Freddie Mac Single-Family Seller/Servicer Guide Section 3402.2 — Quality control processes

Freddie Mac Single-Family Seller/Servicer Guide Section 3402.2 — Quality control processes

3402.2: Quality control processes (05/06/26) This section contains requirements related to: ■ Post-closing sample selection ■ Reverifications made by the Seller ■ Data integrity review ■ Documentation review ■ Preclosing quality control reviews (a) Post-closing sample selection The Seller’s post-closing quality control sample must, at a minimum, consist of three sample types: ■ Random Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-4 ■ Targeted ■ Discretionary (i) Random sample Home Mortgages in the random sample are randomly selected from the population so that every Mortgage has an equal chance of selection. Loan Product Advisor® Mortgages must make up a representative portion of the Seller’s quality control sample. Except as provided under the last paragraph of this section, the Seller must: ■ Select at least 10% of one of the following production populations for quality control review: ❑ Total annual Home Mortgage production ❑ Total annual secondary market Home Mortgage production ❑ Total annual Freddie Mac Home Mortgage production However, any Mortgages excluded from the Seller’s quality control sample selection process, as set forth in the remaining provisions of this section, are not eligible for sale to Freddie Mac. ■ Schedule its sampling procedures so that every Home Mortgage within the selected population has a chance of being selected for review within 90 days of the Note Date ■ Assign to quality control personnel the authority to conduct additional reviews at their discretion ■ Warrant that over the course of each 12-month period, the selected samples are representative of the full scope of the Seller’s product line and production process within the selected population The full scope of the Seller’s product line and origination process includes all of the following: ■ Home Mortgages from all product lines ■ Home Mortgages from all States of operation ■ Home Mortgages from each branch office ■ Home Mortgages from each third party involved in the origination process Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-5 ■ Home Mortgages with high-risk characteristics (e.g., high loan-to-value ratios, ARMs, 3- to 4-unit properties, Manufactured Homes, cash-out refinance Mortgages, Investment Property Mortgages and Caution Mortgages) A Seller with a total annual production volume in excess of 5,000 Home Mortgages may substitute a statistically based sampling methodology that is of sufficient size to ensure a confidence level of 95% and a margin of error not to exceed 2% on an annual basis based on the defect rates for Mortgages recently reviewed by the Seller’s quality control. (ii) Targeted sample Each month, the Seller must select an appropriate risk-based sample of Mortgages sold to Freddie Mac that become 60 days or more past due in the first six months following the Note Date. These Mortgages must be carefully evaluated to determine the presence of any fraud or other deficiency. (iii)Discretionary sample Mortgages in a discretionary sample are selected on a non-random basis from a specific population. When selecting Mortgages to be reviewed as part of the Seller’s discretionary post- closing quality control sample, the Seller may choose to make targeted Mortgage selections that focus on a specific characteristic of the Mortgage, such as product, business source or underwriting component (e.g., income and employment, assets, credit or property). When conducting these discretionary reviews, the Seller must consider the purpose of the targeted selection when determining whether certain reverifications are necessary. Examples: ■ If the purpose of the targeted selection is to focus specifically on income calculations, then reverification of assets or a review of the appraisal is not within the scope of the review and is not required to be completed; however, reverifications of income and employment are required ■ If the purpose of the targeted selection is to review Mortgages originated through a new source of business, then all aspects of the Mortgage are within the scope of the review, and all reverifications noted in Section 3402.2(b) must be performed. Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-6 As required in Section 3201.1(c), discretionary samples must be selected to evaluate the work of a particular employee or Mortgage transaction participant when there is a reason to suspect fraud. Discretionary samples should also be selected as needed in order to: ■ Review the work of a new branch office, employee or third-party originator ■ Validate that a new product or offering is being originated in accordance with the Seller’s policies and procedures ■ Comply with a request from Freddie Mac to review loans in a specific population (b) Reverifications made by the Seller The Seller must make certain reverifications on Loan Product Advisor and Non-Loan Product Advisor Mortgages selected for post-closing quality control review. The purposes of the reverification process include: ■ Evaluating the validity, accuracy and quality of the information used in the original underwriting decision ■ Protecting the Seller against fraud and misrepresentation Sellers should begin reverifying the information listed in this section as soon as possible after the sample selection to facilitate the Mortgage file review. Reverifications may be in written or verbal form. All reverification documentation must be retained in the Mortgage file. (i) Verifications of employment, income and sources of funds (A) Reverifications Except as noted below, for post-closing quality control reviews: ■ The Seller must reverify all employment, income and sources of funds used in the original underwriting process and based on the minimum documentation required at the time of origination ■ Copies of the original verifications should be submitted to the issuers with a request that they confirm the accuracy of the documentation ■ The Seller must pay any applicable fees that are charged for the reverification information Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-7 I. Exceptions to the reverification requirements The following table contains exceptions to the reverification requirements that are permitted provided the Mortgage file contains no evidence of misrepresentation in connection with the Borrower’s application, documentation or any part of the underwriting of the Mortgage: Exceptions to reverification requirements Documentation Requirement for reverification Income, employment or sources of funds used in the original underwriting process received from a third-party service provider designated by Freddie Mac (as of the date of the post-closing quality control review), or from a Freddie Mac financial institution verification report, for the income or asset type used to qualify the Borrower1 Reverification not required for eligible income types (see Sections 5303.4(b), 5303.5(b) and 5305.2(b)) or eligible asset types (see Section 5501.8(b)) when the report data is accessed directly from an authorized electronic database of employer provided information or when tax transcripts are obtained from the Internal Revenue Service (IRS) (see Sections 5304.2(e)(iii) and 5306.2(e)(iii)). 10-day pre-closing verification (10-day PCV) confirmed by the Feedback Certificate or verification report If the Note Date is on or before the close- by date (provided on the Feedback Certificate or verification report) indicating the 10-day PCV requirement is met, reverification of employment is not required. See Section 5302.6 for automated employment assessment with Loan Product Advisor requirements. 1The list of third-party service providers currently designated by Freddie Mac can be found at https://sf.freddiemac.com/tools-learning/loan-advisor/our-solutions/aim-asset-income- modeler. II. Requirements for reverifications The following table contains requirements for reverifications: Requirements for reverifications Method of reverification Requirements Verbal reverifications of employment, income and source of funds Must be documented in writing and do the following: Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-8 Requirements for reverifications Method of reverification Requirements ■ Identify the name of the quality control reviewer who made the contact ■ Identify the name of the business (employer, bank, etc.) ■ Identify the name and title of the individual who provided the verification (employer contact, gift donor, etc.) ■ Show the date(s) of the contact ■ Confirm that the information in the original verification was accurate or identify any inaccuracy ■ Identify the phone number for the individual contacted. The phone number must be obtained from an acceptable third-party source. ■ Identify the name of the third-party source used to obtain the phone number (phone directory, reliable internet source, 411 information services, etc.) E-mail reverifications of employment and income An e-mail exchange with the Borrower’s employer from the independently obtained employer’s work e-mail address that, at a minimum, must include all of the following: ■ Borrower’s name and employer’s name ■ Name and title of the individual contacted at the employer, date of contact and the individual’s work e- mail address ■ Borrower’s current employment status In addition, the Mortgage file must include: Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-9 Requirements for reverifications Method of reverification Requirements ■ Information about the third-party source used to obtain the employer’s e-mail (e.g., a reliable internet source), and ■ Name, title and employer of the representative who contacted the Borrower’s employer and obtained the e-mail verification As part of quality control review, Freddie Mac may require, in its discretion, that the Seller reverify the information contained in any Mortgage file submitted to Freddie Mac. Freddie Mac reserves the right to independently reverify the information contained in any Mortgage file. (B) Tax information Tax transcripts in post-closing quality control reviews are a critical part of validating the income documentation that was used in qualifying the Borrower. Except as noted below, for post-closing quality control reviews, the Seller must: ■ Request the IRS income information using IRS Form 4506-C or an alternate form acceptable to the IRS that authorizes the release of comparable tax information (e.g., IRS Form 8821) for each Mortgage selected for quality control review ■ Request tax information covering the full year(s) that align with all income used in qualifying, regardless of income type ■ Ensure the tax information received from the IRS supports all taxable income used in qualifying, regardless of income type I. Exceptions to the reverification requirements The following table contains exceptions, which are permitted provided the Mortgage file contains no evidence of misrepresentation in connection with the Borrower’s application, documentation or any part of the underwriting of the Mortgage: Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-10 Exceptions to reverification requirements Documentation Requirement for tax information All of the income used to qualify the Borrower is received from a third-party service provider designated by Freddie Mac (as of the date of the post-closing quality control review) or from a Freddie Mac financial institution verification report for the income type used to qualify the Borrower.1 Not required for eligible income types (see Sections 5303.4(b), 5303.5(b) and 5305.2(b)) when the report is accessed directly from the service provider’s electronic database IRS income information was received during the origination process. Not required 1 The list of third-party service providers currently designated by Freddie Mac can be found at https://sf.freddiemac.com/tools-learning/loan-advisor/our-solutions/aim-asset-income- modeler II. Income derived from sources in Puerto Rico, Guam or the U.S. Virgin Islands For Borrowers with income that is derived from sources in Puerto Rico, Guam or the U.S. Virgin Islands that are exempt from federal income taxation under the Internal Revenue Code, the above requirements apply, except as follows: ■ For Borrowers with income that is derived from sources in Puerto Rico, the Seller must submit Commonwealth of Puerto Rico Form 2907 titled “Request For Copy of the Return, Estate or Gift Certificate of Release” (Modelo SC 2907 “Solicitud De Copia De Planilla, Relevo De Herencia Y De Donacion”) to the Puerto Rico Department of the Treasury, Internal Revenue Area ■ For Borrowers with income that is derived from sources in Guam or the U.S. Virgin Islands, the Seller must submit IRS Form 4506-C or an alternate form that authorizes the release of comparable tax information to a third party (e.g., IRS Form 8821) to the Guam Department of Taxation and Revenue or Virgin Islands Bureau of Internal Revenue, as applicable (ii) Borrower’s Social Security number For Mortgages included in post-closing quality control samples, the Seller must validate the Social Security number provided by each Borrower. Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-11 The Seller is not required to validate the Social Security number during the post-closing quality control review if all the following apply: ■ The Seller validated the Social Security number during the loan origination process or a preclosing quality control review, ■ The Social Security number was not initially validated by a Mortgage Broker or Correspondent, and ■ The Mortgage file indicates there were no misrepresentations in connection with the Borrower’s application or the underwriting of the Mortgage (iii)Credit reports The table below identifies the requirements for obtaining credit reports as part of the Seller’s in-house quality control program. For all Mortgages selected for post-closing quality control review, the Seller must determine whether additional credit was granted and considered in qualifying. Requirements for obtaining credit reports as part of the Seller’s in-house quality control program Credit assessment Post-close quality control requirements Loan Product Advisor Accept Mortgages ■ The Seller must verify that the Loan Product Advisor provided credit reports are for the correct Borrower ■ The Seller must verify that the identifying information for any Borrower (name, current and previous address and Social Security number) is true, complete and accurate and properly input into Loan Product Advisor on or before the Note Date ■ Any credit information obtained from sources other than Loan Product Advisor must be reviewed ■ The Seller is not required to obtain a new credit report ■ The Seller is not required to review the Loan Product Advisor-provided credit reports to determine that the credit report was properly underwritten or that it is in Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-12 Requirements for obtaining credit reports as part of the Seller’s in-house quality control program Credit assessment Post-close quality control requirements compliance with credit underwriting guidelines Non-Loan Product Advisor Mortgages ■ For one out of every 10 Mortgages selected for post-closing quality control review, the Seller must obtain either a new Residential Mortgage Credit Report or a three-repository merged in-file credit report ■ For the remaining Mortgages in the Seller’s post-closing quality control sample, the Seller must obtain a new in- file credit report containing information from one or more of the national repositories Manually Underwritten Mortgages The Seller must re-underwrite the credit and continue to review the Mortgage file documents in accordance with Section 3402.2(d) to determine that the Mortgage was underwritten to Freddie Mac’s requirements. (iv) Verification of owner-occupancy For all Mortgages secured by Primary Residences that are selected for post-closing quality control review, the Seller must verify that the Borrower is occupying the Mortgaged Premises as a Primary Residence. (v) Property valuation As part of the Seller’s quality control program, for Mortgages selected for post-closing quality control reviews, the Seller must ensure the appraisal, or, if applicable, other property valuation, meets Freddie Mac requirements. The process is expected to use: ■ Desk reviews ■ Field reviews Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-13 ■ Automated valuation models ■ Multiple listing service data ■ Public records data ■ Online tools ■ Other appropriate methods in order to validate and ensure the quality of origination information. Freddie Mac Enhanced Relief Refinance® Mortgages may be excluded from property valuation reviews. In the event the Seller’s quality control review determines that a quality control finding affects the eligibility of a Mortgage sold to Freddie Mac on the Settlement Date, the Seller must report the finding to Freddie Mac within 90 days or within 60 days of the finding if fraud or possible fraud is involved, consistent with Section 3402.3(b). For the Mortgages selected for quality control review, the Seller must comply with the following: (A) Mortgages originated with appraisals I. Review of appraisal reports that did not receive appraised value representation and warranty relief For Mortgages originated with appraisals except as described in Section 3402.2(b)(v)(A)(II) below, the Seller must obtain a desk review of the appraisal report to ensure that it accurately reflects the market value, condition and marketability of the subject property and that the Mortgaged Premises is adequate collateral for the Mortgage. The desk review is not required to be performed by an appraiser (i.e., a Uniform Standards of Professional Appraisal Practice compliant appraisal review meeting Standards 3 and 4 is not required). However, the reviewer must be familiar with the subject’s Market Area and be qualified to do the following: ■ Address the appropriateness of the data presented in the report, ■ Address the appropriateness of the comparable sales, and ■ Conclude that the appraiser’s rationale for the final reconciliation of value was supported and the appraisal and property eligibility meet Freddie Mac requirements Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-14 If the Seller determines that the characteristics of the property or the scope of the desk review is insufficient to determine the accuracy of the appraisal or the adequacy of the collateral, a field review performed by an appraiser unaffiliated with the origination appraiser or appraisal firm documented on one of the following forms, as applicable, is required: ■ If the Mortgage is secured by a one-unit property and a field review is obtained, the results must be reported on Form 1032, One-Unit Residential Appraisal Field Review Report ■ If the Mortgage is secured by a 2- to 4-unit property and a field review is obtained, the results must be reported on Form 1072, Two- to Four-Unit Residential Appraisal Field Review Report Note: The Seller does not need to obtain a field review during the quality control review if one was obtained during the origination process and adequately supported the eligibility of the Mortgage for sale to Freddie Mac. II. Review of appraisal reports with appraised value representation and warranty relief (Loan Collateral Advisor® risk score less than or equal to 2.5) The Seller must ensure that the Mortgage meets the requirement of Section 5602.2, and the Seller is required to comply with Section 3402.2(b)(v)(A)(I) above, except that Seller is not required to review the accuracy of the appraiser’s opinion of market value. For example, the selection of comparable sales and adjustments may be excluded from the review. The Seller’s review of the appraisal should focus on the data quality, condition and marketability of the property and ensure the Mortgaged Premises is adequate collateral for the Mortgage. (B) Mortgages originated with automated collateral evaluation (ACE) or ACE+ PDR For Mortgages originated with ACE or ACE+ PDR as described in Section 5602.3 or 5602.4, the Seller is not required to comply with Sections 3402.2(b)(v)(A)(I) and (II) above. However, for such Mortgages, the Seller must conduct a review to ensure that the data submitted to Loan Product Advisor was accurate and the eligibility requirements of Section 5602.3 or 5602.4 were met. (c) Data integrity review The Seller’s post-closing quality control review procedures for all Mortgages must include a review of the completeness and accuracy of the information obtained in the Mortgage origination process. Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-15 The data integrity review of the information must include a process for checking data fields entered in Loan Product Advisor and ensuring that all data submitted is valid. The Seller must perform a data integrity review on all Mortgages sampled to ensure that the loan data is accurate and consistent. Source documentation to be reviewed includes: ■ Form 65, Uniform Residential Loan Application(s) ■ Employment and income verifications ■ Sales contracts ■ Tax returns ■ Credit data ■ Asset documentation ■ Property valuation documentation ■ Mortgage delivery data, including the Key Number when applicable. If the business area that conducts the post-closing quality control review does not have access to the delivery data, including the Key Number, this portion of the review may be conducted by another business area if there are documented controls in place to mitigate any delivery data errors. (d) Documentation review For Mortgages included in the post-closing quality control sample, the Seller must review and affirm: ■ The existence and accuracy of documentation necessary to determine compliance with applicable law, as required in Section 4202.1(a) ■ Compliance with the eligibility and underwriting requirements and guidelines of the Seller, the MI and Freddie Mac, as applicable, including: ❑ Compliance with the Seller’s warranties regarding Freddie Mac’s Exclusionary List ❑ The Settlement/Closing Disclosure Statement and related documentation to determine that all conditions of closing have been satisfied Alternatively, a Seller may choose to perform reviews of the existence and accuracy of documentation required by applicable law on a post-closing quality control sample separate from the review of eligibility and underwriting requirements, but the review must be performed on no fewer Mortgages than required by Section 3402.2(a)(i). Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-16 In the event a Seller chooses to conduct this separate sample, the Seller must have a process to review for compliance with applicable law all Mortgages identified through its review of eligibility and underwriting requirements that may: ■ Exceed Home Ownership and Equity Protection Act of 1994 Mortgage thresholds, ■ Meet the definition of a Higher-Priced Mortgage Loan (HPML) or Higher-Priced Covered Transaction (HPCT), as defined in the Glossary, or ■ Exceed the points and fees limitation indicated in Section 4202.2(c) The Seller must also include the following documents in its quality control review for comparison with the reverifications received: ■ Form 65 ■ Credit documentation ■ Employment and income documentation* ■ Asset documentation* ■ Property valuation documentation ■ Sales contract ■ Form 1077, Uniform Underwriting and Transmittal Summary, or equivalent form (e.g., a Feedback Certificate) *When the Seller uses a System (as defined in Section 2401.1(b)) for an automated income and/or asset assessment and receives a representation and warranty eligibility relief result of “Eligible” or “Partial”, the following table contains exceptions with respect to evaluating the validity, accuracy and quality of the information used in the original underwriting decision: Evaluation exceptions based on document type Document type Evaluation exception Third-party verification report using employed income data or paystub(s) and W-2 form(s) The Seller is not required to recalculate such income for eligible income types described in Section 5303.4(b) that are on the verification report or paystub(s) and W-2 form(s). Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-17 Evaluation exceptions based on document type Document type Evaluation exception Income Calculation Report The Seller is not required to: ■ Recalculate income for eligible self- employed income described in Section 5304.2(b) or eligible rental income described in Section 5306.2(b) that is on the Income Calculation Report, and ■ Perform the business review and analysis described in Section 5304.1(d) for eligible self-employed income that is on the Income Calculation Report Only when the eligible result is returned for tax return data representation and warranty relief, the Seller is not responsible for accuracy and integrity of the tax return data for eligible income described in Section 5304.2(b) that is on the Income Calculation Report. Asset verification report The Seller is not required to recalculate eligible asset types described in Section 5501.8(b) that are indicated on the verification report. Verification report using Borrower’s account data The Seller is not required to recalculate such income for eligible income types described in Sections 5303.5(b) and 5305.2(b) that are on the verification report. Freddie Mac Income Calculator Certificate using paystub(s) and W-2 form(s) The Seller is not required to recalculate such income for eligible income types described in Section 5303.4(b) that are on the paystub(s) and W-2 form(s). Freddie Mac Income Calculator Certificate using tax data The Seller is not required to: ■ Recalculate income for eligible self- employed income described in Section 5304.2(b) or eligible rental income described in Section 5306.2(b) that is on the Freddie Mac Income Calculator Certificate, and Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-18 Evaluation exceptions based on document type Document type Evaluation exception ■ Perform the business review and analysis described in Section 5304.1(d) for eligible self-employed income that is on the Freddie Mac Income Calculator Certificate Asset and income modeler (AIM) payroll application programming interface (API) with income representation and warranty relief result (“AIM Payroll API R&W Assessment”) The Seller is not required to recalculate such income for eligible income types described in Section 5303.4(b) that are on the paystub(s) and W-2 form(s). The Seller must include the following applicable closing documents in its post-closing quality control review to ensure that the information is accurate, complete and consistent with other documents in the Mortgage file: ■ Notes and riders ■ Security Instruments and assignments ■ Mortgage insurance certificate or policy or Mortgage guaranty certificate ■ Modification or assumption agreement ■ Title binder or final title insurance policy (both if available) or other evidence of title ■ Plat or survey ■ Settlement/Closing Disclosure Statements and related documentation ■ Leasehold estate documents ■ Hazard insurance policy or certificate ■ Flood insurance policy or certificate or flood zone determination documents ■ Underwriter’s approval and any conditions of closing ■ Closing instructions Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-19 (e) Preclosing quality control reviews The Seller’s quality control program must include a process to perform quality control reviews on a sampling of its Mortgages prior to closing. The goal of an effective preclosing review process is to monitor the Seller’s origination policies, ensure the accuracy of the Mortgage data and prevent the closing of Mortgages with deficiencies such as fraud, inaccurate data and insufficient documentation. The Seller’s in-house preclosing quality control process should operate independently of the Mortgage origination and underwriting departments when operationally possible. (i) Procedures The Seller’s preclosing review process should include procedures for: ■ Completing sample selection and ensuring timing permits reviews to be completed prior to closing ■ Reporting deficiencies and taking appropriate corrective measures ■ Documenting the resolution of defects ■ Canceling or postponing settlement when the preclosing review reveals deficiencies or when the review cannot be completed prior to the scheduled settlement (ii) Sample selection The Seller’s sampling process should include Mortgages that are representative of the full scope of the Seller’s product line and production process as defined in Section 3402.2(a)(i). The Seller should regularly assess its sampling methodology to ensure that its preclosing quality control process is effective. Additionally, the Seller should target samples, as needed, in order to: ■ Review the work originated by a new branch office, employee or third-party originator ■ Validate that a new product or offering is being originated in accordance with the Seller’s policies and procedures ■ Evaluate the work of a particular employee or Mortgage transaction participant when there is a reason to suspect fraud as required in Section 3201.1(c) (iii) Validation and reverification An effective preclosing quality control review process should include validation or reverification of: Freddie Mac Single-Family Seller/Servicer Guide Chapter 3402 As of 05/06/26 Page 3402-20 ■ Data entered into Loan Product Advisor ■ Social Security number provided by each Borrower, unless the Seller validated the number during the loan origination process ■ Income documentation and calculation ■ Employment ■ Assets required to close or meet reserves requirements ■ Property valuation documentation or property valuation data ■ Mortgage insurance commitment reflecting adequate coverage ■ Whether additional credit was granted and considered in qualifying when the Borrower’s credit report reveals inquiries within the previous 90-day period Note: See Sections 3402.2(b) and 3402.2(d) for reverification exceptions and requirements.

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