Freddie Mac Single-Family Seller/Servicer Guide 5201.1 — Credit assessment with Loan Product Advisor®

This section contains requirements related to: ■ Documenting Borrower’s credit reputation ■ Assessing Borrower’s credit reputation ■ Accept Mortgages with Borrowers who do not have a usable Credit Score ■ Inquiries on a Borrower credit report ■ Rent payment history included in the Loan Product Advisor® assessment ■ Borrower cash flow included in the Loan Product Advisor assessment

(a) Documenting Borrower’s credit reputation To document the credit reputation for Loan Product Advisor Accept Mortgages, the Seller must use the following: ■ The Uniform Residential Loan Application ■ The credit reports (see Section 5203.1 for details) ■ The Last Feedback Certificate ■ An underwriting summary (e.g. Form 1077, Uniform Underwriting and Transmittal Summary) Direct verification of Mortgage debt, rental payments and other debts not shown on the credit reports are typically not required for Accept Mortgages. For Accept Mortgages with Borrowers who do not have a usable Credit Score, the requirements in Section 5201.1(c) below apply. The Seller is not required to obtain or document an explanation of adverse or derogatory credit information on Accept Mortgages.

(b) Assessing Borrower’s credit reputation For Accept Mortgages, Loan Product Advisor has assessed the Borrower’s credit reputation and determined that the credit reputation is acceptable.

(c) Accept Mortgages with Borrowers who do not have a usable Credit Score (i) Mortgages where not all Borrowers have a usable Credit Score For Mortgages where not all Borrowers have a usable Credit Score, Loan Product Advisor will apply the following requirements: ■ At least one Borrower must have a usable Credit Score, as determined by Loan Product Advisor ■ The transaction must be a purchase or “no cash-out” refinance Mortgage ■ The Mortgaged Premises must be a 1-unit property, occupied by all Borrowers as their Primary Residence For Mortgages other than Refi Possible® Mortgages, if the Borrower(s) without a usable Credit Score contributes 50% or more of the total monthly income, the Seller must determine that the following additional requirements are met: ■ Each Borrower without a usable Credit Score must have at least two payment references in the United States comprised of Noncredit Payment References and/or Tradelines not appearing on the credit report that meet the requirements in the following Guide sections: Topic Guide section Written verifications Section 5102.3 Age of documentation Section 5102.4 Documentation of Tradelines and Noncredit Payment References Section 5202.1(b) If two or more Borrowers without a usable Credit Score have the same payment reference, then the payment reference may count for each of those Borrowers. ■ Each payment reference must have existed for at least the most recent 12 months ■ At least one Borrower without a usable Credit Score must have a housing payment history as one of the payment references and all housing payment histories must have no 30-day or greater Delinquencies in the most recent 12 months In the event more than one Borrower without a usable Credit Score has a housing payment history, then all such housing payment histories for the most recent 12 months (or length of housing payment history if less than 12 months) must be verified ■ For all payment references other than housing, in the most recent 12 months, there must be: ❑ No more than one 30-day Delinquency; and ❑ No 60-day or greater Delinquencies ■ Each Borrower without a usable Credit Score must have no collections (other than medical), judgments or tax liens filed in the most recent 24 months (ii) Mortgages where no Borrower has a Credit Score For Mortgages where no Borrower has a Credit Score, Loan Product Advisor will apply the following requirements: ■ The transaction must be a purchase or “no cash-out” refinance Mortgage ■ The Mortgaged Premises must be a 1-unit property, occupied by all Borrowers as their Primary Residence ■ The loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios must not exceed 95% ■ The Mortgage must be a fixed-rate Mortgage ■ The Mortgage must not be a super conforming Mortgage ■ The Mortgage must not be a Refi Possible Mortgage In addition, unless the Last Feedback Certificate includes a feedback message that indicates positive Borrower cash flow was identified, the Seller must determine that the following requirements are met: ■ Each Borrower must have at least two payment references in the United States comprised of Noncredit Payment References and/or Tradelines not appearing on the credit report that meet the requirements in the following Guide sections: Topic Guide section Written verifications Section 5102.3 Age of documentation Section 5102.4 Documentation of Tradelines and Noncredit Payment References Section 5202.1(b) If two or more Borrowers have the same payment reference, then the payment reference may count for each of those Borrowers. ■ Each payment reference must have existed for at least the most recent 12 months ■ At least one Borrower must have a housing payment history as one of the payment references and all housing payment histories must have no 30-day or greater Delinquencies in the most recent 12 months In the event more than one Borrower has a housing payment history, then all such housing payment histories for the most recent 12 months (or length of housing payment history if less than 12 months) must be verified ■ For all payment references other than housing, in the most recent 12 months, there must be: ❑ No more than one 30-day Delinquency; and ❑ No 60-day or greater Delinquencies ■ Each Borrower must have no collections (other than medical), judgments or tax liens filed in the most recent 24 months ■ When the credit reputation for all Borrowers is established using only Noncredit Payment References, at least one Borrower must participate in a homeownership education program before the Note Date, or the Effective Date of Permanent Financing for Construction to Permanent Mortgages and Renovation Mortgages. (See Section 5103.4 for requirements related to homeownership education.)

(d) Inquiries on a Borrower credit report When the credit report indicates that a creditor has made an inquiry within the previous 90day period, the Seller must determine if additional credit was granted. If additional credit was granted, the Seller must: ■ Obtain verification of the debt; and ■ Include it when qualifying the Borrower (subject to the requirements in Section 5401.2 for the monthly debt payment-to-income ratio)

(e) Rent payment history included in the Loan Product Advisor assessment (i)Overview For certain Mortgages, Loan Product Advisor’s assessment of a Borrower’s rent payment history submitted to Loan Product Advisor may positively impact the credit assessment. For any such Mortgage, the Feedback Certificate will return a feedback message indicating the Borrower’s rent payment history was included in the assessment. (ii) Eligibility requirements For Loan Product Advisor to consider a Borrower’s rent payment history in the credit assessment, the following requirements must be met: 1. The Mortgage must be a purchase transaction Mortgage 2. At least one Borrower with a rent payment history must: ■ Have a usable Credit Score, as determined by Loan Product Advisor, ■ Be a First-Time Homebuyer who intends to occupy the subject property as their Primary Residence, and ■ Have been renting for a minimum of 12 months with a monthly rent payment of at least $300 paid from the depository account(s) on the verification report or documented as described in Section 5201.1(e)(iii)(B) below 3. The Seller must submit to Loan Product Advisor the current monthly rent amount paid by the Borrower and: ■ Obtain a verification report of the depository account(s) from which the rent payments are made, or ■ Provide true for the Positive Rental History Indicator (iii) Documentation requirements (A) Verification reports For each verification report obtained, the Seller must: ■ Confirm that each depository account is owned by the Borrower and that the account(s) is the one from which the Borrower pays rent ■ Ensure that the most current version of the verification report is used by Loan Product Advisor. If the Seller obtains an updated report, the Mortgage must be resubmitted to Loan Product Advisor to ensure assessment of the most current information. ■ Maintain the verification report in the Mortgage file for transactions where the Last Feedback Certificate includes a feedback message that the rent payment history was successfully identified in Loan Product Advisor, resulting in a Risk Class of Accept The expiration date of the verification report reflected in feedback messaging complies with the age of documentation requirement in Section 5102.4. (B) Borrower provided documentation The Seller must obtain Freddie Mac’s written approval before selling Mortgages using Borrower provided documentation to support the Borrower’s rent payment history to Freddie Mac by contacting its Freddie Mac representative or Customer Service at 800-FREDDIE. When the Seller indicates positive rental history in the Loan Product Advisor submission and the Last Feedback Certificate indicates positive rent payment history was included in the credit assessment using Borrower provided documentation, the Seller must maintain the following documentation in the Mortgage file supporting the monthly rent amount submitted to Loan Product Advisor: 1. Executed lease(s) for the most recent 12 months 2. Proof of timely rent payments (i.e., no 30-day or greater late payments) for the full lease amount paid by the Borrower in accordance with the terms of the lease for the most recent 12 months as of the Application Received Date. Such payments must be documented by one or more of the following: ■ Canceled checks ■ Asset account statements as described in Section 5501.1(e) ■ Third-party asset verifications as described in Section 5501.1(e) ■ Verification reports as described in Section 5201.1(e)(iii)(A) above ■ Evidence of rent payments transferred from the Borrower’s bank account through a third-party money transfer application Note: Verification of rent and/or evidence of cash payments (e.g., money orders) are not acceptable documentation. The documentation used to support the Borrower’s rent payment history must comply with the age of documentation requirement in Section 5102.4.

(f) Borrower cash flow included in the Loan Product Advisor assessment (i) Overview For certain Mortgages, Loan Product Advisor’s assessment of a Borrower’s monthly cash flow identified on a verification report and submitted to Loan Product Advisor may positively impact the credit assessment. For any such Mortgage, the Feedback Certificate will return a feedback message indicating the Borrower’s positive cash flow was included in the assessment. (ii) Eligibility requirements For Loan Product Advisor to consider Borrower cash flow in the credit assessment, the Seller must obtain a verification report of the Borrower’s checking, savings, investment and retirement account(s) with at least 12 months of data and submit to Loan Product Advisor. (iii)Documentation requirements For each verification report obtained, the Seller must: ■ Confirm that each asset in the verification report is owned by at least one Borrower and such Borrower has access to the funds ■ Ensure that the most current version of the verification report is used by Loan Product Advisor. If the Seller obtains an updated report, the Mortgage must be resubmitted to Loan Product Advisor to ensure assessment of the most current information ■ Maintain the verification report in the Mortgage file if the Last Feedback Certificate includes a feedback message that positive Borrower cash flow was identified The expiration date of the verification report is reflected in feedback messaging complies with the age of documentation requirements in Section 5102.4.