortgages secured by properties subject to “The right of first refusal” included in the Community Land Trust Ground Lease Section 4502.7 Right of first refusal for Mortgages secured by Condominium Units in New Condominium Projects Section 5701.6(f) Right of first refusal for a Cooperative Share Loan secured by a First Lien on the Cooperative Interest to a Cooperative Unit Section 5705.6(b) Page 8105-1 Chapter 8105: Servicing Compensation 8105.1: Compensation for Servicing Mortgages ■ Compensation for Servicing Mortgages ■ Servicing compensation for a new Servicer pursuant to a Transfer of Servicing initiated by ■ Servicing obligations related to foreclosure and bankruptcy to be performed for the Servicing compensation (a) Compensation for Servicing Mortgages The compensation Freddie Mac pays to the Servicer for the performance of its duties and obligations under the Servicing Contract for each Mortgage purchased by Freddie Mac is the amount by which the Note Rate exceeds the Accounting Net Yield (ANY), with a Minimum Servicing Spread to provide adequate compensation. Each Servicer agrees that it does not retain any rights or legal ownership interest in such compensation or any portion of the interest or other amounts due or received from the Borrower under the terms of the Mortgage. Further, under no circumstance does a Servicer retain any legal ownership of the Servicing Contract or any related Servicing Contract Rights. Freddie Mac acknowledges that a Servicer may recognize Servicing Contract Rights as assets on its balance sheet in the form of “mortgage servicing rights” in accordance with generally accepted accounting principles (GAAP); however, such recognition under GAAP does not confer any legal ownership interest in any Servicing Contract Rights. The Minimum Servicing Spread is 0.250% (25 basis points) for all Home Mortgages unless the Purchase Documents provide otherwise. Note: For fixed-rate Home Mortgages with Settlement Dates on or after June 3, 2019, the maximum Servicing Spread is 0.500%. For Mortgages with single-premium lender-paid mortgage insurance, the Minimum Contract Servicing Spread must be no less than the Minimum Servicing Spread. For Mortgages with annual- or monthly-premium lender-paid mortgage insurance, the Minimum Contract Servicing Spread must meet the requirements of Section 4701.2(b)(i). Page 8105-2 Refer to the following Guide provisions for additional information related to the Servicing Spread topic: Guide provisions related to Servicing Spread requirements Minimum contract Servicing Spread Section 6101.4(c) Servicing Spreads Section 6102.4(b)(ii) Purchase requirements for Mortgages sold under Guarantor and MultiLender Swap programs Sections 6201.3(b) (b) Servicing compensation for a new Servicer pursuant to a Transfer of Servicing initiated (i) Voluntary Partial Cancellation (VPC) of Servicing or termination of the Servicing If Freddie Mac terminates a Servicer’s Servicing Contract and related Servicing Contract Rights, with or without cause, in whole or in part, pursuant to the terms and conditions of the Purchase Documents, Freddie Mac reserves the right, at Freddie Mac’s discretion, to negotiate a new Servicing fee with the subsequent Servicer of the Mortgages related to the VPC Transfer of Servicing. (ii) Transfers of Servicing Below are key requirements regarding the Servicing compensation for Freddie Mac Mortgages following a Transfer of Servicing: ■ For any Mortgages purchased by Freddie Mac, the Servicing compensation will be calculated on the entire interest-bearing UPB of the Mortgage ■ If the Note Rate minus the ANY is not sufficient to pay a Transferee Servicer the required Servicing compensation plus any applicable mortgage insurance premium, the Transferor Servicer agrees to pay the balance of the required Servicing compensation to the Transferee Servicer ■ The Transferor Servicer acknowledges that its payment of Servicing compensation to the Transferee Servicer is necessary for adequate Servicing of the Mortgage in accordance with the Guide and applicable Purchase Documents ■ The Transferor Servicer also agrees that the Transferee Servicer and Freddie Mac have a right of offset against principal repayments payable to the Transferor Servicer in order to pay the required Servicing compensation if not otherwise done Page 8105-3 (c) Servicing obligations related to be performed for the Servicing compensation In consideration for the Servicing Spread, a Servicer is responsible for the performance of all of its Servicing obligations described in the Guide and other Purchase Documents for each of the Mortgages purchased by Freddie Mac. The Servicer’s Servicing obligations compensated by the Servicing Spread include, among other things, undertaking all activities required to protect Freddie Mac’s interest in the Mortgage in the event of a foreclosure of the property or a bankruptcy of the Borrower, such as: ■ Preparing and delivering foreclosure and bankruptcy referrals to attorneys ■ Providing all documents and information necessary for the attorneys to prosecute foreclosure or bankruptcy cases (including, but not limited to, missing documents such as Notes, title insurance policies and Intervening Assignments) ■ When necessary, paying for the preparation and recordation of missing documents, such as Intervening Assignments, necessary for the prosecution of foreclosure or bankruptcy cases ■ Resolving any title issues that are the result of the Seller’s or Servicer’s action or inaction ■ Managing attorneys, including but not limited to: ❑ Collecting, receiving, processing, reviewing and paying attorneys’ invoices ❑ Supervising and providing necessary assistance to attorneys in the foreclosure and bankruptcy proceedings ❑ Making available any monitoring, management, reporting, information and document delivery processes or systems and paying the fees and costs for such processes or systems. (Refer to Section 9501.5(a) for information on connectivity and invoice processing systems.) ■ Continuing to work with the Borrower to resolve the Delinquency through loss mitigation activities ■ Handling the bankruptcy management activities specified in Chapter 9401 Nothing in the Guide is intended to prohibit a foreclosure or bankruptcy attorney from assisting a Servicer by working with a Borrower to facilitate a reinstatement of the Mortgage or loss mitigation activity. Page 8106-1 Chapter 8106: Servicing Reports to Freddie Mac, Other Third Parties and the Borrower 8106.1: General requirements for Servicing-related reports to Freddie Mac, third parties and the Borrower ■ Computer facsimiles ■ Submission of additional reports to Freddie Mac ■ Noncompliance fees ■ Reports to credit repositories A Servicer must report regularly to Freddie Mac on Servicing activities for Freddie Mac-owned Mortgages. Servicers are also required to report certain information to third parties as well as the Each report and all correspondence to Freddie Mac for a particular Mortgage must reference the Freddie Mac Seller/Servicer number and the Freddie Mac loan number. (a) Computer facsimiles Freddie Mac will accept computer-generated facsimiles for: ■ Form 1013, 1-4 Unit Property Inspection Report ■ Form 105, Multipurpose Loan Servicing Transmittal Any computer-generated facsimiles of these forms must: ■ Reflect the most current version of the comparable Freddie Mac form ■ Be in the same format as the comparable Freddie Mac form with no alterations to the placement of the data fields and no deletions of data fields ■ Provide at least two lines of space between detail lines (b) Submission of additional reports to Freddie Mac Page 8106-2 The Servicer must submit such other reports as Freddie Mac may require from time to time. (c) Noncompliance fees Failure to provide timely, complete and accurate reports (regardless of the mode of submission or transmission) subjects the Servicer to the Servicing reporting noncompliance compensatory fees. Investor Accounting reporting and Servicing reporting noncompliance compensatory fees are monitored and assessed separately. Freddie Mac reserves the right to change all fees and other remedies at any time and at its sole discretion. (d) Reports to credit repositories (i) Reporting payment status of the Mortgage to the credit repositories For each Mortgage serviced for Freddie Mac under the Home Mortgage program, a Servicer must report on a monthly basis the payment status of the Mortgage to the credit repositories listed in Exhibit 51, Credit Repositories and Information to Report. Freddie Mac does not specify a particular day of the month by which the Servicer must perform the full-file reporting. Freddie Mac requires only that the reporting be performed on a monthly basis for all Mortgages regardless of the Mortgage status. The Servicer may report after each month end to allow time for payment corrections, returned checks and other adjustments to be processed. Freddie Mac will audit Servicers for compliance with the full-file credit reporting requirements. (ii) Full-file reporting requirements Full-file reporting includes Mortgages recently originated, current and delinquent Mortgages, Mortgages liquidated through workout options or foreclosure and chargeoffs. Each credit repository will provide the Servicer with the applicable codes to use to report each Mortgage status type. Freddie Mac will not require reporting to a repository that does not serve the jurisdiction for which a report must be filed. Written advice from a repository that it cannot accept a Servicer’s report for a given jurisdiction because it does not serve that jurisdiction will be sufficient evidence to Freddie Mac that the Servicer is in compliance with Freddie Mac’s requirements for that jurisdiction. Borrowers or their representatives are permitted under the Federal Fair Credit Reporting Act (FCRA) to inquire about or dispute the accuracy of information in their credit repository files. This right to inquire about or dispute the accuracy of information applies to any Mortgage that the Servicer services for Freddie Mac, just as it does to any other Page 8106-3 indebtedness of a Borrower. A Borrower may send an inquiry or a notice of dispute concerning the accuracy of reported information about the Borrower’s Mortgage directly to the Servicer or to any of the credit repositories listed in Exhibit 51. Whenever the Servicer receives such an inquiry or notice of dispute from a Borrower or receives a letter from a credit repository requesting verification or correction of Mortgage-related information, the Servicer must respond in accordance with the requirements of the FCRA. 8106.2: Internal Revenue Service (IRS) Forms 1098, 1099-A, 1099-C and 1099-MISC (09/10/25) ■ IRS Form 1098, Mortgage Interest Statement ■ IRS Form 1099-A, Acquisition or Abandonment of Secured Property ■ IRS Form 1099-C, Cancellation of Debt ■ IRS Form 1099-MISC, Miscellaneous Income (a) IRS Form 1098, Mortgage Interest Statement The Servicer must provide Internal Revenue Service (IRS) Form 1098 to the IRS and the Borrower as required under Section 6050H of the Internal Revenue Code. This reporting must be done for each Mortgage owned in whole or in part by Freddie Mac. The following must be provided: ■ The Servicer’s name, address and federal identification number must be reported for “Recipient” ■ The Borrower’s name, address and Social Security number must be reported for “Payer” The Servicer must maintain copies of all statements and reports that Freddie Mac requires the Servicer to provide directly to the Borrowers and the IRS in compliance with the above section of the Internal Revenue Code and make such copies available for examination by Freddie Mac upon request. The Servicer is responsible for any penalty levied by the IRS for nonreporting or reporting of inaccurate information, as applicable, with respect to those statements and reports which Freddie Mac requires the Servicer to provide directly to the Borrowers and the IRS. (b) IRS Form 1099-A, Acquisition or Abandonment of Secured Property Page 8106-4 The Servicer must provide IRS Form 1099-A to the IRS and the Borrower as required under Section 6050J of the Internal Revenue Code. This reporting must be done whenever Freddie Mac or a third party acquires an interest in a property in full or partial satisfaction of Freddie Mac’s secured debt or when Freddie Mac or the Servicer knows or has reason to know that a property has been abandoned. For the purposes of filing these reports, the following definitions apply: ■ Freddie Mac acquires an interest in Mortgaged Premises either: ❑ On the date of the foreclosure sale or the date the Borrower’s right of redemption, if any, expires, whichever occurs later, or ❑ At the time a deed-in-lieu of foreclosure is recorded ■ A third party acquires an interest at the time of the foreclosure sale ■ Abandonment has occurred when Freddie Mac or the Servicer has reason to know from all the facts and circumstances concerning the status of the Mortgaged Premises that the Borrower intended to and has permanently discarded the property from use. If a Servicer determines that an abandonment has occurred and expects to commence foreclosure proceedings within three months, the reporting obligation generally arises at the end of the three-month period. The following events trigger the reporting requirement: ■ Freddie Mac acquisition. (Freddie Mac acquires the Mortgaged Premises at a foreclosure sale or by deed-in-lieu of foreclosure.) ■ Third-party sale. (A third party acquires the Mortgaged Premises at a foreclosure sale.) ■ HUD, RHS or VA acquisition. (The Mortgaged Premises was acquired by HUD, RHS or the VA.) ■ Abandonment. (The Mortgaged Premises has been abandoned, three months have passed and foreclosure proceedings have not begun.) A completed IRS Form 1099-A must be filed electronically with the IRS on or before March 31 of the year following the calendar year in which the reportable event occurred. The Servicer must also furnish the Borrower with an information statement on or before January 31 of that year. The requirement for furnishing such statement to the Borrower can be satisfied by sending a completed IRS Form 1099-A to the Borrower’s last known address. The form must include the following information: Page 8106-5 ■ The form must show Freddie Mac’s name and address and include a statement that the information is being reported to the IRS ■ The “account number” should include the nine-digit Freddie Mac loan number, followed by one space and the six-digit Seller/Servicer number Note: See Section 8106.2(c) for information related to when both IRS Forms 1099-A and 1099-C, Cancellation of Debt, may be filed as the result of a cancelation of debt in connection with a foreclosure or similar action in the same year for the same Borrower. Instructions for completing IRS Form 1099-A are set forth in Form 1065, Report of IRS Form 1099-A and Form 1099-C Filing. Servicers must comply with the IRS’s and the various States’ requirements, as amended from time to time, for filing IRS Form 1099-A. Servicers should consult with either their tax advisors or the IRS concerning questions on such requirements. The Servicer must file all IRS Forms 1099-A with the IRS electronically. (i) IRS reporting Servicers must file their reports with the IRS no later than March 31 of the year following the calendar year in which the reportable event occurred. Even though a Servicer reports to the IRS electronically, the Servicer is still responsible for providing a copy of the IRS Form 1099-A to the Borrower (copy B) and to those States that require it (copy C). Copy B must be furnished to the Borrower on or before January 31 of the year following the reportable event. IRS requirements for filing electronically are set forth in IRS Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498 and W2G. A Servicer may obtain this publication by downloading it from the IRS website at www.irs.gov or by calling the IRS at 1-800-TAX-FORM (1-800-829-3676). When filing electronically, the Servicer must: ■ Insert appropriate header information on the electronic report it files with the IRS in accordance with the following record description: Page 8106-6 Requirements for electronic report filing “A” record Payer’s taxpayer identification number (TIN) Payer city, State and ZIP CodeTM “B” record The nine-digit Freddie Mac loan number and the six-digit Seller/Servicer number, separating these two numbers by one space ■ Notify Freddie Mac that the Servicer reported to the IRS electronically: ❑ When the report is sent to the IRS, the Servicer must submit Form 1065 to Freddie Mac (see Directory 3) ❑ A Servicer should not send Freddie Mac copies of the report that it filed with the IRS (ii) Correcting or voiding previously submitted IRS Forms 1099-A To correct or void a previously submitted IRS Form 1099-A, the Servicer must refer to IRS requirements to determine how to report either for electronic corrections or voids. To avoid or minimize penalties that may be imposed by the IRS, the Servicer must report corrections or voids to the IRS when an error is discovered. When corrections or voids are submitted to the IRS, a copy of Form 1065 must be submitted to Freddie Mac (see Directory 3). Form 1065 should indicate the number of corrected or voided IRS Forms 1099-A submitted to the IRS. Page 8106-7 (iii) Filing accuracy and documentation Servicers are responsible for completing the IRS Form 1099-A and for providing the information to the IRS and to the Borrower in a timely and accurate manner. The Servicer must maintain copies of all statements and reports that Freddie Mac requires the Servicer to provide directly to the Borrowers and the IRS in compliance with Section 6050J of the Internal Revenue Code. The Servicer must make such copies available for examination by Freddie Mac upon request until Freddie Mac agrees, in writing, that such records may be destroyed. If the IRS penalizes Freddie Mac or assesses any fee for failure to produce such information or because a Servicer failed to file a return or statement or filed an untimely, incorrect or incomplete return or statement, the Servicer will be required to reimburse Freddie Mac for all costs incurred by Freddie Mac as a result of such penalty or assessment and an amount representing Freddie Mac’s total tax liability resulting from such reimbursement. Such reimbursement will not be required if the Servicer can show that it met the filing requirements. (c) IRS Form 1099-C, Cancellation of Debt The Servicer must report cancelations of Borrowers’ mortgage debt on IRS Form 1099-C, as required under Section 6050P of the Internal Revenue Code, for all cancelations of mortgage debt of $600 or more occurring on or after January 1, 2005, with respect to Mortgages owned or guaranteed in whole or in part by Freddie Mac. IRS Form 1099-C must be filed regardless of whether the Borrower must report the cancelation of debt as income. Form 1065 includes instructions for completing IRS Form 1099-C. (i) Coordination with IRS Form 1099-A If, in the same calendar year, the Servicer cancels a debt in connection with a foreclosure or abandonment of the Mortgaged Premises, it is not necessary to file both IRS Form 1099-A (see Section 8106.2(b)) and IRS Form 1099-C for the same Borrower. The Servicer will meet the filing requirement for IRS Form 1099-A by completing boxes 4, 5 and 7 on IRS Form 1099-C. However, the Servicer may complete both IRS Forms 1099A and 1099-C separately; in that case, the Servicer should not complete boxes 4, 5 and 7 on IRS Form 1099-C. (See Form 1065 for filing instructions for IRS Forms 1099-A and 1099-C.) (ii) Requesting TINs A Servicer must make a reasonable effort to obtain the correct name and TIN of the Borrower whose debt was canceled. If the Servicer does not obtain the TIN before the debt is canceled, it must request the Borrower’s TIN. Such request must clearly notify the Borrower that the IRS requires the Borrower to furnish the TIN and that failure to furnish such TIN subjects the Borrower to a $50 penalty imposed by the IRS. Use IRS Form WPage 8106-8 9, Request for Taxpayer Identification Number and Certification, to request the TIN. However, a Borrower is not required to certify the TIN under penalties of perjury. (iii) Exceptions to IRS Form 1099-C Servicers are not required to report the following on IRS Form 1099-C: (A) Certain bankruptcy scenarios Debt canceled in bankruptcy is not reported unless the debt was incurred for business or investment purposes. Single-family Mortgages may be incurred either for personal purposes or for business or investment purposes. Thus, Servicers should only file IRS Form 1099-C for discharges of debt in bankruptcy if they are aware that the Borrower is holding the property for investment and not as a Primary Residence or second home, such as in the case of an Investment Property Mortgage, determined at origination. In that case, report debt canceled for the later of: ■ The year in which the amount of canceled debt first can be determined, or ■ The year in which the debt is canceled in bankruptcy (B) Interest as part of the canceled debt Servicers do not need to include interest as part of the canceled debt in box 2. However, if interest is reported as part of the canceled debt in box 2, Servicers should show the interest separately in box 3. (C) Nonprincipal amounts Nonprincipal amounts include penalties, fines, fees and administrative costs. These do not need to be reported. (D) Release of a Borrower IRS Form 1099-C need not be filed if one of the Borrowers on a Mortgage is released as long as the remaining Borrowers remain liable for the full amount of the unpaid (E) Guarantor or surety IRS Form 1099-C need not be filed for a guarantor or surety. A guarantor is not a debtor for purposes of IRS Form 1099-C, even if demand for payment is made to the guarantor. (F) Multiple Borrowers Page 8106-9 For Mortgages originated after 1994 that involve Borrowers who are jointly and severally liable for the Mortgage, the Servicer should report the entire amount of the canceled debt on each Borrower’s IRS Form 1099-C. Multiple Borrowers are jointly and severally liable for a debt if there is no clear and convincing evidence to the contrary. If it can be shown that joint and several liability does not exist, an IRS Form 1099-C is required for each Borrower for whom the Servicer canceled a debt of $600 or more. (G) Mortgages originated before 1995 For Mortgages originated before 1995, the Servicer must file IRS Form 1099-C only for the primary (or first-named) Borrower. (H) Multiple Borrowers who were husband and wife If the Servicer knows or has reason to know that the multiple Borrowers were husband and wife who were living at the same address when the debt was incurred, and the Servicer has no information that these circumstances have changed, the Servicer may file only one IRS Form 1099-C. (I) Rules to entity borrowers See the instructions to Form 1065 for the application of these rules to entity borrowers (i.e., estates or trusts). (J) Report definitions For purposes of these reports, the following definitions apply: A debt may include all amounts owed, including stated principal, stated interest, fees, penalties, administrative costs and fines. However, only stated principal is required to be reported. If accrued interest is included in the amount of the stated debt (in box 2), then it must be reported in box 3. A debt is canceled on the date an identifiable event occurs. An identifiable event ❑A discharge in bankruptcy under Title 11 of the U.S. Code (but see exceptions in Section 8106.2(c)(iii)( above) ❑A cancelation or extinguishment making the debt unenforceable in a receivership, foreclosure or similar proceeding ❑A cancelation or extinguishment when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Expiration of the statute of limitations is an identifiable event only when the Borrower’s affirmative Page 8106-10 statute of limitations defense is upheld in a final judgment or decision of a court and the appeal period has expired. ❑ A cancelation or extinguishment when deficiency rights were not preserved during the foreclosure process ❑ A cancelation or extinguishment when Freddie Mac (or its vendor per Section 9601.1(a)) makes the determination not to pursue a deficiency action post-foreclosure and notifies the Servicer of such determination ❑ A cancelation or extinguishment when a creditor elects foreclosure remedies that by law end or bar the creditor’s right to collect the debt. This event applies if collection is barred by local law after a “power of sale” in the Mortgage or deed of trust is exercised. ❑ A cancelation or extinguishment due to a probate or similar proceeding ❑ A discharge of indebtedness under an agreement with the debtor to cancel the debt at less than full consideration (e.g., a short sale). Freddie Mac will advise the Servicer if such an agreement is reached with a Borrower. ❑ A discharge of indebtedness because of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. A creditor’s defined policy can be in writing or an established business practice. A practice to stop collection activity and abandon a debt when a particular nonpayment period expires is a defined policy. Facts and circumstances indicating that a debt was not canceled include the existence of a lien relating to the debt (up to the value of the security) or the sale or packaging for sale of the debt by the creditor. In the event of a foreclosure sale where deficiency rights were preserved, the Servicer must not initially file an IRS Form 1099-C. Freddie Mac will determine whether to pursue collection of the deficiency of that Mortgage. If Freddie Mac makes a determination not to pursue collection of the deficiency, Freddie Mac will notify the Servicer in the report described below, and the Servicer must then file the IRS Form 1099-C. Servicers must review the 1099-C Loan Detail report, accessible via the “Default Reporting” tile of the Servicer’s Servicer Performance Profile (SPP) (see Exhibit 88, Servicing Tools), by the end of January annually and ensure that an IRS Form 1099-C is filed with the IRS as required in Section 8106.2(c)(iii)(k) and is provided to the Borrower as required in Section 8106.2(c)(iii)(L) for all Mortgages in which the debt has been discharged in the prior year. This report will list all Mortgages owned or guaranteed in whole or in part by Freddie Mac whereby Freddie Mac has determined not to pursue collection of the deficiency in the prior year. Page 8106-11 To help facilitate this annual review, from February 1 to December 31 each year, Servicers can monitor the 1099-C Loan Detail report in the SPP, which also provides a tentative aggregate list of Mortgages for which Freddie Mac has decided to not pursue collection of the deficiency for the current year. Servicers may use this current year’s list to prepare for the required annual review and reconcile any eventual IRS Form 1099-C filings; however, as the status of the Mortgage and/or the cancelation of debt may subsequently change, any Servicer that chooses to use this current year’s list in such a manner must, as part of the required annual review, reconcile the final report against any IRS Form 1099-C filings already prepared. (K) Reporting IRS Form 1099-C to the IRS The Servicer must file IRS Forms 1099-C on Freddie Mac’s behalf. The Servicer must file all IRS Forms 1099-C with the IRS electronically. IRS Publication 1220 sets forth the IRS requirements for filing electronic reports and corrections. The Servicer can obtain this publication by downloading it from the IRS website at http://www.irs.gov, or by calling 1-800-TAX-FORM (1-800-829-3676). When filing electronically through the IRS Filing Information Returns Electronically (FIRE) System, the Servicer must insert appropriate header information on the report it files with the IRS in accordance with the following record descriptions: “A” record Payer city, State and ZIP Code “B” record Page 8106-12 The 9-digit Freddie Mac loan number and the 6-digit Seller/Servicer number, separating these two numbers by one space Each Servicer must file its reports with the IRS no later than March 31 of the year following the calendar year in which the cancelation of debt occurs. (L) Reporting to the Borrower Even if a Servicer reports to the IRS electronically, the Servicer is still responsible for providing a paper copy of the IRS Form 1099-C to the Borrower (copy B) by January 31 of the year following the calendar year in which the cancelation of debt occurred. The Servicer can satisfy the requirement for furnishing such statement to the Borrower by sending a completed IRS Form 1099-C to the Borrower’s last known address. The form must show Freddie Mac’s name and address and include a statement that the information is being reported to the IRS. The Servicer is also required to file IRS Form 1099-C with any State that requires this filing in accordance with the State’s filing deadlines. (M) Notification to Freddie Mac of electronic reporting The Servicer must notify Freddie Mac that the Servicer reported IRS Form 1099-C to the IRS. When the electronic report is sent to the IRS, the Servicer must submit Form 1065 to Freddie Mac (see Directory 3). (N) Correcting or voiding previously submitted IRS Form 1099-C To correct or void a previously submitted IRS Form 1099-C, the Servicer must refer to IRS requirements to determine how to report either electronic corrections or voids. To avoid or minimize penalties that may be imposed by the IRS, the Servicer must promptly report corrections or voids to the IRS when an error is discovered. When the Servicer submits corrections or voids to the IRS, the Servicer must also submit a copy of Form 1065 to Freddie Mac (see Directory 3). The Servicer must indicate on Form 1065 the number of corrected or voided IRS Forms 1099-C submitted to the IRS. (O) Filing accuracy and documentation Servicers are responsible for completing the IRS Form 1099-C and for providing the information to the IRS and to the Borrower in a timely and accurate manner. The Page 8106-13 Servicer must maintain copies of all statements and reports that Freddie Mac requires the Servicer to provide directly to the Borrowers and the IRS in compliance with Section 6050P of the Internal Revenue Code. The Servicer must make such copies available for examination by Freddie Mac upon request until Freddie Mac agrees, in writing, that such records may be destroyed (which will be a minimum of four (4) years). If the IRS penalizes Freddie Mac or assesses any fees for failure to produce such information, or because the Servicer failed to file a return or statement or filed an untimely, incorrect or incomplete return or statement, the Servicer will be required to reimburse Freddie Mac for all costs incurred by Freddie Mac as a result of such penalty or assessment and for the amount representing Freddie Mac’s total tax liability resulting from such reimbursement. Freddie Mac will not require such reimbursement if the Servicer can show that it met the filing requirements. (d) IRS Form 1099-MISC, Miscellaneous Income Servicers should not prepare or file IRS Form 1099-MISC using Freddie Mac’s name or TIN. The Servicer should consult with its tax advisor to review its reporting obligations with regard to the filing of Form 1099-MISC. Page 8107-1 Chapter 8107: Document Custody 8107.1: Servicer responsibilities related to document custody (12/17/25) ■ Delivery of trailing documents to the Document Custodian ■ Requests for release of documents ■ Returning documents to the Document Custodian ■ Lost Notes (a) Delivery of trailing documents to the Document Custodian Upon receiving a Mortgage document that is required to be held by a Document Custodian, such as a modifying instrument or an original document from a recording office, the Servicer must promptly deliver it to the Document Custodian holding the related Note. (b) Requests for release of documents Servicers may require possession of a Note to take action in conjunction with the payoff, foreclosure, repurchase, substitution, conversion, modification or assumption of a Mortgage or to take legal action, such as responding to a Borrower’s bankruptcy, bringing or defending a lawsuit or other litigation relating to the maturity, prepayment, repurchase, substitution, conversion, modification or assumption of a Mortgage or a Freddie Mac Default Legal Matter (each such bankruptcy, suit or litigation being a “Legal Action”). Servicers often require physical possession of a Note for Legal Actions. Even if the Servicer needs only one document from the Note file, the Document Custodian will release the entire file because it is important to keep all the documents comprising the Note file together. In certain circumstances, constructive possession, which can be obtained quickly, is legally sufficient to establish the Servicer as a “holder” of, or person entitled to enforce, the Note in a Legal Action. “Constructive possession” describes the situation in which someone controls an object without physically possessing it. In this context, a Servicer can control and direct a Note that is in the Document Custodian’s vault. If constructive possession is appropriate for a Legal Action, the Servicer will automatically, immediately and conclusively be deemed to have constructive possession of the Note from the earlier of the date that: ■ The Legal Action commences, or; Page 8107-2 ■ The Document Custodian receives the Servicer’s request to release constructive possession of the Note until the Legal Action is concluded For physical possession, the Document Custodian will deliver the Note as directed by the Servicer. For constructive possession, the Document Custodian will promptly contact the Servicer by e-mail or otherwise when Document Custodian’s tracking system has been updated to indicate the Servicer (rather than Freddie Mac) as the “owner” or “investor” of the related Mortgage. Upon Document Custodian’s release of the Note, the Servicer shall automatically, immediately and conclusively be deemed to be: ■ The holder of the Note ■ Entitled to enforce the Note ■ Duly authorized by Freddie Mac to take Legal Action in connection with Servicing the related Mortgage ■ As appropriate, in physical possession of the Note Servicers request and return physical and constructive possession of Notes from Document Custodians (including eMortgages as defined in Section 1402.1(b)) using Form 1036, Request for Possession or Control of Documents, or its equivalent (“Form 1036,” regardless of its format). A single form may be used to request multiple Notes if each Note is separately listed and identified. An Electronic, as defined in Section 1401.1(b), or alternative version of Form 1036 must contain all information required by the Form 1036, regardless of format. Any request for release that is not delivered as hard copy is considered to be an Electronic Form 1036 (including a Portable Document Format (PDF) of a paper document attached to an e-mail). To use an Electronic Form 1036, the Servicer must enter into an agreement with the Document Custodian as described in Section 8107.2(b). The procedures to obtain physical or constructive possession of a Note are described below. (i) Designated Custodian To obtain physical or constructive possession of a Note from a Document Custodian other than The Bank of New York Mellon Trust Company, N.A. (“BNYM”) as Designated Custodian, a Seller/Servicer must complete Form 1036 and deliver it to the Document When the Servicer no longer requires possession of the Note, it must promptly: ■ For physical possession, return the Note to the Document Custodian unless the Mortgage was repurchased or paid in full, or Page 8107-3 ■ For constructive possession, send notice (a copy of the original Form 1036 with a request for termination of constructive possession) to the Document Custodian, which will then update its document tracking system (ii) BNYM as Designated Custodian To obtain physical or constructive possession of a Note from BNYM, a Servicer may complete and send the Form 1036 as described above or make an electronic request using the Asset Repository and Collateral System (“ARK”). Contact BNYM for further information on ARK (see Directory 4). When the Servicer no longer requires possession of the Note, it must promptly: ■ For physical possession, return the Note to BNYM unless the related Mortgage was repurchased or paid in full as described above; however, Servicers using ARK to request a Note must use that method to return it and include a copy of the ARKgenerated 1036 Release Receipt Report, or ■ For constructive possession, notify BNYM by sending a copy of the original Form 1036 with a notice of termination of constructive possession or otherwise as instructed by BNYM, which will then update its document tracking system. (iii) eMortgage designated custodian In States in which the Servicer must be the holder of an eNote (as defined in Section 1402.1(b)) to commence foreclosure or other Freddie Mac Default Legal Matters, the Servicer must follow the requirements of Section 1402.5(c)(v) and, if required to produce a copy of the eNote for a Freddie Mac Default Legal Matter, Section 1402.5(c)(vi). Servicers must follow prudent business practices to protect and safeguard all Notes and documents while in their possession, in transit and in the possession of foreclosure counsel or agents. At a minimum, these practices include protection from damaging elements, such as water and fire, identification as a Freddie Mac asset, secure storage and tracking and segregation from unrelated documents. (c) Returning documents to the Document Custodian When a Note is no longer needed for the reason cited on Form 1036, or when the Legal Action is concluded, the Servicer must promptly, in all events within 90 days, return the Note to the Document Custodian. Notes and related documents may be transported only by nationally recognized commercial or bonded carrier or courier services and must be covered by in transit insurance. Note: See Section 2202.3(b) for Seller/Servicer and Document Custodian requirements. Page 8107-4 (d) Lost Notes (i) Lost Notes Requirements If a Servicer becomes aware at any time that an original Note is lost, is missing or has been inadvertently destroyed, the Servicer must promptly conduct a thorough and diligent search of its premises and business records and make diligent inquiry of any party that has had physical responsibility for the Note, such as a Document Custodian or foreclosure counsel. Servicer is responsible to Freddie Mac for the original Note even if it did not have physical possession of the Note at the time of loss. If Servicer cannot locate the Note after conducting the search, it must: ■ Retain written records describing the search in the Mortgage file, and ■ Immediately send an e-mail to Freddie Mac (Directory 9) requesting Freddie Mac’s permission to create an LNA that meets the requirements of this Section 8107.1. In response, Freddie Mac will issue: • An e-mail indicating Servicer’s authority to create an LNA subject to the terms and conditions set forth in this section • A written communication with a request for additional action • Additional instructions for an alternate remedy, or • A repurchase request, if the request is not granted Upon Freddie Mac’s approval of the request, the Servicer will create an LNA as described in subsection (ii) below and maintain the LNA as if it were the original Note, provided that a copy of Freddie Mac’s approval of Servicer’s creation of the LNA must be maintained with the LNA in the Note file. If a Document Custodian released an original Note, it is not permitted to accept return of an LNA without evidence of Freddie Mac’s authorization to create the LNA. Servicer must adhere to these procedures, whether it believes that it or another party was responsible for losing or destroying the Note and must maintain written policies to implement these procedures. (ii) LNA requirements Each LNA that Servicer creates must: ■ Identify information regarding the related Mortgage, including the: • Name(s) of the Borrower Page 8107-5 • Original principal balance • Note Date • Recording information for the Security Instrument • Address of the Mortgaged Premises (ZIP CodeTM not required) • Freddie Mac loan number; and • Servicer loan number ■ Confirm that the person signing the LNA on behalf of the Servicer (“affiant”) is over the age of 18, is competent to testify and either has independent knowledge of the facts set forth in the LNA or has made appropriate inquiry of persons having knowledge of such facts ■ Identify Freddie Mac as owner of the Mortgage ■ Set forth the name and function of the Servicer ■ State the basis for affiant’s assertion that the Note is lost or destroyed, including whether affiant is familiar with and has access to Servicer’s business records as part of affiant’s regular job functions ■ Verify that Servicer received the original Note ■ State that Servicer conducted a good faith, thorough and diligent search of Servicer’s premises and business records and has been unable to locate the original Note ■ State that, at the time that the Note was lost or destroyed, Servicer was entitled to enforce the Note ■ State that Freddie Mac and its successors-in-interest and assignees may rely on the LNA ■ Have attached to it a complete copy of the Note showing all endorsements through certification for purchase by Freddie Mac, if any ■ Contain the notarized signature of an employee of Servicer who is identified on the LNA by printed or typed title; and ■ Satisfy the requirements of applicable law to enforce the debt obligation in the State in which the Mortgage Premises is located Page 8107-6 For each such State, Servicer must receive, and make available upon request for Freddie Mac’s inspection, a legal analysis from either Servicer’s in-house counsel or outside counsel that the form of LNA used is as valid and enforceable as the Note would be if it were present. Certain States may require additional representations and information. For example, New York requires information regarding the original receipt of the Note and the methodology of Servicer’s good faith efforts to determine that the Note was lost. (iii)Servicer representations and warranties regarding enforceability of the Note; indemnification Servicer acknowledges that creating an LNA does not relieve Servicer of any representation or warranty relating to enforceability of the Note and agrees to indemnify Freddie Mac under Section 8101.1(d) for any loss, damage or expenses that arise because the original Note is unavailable. Servicer must provide written testimony, witnesses or other support to prove the LNA and enforce the debt obligation in a Legal Action, as defined in Section 8107.2, when requested by Freddie Mac, even when Servicer no longer services the related Mortgage and those activities support a Transferee Servicer’s efforts to enforce the debt obligation or otherwise service that Mortgage. If the Servicer has transferred servicing of a Mortgage with an LNA, Servicer must provide such support at the request of any subsequent Transferee Servicer or Freddie Mac. (iv) Records and reporting of LNAs Servicer must maintain a list of all Mortgages with LNAs created pursuant to this section 8107.1 and provide the list to Freddie Mac upon request. (v) “Found” Notes If a Note is located after an LNA has been created, Servicer shall immediately notify Freddie Mac by sending an e-mail to [email protected] and deliver the Note as directed below. If Freddie Mac owns the Mortgage, Freddie Mac may direct Servicer and Document Custodian to perform certain verifications, deliver the Note to the Document Custodian and execute certain documents as further described in the Document Custody Procedures Handbook. After the Document Custodian accepts the Note, Freddie Mac will destroy, or direct the destruction of, the LNA, and the Servicer’s indemnification obligations shall terminate without further action by any party. If Freddie Mac no longer owns the Mortgage when the Note is found, the Servicer must contact the new owner for instruction. Page 8107-7 8107.2: Document Custodian’s functions and This section contains information related: ■ Document Custodian’s general duties ■ Requests for release of notes and assignments to Servicers ■ Document delivery requirements ■ Form imaging and retention requirements ■ Lost Notes and LNAs (a) Document custodian’s general duties Each Document Custodian must maintain custody of the Notes and assignments (collectively, as appropriate, “Notes,” see the definition in the Glossary), in trust, for the benefit of Freddie Mac by: ■ Storing the Notes in secure, fire-resistant facilities as required by Section 2202.1(b)(ii). When a Servicer delivers supplemental or trailing documents, such as original modifying instruments, the Document Custodian must place them with the related Note. ■ Affixing the Freddie Mac loan number to the Note, if advised that Freddie Mac requires it, and, if the Note contains the Freddie Mac loan number, changing the Freddie Mac loan number on a Note if advised by the Servicer that Freddie Mac has changed the Freddie Mac loan number for that Mortgage ■ Complying with the requirements of this Section 8107.2 and all Tri-Party Agreements (b) Requests for Release of Notes and assignments to Servicers Servicers may require physical or constructive possession of Notes in conjunction with a Legal Action or for the payoff, foreclosure, repurchase, substitution, conversion, modification or assumption of a Mortgage. Servicers must complete, sign and submit a Form 1036, Request for Possession or Control of Documents, or its equivalent, such as the Web Release Request described in Section 8107.1(b) (“Form 1036” regardless of its format) to the Document Custodian. Absent manifest error, Document Custodians may rely on information received from Servicers on Form 1036. Alternative versions of Form 1036 must contain all information required by the Form 1036, regardless of their format. A single form may be used to request multiple Notes if each Note is separately listed and identified. Page 8107-8 A Form 1036 is considered to be Electronic, using the definition in Section 1402.1(b), if it is transmitted in any format other than paper, including Portable Document Formats (PDFs) of paper documents delivered as attachments to e-mails. Before using an Electronic Form 1036, Freddie Mac requires that the Servicer and Document Custodian have in place a written agreement that: ■ Defines Electronic Signature and the type(s) of electronic transmission(s) permitted ■ States the Document Custodian’s requirements for accepting an Electronic Signature ■ States the Servicer’s requirements for maintaining and controlling access to Electronic Signature information ■ Clearly assigns liability when the terms of the agreement are violated Document Custodian must retain for each Servicer a list of individuals authorized to request the release of documents electronically. The list must be dated and signed by an officer of the Servicer and contain sample signatures of the authorized individuals. The Document Custodian should review and retain documentation of such review for each Note file to verify its completeness and that the Note is original before releasing it to the Servicer. This enables the Document Custodian to verify that the Servicer returns all the documents, including the original documents, that were released to it. (c) Document delivery requirements (i) Delivery and return of physical possession Servicers may require physical possession of Notes to service Mortgages for a Legal Action or otherwise. Servicers must complete and sign Form 1036 and submit it to the Document Custodian. See Section 8107.1(b) for information related to requests for release of documents. Upon receipt of Servicer’s signed Form 1036, the Document Custodian shall transfer and deliver physical possession of the Note as directed by the Servicer. Notes may be transported only by a nationally recognized commercial or bonded carrier or courier service and must be covered by in transit insurance. Note: See Sections 2202.1(b) and 2202.3(b) for information related to Document Custodians and document custody. When a Note is no longer needed for the reason cited on Form 1036 or when the Legal Action is concluded, the Servicer must promptly (and in any event within 90 days) return the Note to the Document Custodian. Upon receiving the Note, the Document Custodian shall immediately resume its physical custody, in trust, for the benefit of Freddie Mac, as set forth in the Tri-Party Agreement, verify that all documents that were released have been returned and update its tracking system to reflect their receipt. See Section 8107.2(e) Page 8107-9 below for instances in which the Document Custodian released an original Note and the Servicer returns an LNA in lieu of the original Note. (ii) Delivery and return of constructive possession The Servicer must complete, sign and submit Form 1036 to request constructive possession from the Document Custodian. The constructive possession will commence on the earlier of the date on which the Document Custodian receives the Servicer’s request for constructive possession and the Servicer commences the Legal Action. The Document Custodian maintains physical custody of the Note for the benefit of the Servicer while the Servicer has constructive possession. For the duration of the Legal Action, the Servicer shall be: ■ In constructive possession of the Note ■ The holder of the Note ■ Entitled to enforce the Note, and ■ Authorized by Freddie Mac to take Legal Action to service the related Mortgage Upon notice from the Servicer that the Legal Action is concluded, the Document Custodian shall automatically and immediately update its document tracking system and cease maintaining physical custody of the Note, in trust, for the benefit of the Servicer and resume maintaining physical custody of the Note, in trust, for the benefit of (d) Form imaging and retention requirements The Document Custodian must retain Form 1036 for three months after the date the Mortgage is paid off, but they need not retain Form 1034E, Custodial Certification Schedule, or the Note Delivery Cover Sheet after the related Mortgages have been certified. Documents and forms may be retained as Electronic Records on the terms and conditions for maintaining such Records set forth in Chapter 1401. In disposing of documents, the Document Custodian must have in place and follow procedures and use destruction methods that ensure the confidentiality of Borrowers’ private personal information. (e) Lost Notes and LNAs The Document Custodian may receive, either as a return of released documents or in a Transfer of Servicing or transfer of custody, an LNA rather than the original Note. The Document Custodian may accept an LNA only if the Servicer delivers evidence of Freddie Mac’s approval of the use of an LNA for that Mortgage. Acceptable evidence of such Page 8107-10 approval includes a copy of a single loan exception or the text of an e-mail from Freddie Mac, and the approval must include specific reference to the related Mortgage, which may appear on a list. If the Servicer does not include such evidence, the Document Custodian must contact Freddie Mac immediately at [email protected] and await further instruction. The Document Custodian must verify that each LNA: ■ Is an original, signed in ink by an officer of the Seller/Servicer that created the LNA and notarized ■ Includes the name of each Borrower on the Note, the original principal amount of the Note, the Note Date and recordation information for the related Security Instrument ■ Has attached to it a complete copy of the entire missing Note, including all required signatures and endorsements to the Servicer that created the LNA If the LNA meets these requirements, the Document Custodian must verify the loan data from the Note copy attached to the LNA and maintain the LNA on the same basis as it would if the LNA were an original Note. This includes observing all requirements relating to requests for release. If at any time an original Note is recovered as described in Section 8107.1(d)(v), the Servicer will deliver it to the Document Custodian, and the Document Custodian will follow the process set forth in the Document Custody Procedures Handbook for “found Notes.” Document Custodians may contact Freddie Mac (see Directory 9) for instructions and further information on verifying and managing LNAs. Page 8201-1 Chapter 8201: Escrow 8201.1: Escrow account management for property taxes, ground rents, assessments or other charges and waiver requirements (09/10/25) ■ Annual Escrow analysis ■ Waiver of Escrow accounts ■ Non-payment of Escrow charges ■ Escrow waiver exception requests ■ Interest of escrow accounts The Servicer must obtain bills for and pay all Escrow items in accordance with the terms of the Mortgage before the applicable penalty or termination date. The Servicer must maintain adequate records to prove payment of all property taxes, ground rents and assessments or other charges that, if delinquent, are or may become First Liens on the property or that if not paid would result in the subordination of Freddie Mac’s interests, as applicable. Note: See Section 9301.6(e) regarding expenses that may become First Liens on the property. If the Borrower requests, the Servicer may also collect and administer funds to pay expenses not provided for in the Mortgage, such as life insurance on the Borrower. If the Servicer does not collect Escrow or discontinues collecting Escrow, then: ■ The Servicer must require that the Borrower furnish proof of payment; and/or ■ The Servicer may use other means (such as tax services) commonly employed by private institutional mortgage investors to satisfy itself that these items have been paid (a) Annual Escrow analysis At least annually, the Servicer must compute the required Escrow payment based on reasonable estimates of assessments and bills to determine that sufficient funds are being collected to meet all Escrow payments. (i) Escrow surplus Page 8201-2 If the amount held in Escrow by the Servicer, together with the future monthly installments of Escrow, exceeds the amount required to pay charges as they fall due, plus any “cushion” permitted by applicable law, the Servicer must either: ■ Repay the excess promptly to the Borrower (if there is no default under the terms of the Security Instrument), or ■ Credit the excess to the Borrower by a reduction in monthly Escrow installments Any interest payable to the Borrower for Escrow, when required by applicable law, or any other funds held by the Servicer, whether due to contractual agreement or operation of law, must be paid by the Servicer at its own expense. (ii) Escrow shortages If the Borrower is unable to pay an Escrow shortage as a lump sum, then the Borrower must pay the shortage as part of the monthly payment (“Projected Monthly Escrow Shortage Payments”) on the Mortgage. If the Borrower must pay Projected Monthly Escrow Shortage Payments, then the Servicer must: over a period of not more than 60 months; and ■ Account for any remaining unpaid amount of the Escrow shortage in any subsequent Escrow analysis to ensure that the Borrower is able to continue to pay all Escrow shortage amounts over the remaining portion of either the current remaining Escrow shortage repayment period or a period up to 60 months. The Servicer may not accelerate or compress the remaining Escrow shortage amount into a new Escrow payment or shorter repayment period as a result of a future Escrow analysis. (b) Waiver of Escrow accounts The Servicer must have a written policy governing the circumstances under which Escrow accounts may be waived. When a Servicer permits Escrow waivers, subject to the Mortgage Purchase Documents and applicable law, the Servicer’s written policies must provide that the waiver not be based solely on the loan-to-value ratio of the Mortgage but also on whether the Borrower has the financial ability to handle the lump sum payments of property taxes, property insurance premiums and other charges described in the Security Instrument. The Servicer may, by written notification to the Borrower and without Freddie Mac’s approval, start collecting Escrow previously waived. Page 8201-3 Any Escrow account waiver must be in writing and grant the Servicer the right to resume collection of Escrow if there is any nonpayment of the items for which Escrow had previously been collected. (i) Circumstances in which Escrow may be discontinued Servicers must discontinue collecting Escrow when required by applicable law. If not prohibited by applicable law and the Mortgage is current, Servicers may approve an Escrow waiver requested by the Borrower, except as stated in Section 8201.1(b)(ii), if: ■ The unpaid principal balance for the Mortgage is less than 80% of the original appraised value; or ■ The Mortgage has not been delinquent for 30 days or more at any time during the previous six months Additionally, there is no minimum period having elapsed since the Origination Date of a Mortgage when evaluating an Escrow waiver request. (ii) Circumstances in which Escrow may not be discontinued Servicers may not discontinue or waive collecting Escrow on the following Mortgages if they had an Escrow account when sold to Freddie Mac: ■ A Mortgage secured by a Manufactured Home or a 2- to 4-unit property ■ An Affordable Gold® 97 Mortgage ■ A Texas Equity Section 50(a)(6) Mortgage ■ A Freddie Mac 100 Mortgage ■ A Home Possible® Mortgage ■ A HomeOne® Mortgage ■ A HeritageOne® Mortgage Additionally, except Mortgages modified under the terms in Section 9206.1(c)(v), a Servicer may not discontinue or waive collecting Escrow on Mortgages that have been modified under a Freddie Mac mortgage modification program. Servicers must follow FHA, VA, RHS or MI Escrow waiver and reinstatement Page 8201-4 (c) Non-payment of Escrow charges (i) Mortgage with an Escrow account If the funds held in Escrow are insufficient to pay charges when due, the Servicer should obtain the necessary additional funds from the Borrower before the latest date on which the charges may be paid prior to penalty, lapse of insurance policies, adverse impact to Freddie Mac’s interest in the Mortgage, etc. If the Servicer is unable to obtain the funds from the Borrower, the Servicer must pay any charges due. The Servicer may either increase the Borrower’s next payment to cover the entire advance or schedule the repayment of such advance over several months. The Servicer may not collect the advance by deducting from one or more regular monthly Mortgage payments. For delinquent Mortgages, the Servicer must continue to pay Escrow items for the following expenses: ■ Property taxes, property insurance premiums and other charges as described in the ■ Mortgage insurance premiums, if applicable Servicers must contact Freddie Mac (see Directory 5) and obtain Freddie Mac’s written approval before paying the taxing authority when federal, State or local income tax liens would take priority over Freddie Mac’s First Lien position. However, if the Mortgage is secured by a Manufactured Home and the Borrower becomes 60 days or more delinquent, a Servicer must start collecting Escrow that was previously waived as a part of any repayment arrangement. (ii) Mortgage without an Escrow account If Escrow is not collected and the Servicer discovers nonpayment of any charge otherwise payable from Escrow, the Servicer must contact the Borrower and allow the Borrower 30 days to provide proof of payment. The Servicer must advance funds for the unpaid charge and any applicable penalty if the Borrower indicates inability to make the payment or does not provide proof of payment within the required 30 days. The Servicer must attempt to work out an arrangement with the Borrower for repayment of any advance and, if allowed by applicable law, must begin to collect Escrow for future bills. If both: ■ The Borrower fails to pay any charge otherwise payable from Escrow; and ■ The Servicer has advanced funds for the unpaid charge and any applicable penalty And either: Page 8201-5 ■ A mutually satisfactory arrangement cannot be made for the Borrower’s repayment of the advance or the Borrower fails to comply with the terms of any such arrangement; ■ The Borrower fails to pay Escrow to the Servicer after the Servicer starts collecting Escrow that was previously waived Then the Servicer must comply with the collection, loss mitigation and, if necessary, foreclosure referral requirements set forth in Chapters 9101 or 9102, as applicable. (d) Escrow waiver exception requests If the Servicer believes that the Borrower should not need an Escrow account, even though the Borrower did not meet the requirements under Section 8201.1(c), then the Servicer must submit an exception request to Freddie Mac (see Directory 5) for review. (e) Interest on Escrow accounts If the Servicer either has entered into an agreement or is required by law to pay interest on Escrow, the Servicer is solely and fully responsible for this payment. The accounting related to the payment of interest on Escrow may not be included with the regular Mortgage accounting for principal and interest. Page 8202-1 Chapter 8202: Property Insurance 8202.1: General property insurance requirements ■ General property insurance requirements ■ Mortgage clause ■ Minimum property insurance types and amounts ■ Insurance charges covering the Mortgaged Premises (a) General property insurance requirements For as long as Freddie Mac owns a Mortgage, the Servicer must ensure that the Mortgaged Premises is covered by insurance meeting the requirements of Chapters 4703 and 8202. Servicers must ensure that each insurer or reinsurer that provides property or flood insurance coverage for each Mortgaged Premises securing a Mortgage owned by Freddie Mac meets the minimum licensing, assessment and rating requirements outlined in Section 4703.1. Insurance policies must include coverage for fire, windstorm, hurricane, hail, flood and localized perils, when applicable, and provide claims to be settled based on replacement cost. Note: Refer to Section 4703.2 for requirements for minimum property insurance types and amounts and Section 4703.3 for flood insurance requirements. ■ Ensure that the carrier, policy amount and coverage meet the minimum Freddie Mac requirements described in Chapter 4703 ■ Ensure property and flood, when applicable, insurance premiums are paid ■ Obtain Lender-Placed Insurance (LPI) when required in accordance with applicable law, the Security Instrument and the Guide. See Section 8202.6 for LPI requirements. Page 8202-2 (b) Mortgage clause Servicers must ensure all insurance policies documenting insurance coverage(s) obtained in accordance with Freddie Mac’s requirements for 1- to 4-unit properties include the insurance industry’s standard Mortgage clause and meet the requirements outlined in Section 4703.6. (c) Minimum property insurance types and amounts For each Freddie Mac-owned Mortgage it services, the Servicer must have policies and controls in place to ensure that the Mortgaged Premises is insured and the coverage meets the minimum property insurance requirements outlined in Section 4703.2. If at any time during the term of the Mortgage the Mortgaged Premises is not covered by the minimum property insurance requirements outlined in Section 4703.2, the Servicer must follow the LPI process under Section 8202.6. (d) Insurance charges covering the Mortgaged Premises Premiums for insurance covering the Mortgaged Premises will be paid when due by Borrowers or the Servicer if the Servicer collects Escrows for such purposes. Premiums for insurance obtained by a Planned Unit Development (PUD), condominium homeowners association or Cooperative Corporation for the benefit of the PUD, Condominium Project or Cooperative Project will be paid as a common expense apportioned to each unit owner or Shareholder. If the Condominium Project is located in Puerto Rico, premiums for insurance for a condominium homeowners’ association policy for the benefit of the Condominium Project may be paid by the Servicer if the Servicer collects Escrow for such purposes. 8202.1: General property insurance requirements (Future effective date 01/01/27) ■ General property insurance requirements ■ Mortgage clause ■ Minimum insurance monitoring requirements ■ Insurance charges covering the Mortgaged Premises ■ Annual insurance reminder Page 8202-3 (a) General property insurance requirements For as long as Freddie Mac owns a Mortgage, the Servicer must: Ensure that the Mortgaged Premises is covered by insurance meeting the requirements of Chapters 4703 and 8202, and Ensure property and flood, when applicable, insurance premiums are paid, and Obtain Lender-Placed Insurance (LPI) when required in accordance with applicable law, the Security Instrument and the Guide. See Section 8202.6 for LPI requirements. Refer to: ■ Section 4703.1 for requirements related to insurer licensing, assessments and ratings, and ■ Section 4703.2 for minimum property insurance requirements, and ■ Section 4703.3 for flood insurance requirements (b) Mortgage clause Servicers must ensure all insurance policies documenting insurance coverage(s) obtained in accordance with Freddie Mac’s requirements for 1- to 4-unit properties include the insurance industry’s standard Mortgage clause and meet the requirements outlined in Section 4703.6. (c) Minimum insurance monitoring requirements For each Freddie Mac-owned Mortgage it services, the Servicer must: 1. Confirm, at least annually (or upon policy renewal or replacement), that the Mortgaged Premises is insured and the coverage meets or exceeds the minimum insurance requirements outlined in Chapter 4703, and 2. Have reasonable policies, procedures and controls in place to: Confirm insurance policies meet the minimum requirements in Chapter 4703 If an initial insurance review cannot determine whether an insurance policy meets the minimum requirements in Chapter 4703, obtain additional evidence of insurance. If the Servicer must obtain additional evidence of 1- to 4-unit property insurance coverage sufficiency, it may, as an alternative or supplement to other methods of evidencing replacement cost, monitor the dwelling coverage limit for renewal policies. If the dwelling coverage limit compared to the prior year’s policy has Page 8202-4 decreased, then the Servicer may not consider this as additional evidence of coverage sufficiency. In instances where reasonable efforts to obtain additional evidence that the insurance policy meets the minimum requirements of Chapter 4703 have been exhausted and failed, the Servicer must document its efforts in the Mortgage file. Notify the Borrower when the Servicer identifies a 1- to 4-unit property insurance policy that does not meet one or more of the following minimum requirements outlined in Sections 4703.1 and 4703.2: ■ Carrier licensing, assessment and rating ■ Coverage sufficiency ■ Perils ■ Deductibles (d) Insurance charges covering the Mortgaged Premises Premiums for insurance covering the Mortgaged Premises will be paid when due by Borrowers or the Servicer if the Servicer collects Escrows for such purposes. Premiums for insurance obtained by a Planned Unit Development (PUD), condominium homeowners association or Cooperative Corporation for the benefit of the PUD, Condominium Project or Cooperative Project will be paid as a common expense apportioned to each unit owner or Shareholder. If the Condominium Project is located in Puerto Rico, premiums for insurance for a condominium homeowners’ association policy for the benefit of the Condominium Project may be paid by the Servicer if the Servicer collects Escrow for such purposes. (e) Annual insurance reminder At least annually, Servicers must provide a reminder to Borrowers of their responsibility to maintain insurance on the Mortgaged Premises and recommend they contact their insurance provider to review their coverage. Servicers may include this reminder in any existing Borrower communication, refer the Borrower to applicable insurance information on the Servicer’s website or direct the Borrower to insurance resources on Freddie Mac’s website. Servicers may deliver this notice via any method as permitted by applicable law, including, but not limited to, e-mail, text messaging, voice response unit technology or a Servicer’s web portal. Page 8202-5

Source: Freddie Mac Single-Family Seller/Servicer Guide Section 8104.1(a) · source URL · snapshot 5869ee9e606cd4ae