Freddie Mac Single-Family Seller/Servicer Guide 2202.1 — Document Custodian eligibility and requirements

Freddie Mac Single-Family Seller/Servicer Guide 2202.1 — Document Custodian eligibility and requirements

Effective 2025-12-17 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Document Custodian engagement ■ Document Custodian eligibility and requirements (a) Document Custodian engagement For each Seller/Servicer number, the Seller/Servicer must contract with at least one Document Custodian, which may be a Designated Custodian or another approved Document Custodian chosen by the Seller/Servicer, on the Tri-Party Agreement, in accordance with the requirements of Sections 2202.1(b) and 2202.2. (i) Tri-Party Agreement limits Seller/Servicers may enter into Tri-Party Agreements with up to 10 Document Custodians per Seller/Servicer number. Compensation for each Document Custodian’s services is the sole responsibility of the Seller/Servicer. (ii) eMortgage requirements For requirements related to eMortgages, see Chapter 1402. (b) Document Custodian eligibility and requirements (i) General requirements The Seller/Servicer must choose a Document Custodian that will: ■ Enter into a Tri-Party Agreement with the Seller/Servicer and Freddie Mac (see Section 2202.2) ■ Meet and maintain all applicable eligibility requirements outlined in this section ■ Comply with: ❑ All Guide requirements pertaining to Notes and assignments held for Freddie Mac, including, but not limited to, Sections 4101.8 and 7101.4(c) and other requirements for Notes, assignments and related documents. If the requirements are amended in the Guide, then the Tri-Party Agreement will be deemed amended as necessary to conform with such amended requirements. ❑ All terms of the Tri-Party Agreement ❑ Any other requirements that Freddie Mac may specify to ensure the safety and security or enforceability of the Notes and assignments held by the Document Custodian ❑ Such standards, including custodial performance, and such fiduciary responsibilities as may be prescribed by Freddie Mac, in its discretion, from time to time Additionally, the Document Custodian must notify Freddie Mac and the Seller/Servicer if, at any time, it fails to meet any applicable eligibility requirements. The Seller/Servicer must have its own oversight process to monitor its Document Custodian(s) to ensure they remain in good standing and meet Freddie Mac eligibility requirements. If at any time, the Document Custodian fails to meet any applicable eligibility requirement, the Seller/Servicer must notify Freddie Mac within one Business Day at [email protected]. Freddie Mac is not approving new Document Custodians until further notice. The eligibility requirements stated in this chapter and elsewhere in the Guide are requirements for continuing eligibility as a Freddie Mac Document Custodian. This does not limit the ability of Freddie Mac-approved Document Custodians to obtain Freddie Mac approval to provide eNote custody. (See Section 1402.4 regarding eNote custodian requirements.) (ii) Basic eligibility requirements An eligible Document Custodian must: 1. Be one of the following: ■ A financial institution that is supervised and regulated by the FDIC, Board of Governors of the Federal Reserve System or the Office of the Comptroller of the Currency, ■ A subsidiary of a supervised and regulated financial institution listed above, authorized to perform trust services under applicable law, or ■ A Federal Home Loan Bank chartered pursuant to the Federal Home Loan Bank Act 2. Not be in receivership, conservatorship or liquidation and may not be a subsidiary of a federally regulated parent that is in receivership, conservatorship or liquidation 3. Maintain financial suitability by either: ■ Maintaining an acceptable risk threshold based on the requirements set forth in Section 2202.1(b)(iii) or (iv), or ■ Having an Acceptable Net Worth of at least $500,000,000 if it is one of the following: ❑ An entity applying to be a Document Custodian ❑ A Document Custodian with existing custodial relationship(s) or entering into new custodial relationships with Freddie Mac Seller/Servicers Servicers and Document Custodians will be notified if a Document Custodian is below the acceptable risk threshold and does not have an Acceptable Net Worth of at least $500,000,000. 4. Be equipped with secure, fire-resistant storage facilities with adequate controls on access to ensure the safety and security of the Notes and assignments in its custody. The vault must provide a minimum of two hours fire protection, and the fireproof certificate must be renewed annually; however, if a Document Custodian’s regulator requires a higher standard of fire protection, then that higher standard shall apply. 5. Maintain the Notes and assignments in such a manner as to ensure security and confidentiality and to prohibit unauthorized access to or use of information contained in the Notes and assignments 6. Use employees who are knowledgeable in the handling of Notes and assignments and of the functions and duties of a Document Custodian as required by Freddie Mac, including access to and use of Loan Selling Advisor®. (See Section 2403.2(b) for information on obtaining Loan Selling Advisor access and user roles.) 7. Access the electronic version of the Guide through the link on https://guide.freddiemac.com or arrange for a current subscription to the electronic Guide via AllRegs® 8. Maintain the following insurance coverages, at a minimum: ■ Financial institution bond, or equivalent insurance, covering any loss resulting from: ❑ Employee dishonesty, ❑ Physical damage or destruction to, or loss of, any Notes and assignments while such documents are located on the Document Custodian’s premises, and ❑ Physical damage or destruction to, or loss of, any Notes and assignments while such documents are in transit between the Document Custodian’s premises and any destination, regardless of the means by which they are transported, if the Document Custodian has contractually agreed with the Seller/Servicer to assume liability for Notes and assignments while in transit. Note: See Section 2202.3(b)(iii) for Seller/Servicer insurance requirements if the parties have not so agreed. ■ Errors and omissions insurance covering claims resulting from the Document Custodian’s breach of duty, neglect, errors or omissions, misstatements, misleading statements or other wrongful acts committed in the conduct of its services. For the purpose of these insurance coverages, the Notes are to be defined as “Negotiable Instruments” per Section 3-104 of the Uniform Commercial Code. Freddie Mac’s insurance requirements as stated above do not diminish, restrict or otherwise limit the Document Custodian’s responsibilities and obligations as stated in any Tri-Party Agreement. The required insurance coverages must: ■ Be underwritten by an insurer that has an A− (A minus) or better rating according to the A.M. Best Company, ■ Be maintained in amounts that are deemed adequate for the number of Notes held in custody and appropriate based on prudent business practice, and ■ Each have a deductible amount of no more than the greater of 5% of the Document Custodian’s generally accepted accounting principles (GAAP) net worth or $100,000 but in no case be more than $10,000,000 A Document Custodian may be covered under its parent’s insurance program rather than maintaining its own insurance only if: ■ The acceptable deductible amount for each insurance coverage does not exceed the greater of 5% of the parent’s GAAP net worth or $100,000 but in no case be more than $10,000,000, ■ The Document Custodian is a named insured, and ■ The parent’s insurance policy(ies) meets the insurance requirements for Document Custodians as stated in this section In the event of cancelation or non-renewal of any of the required insurance coverages, the Document Custodian or its insurer, insurance broker or agent must provide the Seller/Servicer and Freddie Mac’s Counterparty Credit Risk Management Department (see Directory 1) 30 days advance written notice thereof. 9. Have and maintain a document tracking and reporting system that, at minimum: ■ Provides, in an electronic format acceptable to Freddie Mac, an accounting of all Notes held for Freddie Mac identified by Freddie Mac loan number and the sixdigit Seller/Servicer number, ■ Monitors the receipt of Notes and assignments, including related or trailing documentation (e.g., modifying instruments or powers of attorney), ■ Monitors the release of Notes and assignments, ■ Tracks the physical location of Notes and related documents, ■ Cross-references the Freddie Mac loan number for each Mortgage with the loan number assigned by the Seller/Servicer, and ■ Accurately accounts for documents transferred or released The Document Custodian must provide screen prints of its document tracking system to Freddie Mac with its request for initial approval annually as part of its eligibility certification and upon Freddie Mac’s request. 10. Have and maintain a disaster recovery plan that documents, at a minimum: ■ The process by which the physical recovery/restoration of documents will occur, ■ The recovery of tracking system data, including any electronically maintained information, ■ The relocation/restoration of the facilities to ensure continuing ability to perform required custodial functions, ■ Provisions for the testing and maintenance of the plan, and ■ A provision to notify Freddie Mac (see Directory 9) of a disaster within 24 hours of the disaster according to the requirement in Section 8107.2(a) 11. Have and implement written procedures that ensure compliance with Freddie Mac requirements and prudent practices in performing the duties of a Document Custodian with respect to the Notes and associated documents, including, at minimum: ■ Certification and maintenance ■ Release and transfer ■ Access ■ Tracking and reporting (iii)Eligibility requirements for the Seller/Servicer acting as its own Document Custodian Subject to Freddie Mac’s approval and in Freddie Mac’s sole discretion, the Seller/Servicer may act as its own Document Custodian if: ■ All requirements in Sections 2202.1(b)(i) and (ii) are satisfied, and ■ The Notes and assignments for Mortgages serviced for Freddie Mac in its custody are entrusted to a department that: ❑ Is established and operated under trust powers granted by the Seller/Servicer’s primary regulator ❑ Has custodial officers who are duly authorized to act on behalf of the Document Custodian in its trust capacity and empowered to enter into a Tri-Party Agreement with the Seller/Servicer and Freddie Mac ❑ Is subject to periodic review, examination and inspection by the regulator granting trust powers ❑ It has a financial rating of 130 or better from IDC Financial Publishing, Inc. (IDC) or a C rating or better from Kroll Bond Rating Agency, Inc. (KBRA). Document Custodian may satisfy one rating provided the other rating is not lower than 75 from IDC or a C from KBRA. If Document Custodian is not a rated institution, then Document Custodian’s parent or subsidiary must meet these standards. Additionally, the Seller/Servicer is required to have a financial rating that meets or exceeds a long-term rating of BBB from Standard & Poor’s or a long-term rating of Baa2 from Moody’s. If the Seller/Servicer is not a rated institution, then the nearest parent must meet these requirements. ❑ Is independently and separately managed from any functional area that performs Mortgage origination, selling or Servicing ❑ Maintains separate records, files and operations ❑ Uses personnel not engaged in the functions of Mortgage origination, selling or Servicing to perform the custodial function (iv) Eligibility requirements for a third-party Document Custodian that is not an affiliate of the Seller/Servicer An institution that is not an affiliate of the Seller/Servicer may act as a Document Custodian if: ■ It meets all requirements in Sections 2202.1(b)(i) and (ii) ■ It has a financial rating of 125 or better from IDC or a C rating or better from KBRA. Document Custodian may satisfy one rating provided the other rating is not lower than 75 from IDC or a C from KBRA. If Document Custodian is not a rated institution, then Document Custodian’s parent or subsidiary must meet these standards. ■ Within the institution, the document custodial function: ❑ Is independently and separately managed from any functional area that performs Mortgage origination, selling or Servicing, ❑ Maintains separate records, files and operations, and ❑ Is performed by personnel not engaged in the functions of Mortgage origination, selling or Servicing (v) Eligibility requirements for a third-party Document Custodian that is an affiliate of the Seller/Servicer Subject to Freddie Mac’s approval and in Freddie Mac’s sole discretion, a third-party that is an affiliate of the Seller/Servicer may act as a Document Custodian if: ■ It meets all the requirements in Sections 2202.1(b)(i) and (ii) ■ It is independently and separately managed from the Seller/Servicer Note: The third-party Document Custodian may occupy the same premises as the Seller/Servicer, as long as the Seller/Servicer is not involved in the management or operations of the third-party custodian. ■ It has a financial rating of 130 or better from IDC or a C rating or better from KBRA. Document Custodian may satisfy one rating provided the other rating is not lower than 75 from IDC or a C from KBRA. If Document Custodian is not a rated institution, then Document Custodian’s parent or subsidiary must meet these standards. Additionally, the Seller/Servicer is required to have a financial rating that meets or exceeds a long-term rating of BBB from Standard & Poor’s or a long-term rating of Baa2 from Moody’s. If the Seller/Servicer is not a rated institution, then the nearest parent must meet these requirements. ■ Within the institution, the document custodial function: ❑ Is independently and separately managed from any functional area that performs Mortgage origination, selling or Servicing, ❑ Maintains separate records, files and operations, and ❑ Is performed by personnel not engaged in the functions of Mortgage origination, selling or Servicing (vi) Additional eligibility requirements for a Document Custodian that is an affiliate of a Warehouse Lender Freddie Mac recognizes that there may be instances where, for operational efficiency, the document custodial function shares personnel with the institution’s warehouse lending function. This sharing of personnel will be allowed only when the document custodial function has: ■ A separate tracking and reporting system that provides a clear distinction between Freddie Mac’s assets and the collateral held for the Warehouse Lender, ■ Separate record keeping from other functional areas, including warehouse lending, and ■ Operating controls that provide a clear distinction between: ❑ Activities that an employee performs for the benefit of the Warehouse Lender and activities performed for Freddie Mac, and ❑ Management decisions that apply to collateral held as security for the warehouse line and those that apply to Notes that are held in trust for the sole benefit of Freddie Mac

Source: Freddie Mac Single-Family Seller/Servicer Guide 2202.1 — Document Custodian eligibility and requirements · source URL · snapshot 4c94f67729042dd6