Freddie Mac Single-Family Seller/Servicer Guide 4702.4 — Acceptable exceptions to the title insurance policy or to the attorney’s opinion of title letter

This section contains requirements related to: ■ Subsurface public utility easements ■ Surface public utility easements ■ Encroachments on public utility easements ■ Restrictive agreements and restrictive covenants ■ Mutual easement agreements ■ Fence misplacements ■ Encroachments on the Mortgaged Premises by improvements on adjoining property ■ Encroachments on adjoining property ■ Oil, gas, water and mineral rights ■ Liens for taxes not due ■ Sums readvanced ■ Tenants in possession ■ Liens and leases for solar panels ■ Other exceptions The following exceptions to the title insurance policy or to the attorney opinion of title letter are acceptable:

(a) Subsurface public utility easements Exceptions for subsurface public utility easements for local residential distribution, such as lines for gas and water, and cable for electric, telephone or television utilities, are acceptable provided that the location of the easements is ascertainable and fixed. The exercise of the rights thereunder must not interfere with the use and enjoyment of any present improvements on the Mortgaged Premises or proposed improvements on which the appraisal or Mortgage is based.

(b) Surface public utility easements Exceptions for surface easements for public utilities for local residential distribution are acceptable provided that the location of the easements is ascertainable and fixed. The exercise of the rights thereunder must not interfere with the use and enjoyment of any of the following: ■ Present improvements on the Mortgaged Premises ■ Proposed improvements upon which the appraisal or Mortgage is based ■ Part of the Mortgaged Premises outside the easement and not occupied by improvements

(c) Encroachments on public utility easements Exceptions for encroachments on easements for public utilities by a garage, tool shed or similar structure that is not attached to, or a portion of, the dwelling structure are acceptable provided that the encroachments do not interfere with the use and enjoyment of the easements or the exercise of rights of repair and maintenance in connection therewith.

(d) Restrictive agreements and restrictive covenants Exceptions for restrictive agreements or restrictive covenants of record related to cost, use, setback, resale restrictions, right of first refusal, minimum size and building materials, and architectural, aesthetic or similar matters (other than single-family-use restrictions on 2- to 4unit properties) are acceptable provided that the following conditions are met: ■ The 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 ■ The terms and provisions of the restrictive agreements or restrictive covenants are commonly acceptable to private institutional Mortgage investors in the area where the Mortgaged Premises is located ■ An endorsement to the title insurance policy affirmatively insures that no violation of any such restrictive agreement or restrictive covenant exists and that any future violation shall not result in forfeiture or reversion of title

(e) Mutual easement agreements Exceptions for mutual easement agreements of record that establish a joint driveway or a party wall are acceptable if such improvements are constructed in any of the following ways: ■ Partly on the Mortgaged Premises and partly on adjoining property ■ Wholly on the Mortgaged Premises, or ■ Wholly on the adjoining property The easement agreement must allow all present and future owners and their heirs, successors and assigns forever, unlimited use and enjoyment of the driveway or party wall without any restriction other than restriction by reason of the mutual easement owners’ rights in common and duties for joint maintenance.

(f) Fence misplacements Exceptions for fence misplacements on either side of the property line of the Mortgaged Premises are acceptable provided that neither the misplacement, nor a future correction thereof, will interfere with the use and enjoyment of any improvements on the Mortgaged Premises nor with the use and enjoyment of the balance of the Mortgaged Premises not occupied by improvements. The definition of fence in this section shall not include retaining walls or other permanent structures.

(g) Encroachments on the Mortgaged Premises by improvements on adjoining property Exceptions for encroachments on the Mortgaged Premises by improvements on adjoining property are acceptable provided that the following conditions are met: ■ The encroachment must not touch any improvements on the Mortgaged Premises ■ The encroachment must not interfere with the use and enjoyment of any improvements on the Mortgaged Premises nor with the use and enjoyment of the Mortgaged Premises not occupied by improvements

(h) Encroachments on adjoining property Exceptions for encroachments on adjoining property by eaves or other projections attached to improvements on the Mortgaged Premises, or by structures such as tool sheds, or by a driveway appurtenant to the Mortgaged Premises, are acceptable provided that there is an endorsement to the title insurance policy whereby the policy affirmatively insures against loss suffered by reason of the entry of a decree or court order requiring the removal of the encroachment.

(i) Oil, gas, water and mineral rights Exceptions for outstanding oil, gas, water or mineral rights are acceptable if commonly granted by private institutional Mortgage investors in the area where the Mortgaged Premises is located, and: ■ The exercise of such rights will not result in damage to the Mortgaged Premises or impairment of the use or marketability of the Mortgaged Premises for residential purposes and there is no right of surface or subsurface entry within 200 feet of the residential structure, or ■ There is a comprehensive endorsement to the title insurance policy that affirmatively insures the lender against damage or loss due to the exercise of such rights

(j) Liens for taxes not due Exceptions for liens for real estate or ad valorem taxes and assessments that specifically state that such liens are not yet due and payable are acceptable.

(k) Sums readvanced This includes the priority of the lien for any sum repaid and subsequently readvanced under the terms of the Mortgage insured thereby.

(l) Tenants in possession Exceptions for rights of tenants in possession, as tenants only, under prior unrecorded leases are acceptable. (m)Liens and leases for solar panels Exceptions for liens and leases, including UCC-1 Financing Statements, for solar panels are acceptable provided the exception is for a lien or lease that lists only the solar panels as the collateral. (n) Other exceptions Any exception not set forth above in Sections 4702.4(a) through 4702.4(m) is acceptable only if all of the following conditions are met: 1. The subject of the exception must not interfere with the use and enjoyment of any present or proposed improvements on the Mortgaged Premises or with the use and enjoyment of the balance of the Mortgaged Premises not occupied by improvements 2. The subject of the exception must not affect the marketability of the Mortgaged Premises 3. The subject of the exception must have no or minimal effect on the value of the Mortgaged Premises 4. The subject of the exception must be acceptable to the MI if the Mortgage is insured 5. The subject of the exception must be commonly acceptable to private institutional Mortgage investors in the area where the Mortgaged Premises is located The Seller shall warrant that all exceptions to the title insurance policy or to the attorney opinion of title letter are permissible under this section. Freddie Mac will not issue any letters addressing the acceptability of particular exceptions nor waivers of the above requirements.