Freddie Mac Single-Family Seller/Servicer Guide Section 5705.1 — Cooperative Share Loans

Freddie Mac Single-Family Seller/Servicer Guide Section 5705.1 — Cooperative Share Loans

5705.1: Cooperative Share Loans (03/05/25) Freddie Mac purchases Cooperative Share Loans secured by an ownership interest in Cooperative Projects that meet Freddie Mac’s eligibility requirements. This section contains requirements related to: ■ Seller’s assessment of Cooperative Project risks ■ Seller approval for Cooperative Share Loans ■ Glossary definitions and other terms used in this chapter Sellers must obtain written approval to be eligible to deliver Cooperative Share Loans to Freddie Mac. A Seller should contact its Freddie Mac representative or Customer Service at 800- FREDDIE to discuss how to obtain the applicable term of business. Freddie Mac reserves the right to cease approving Sellers or accepting deliveries of Cooperative Share Loans from any or all Sellers. The term “Mortgage” as used in the Guide includes, as the context requires, the term “Cooperative Share Loan.” Requirements pertaining to Mortgages apply to Cooperative Share Loans. (a) Seller’s assessment of Cooperative Project risks Freddie Mac requires a Cooperative Project review to address certain project risks, including, but not limited to: ■ The marketability and condition of the project ■ The marketability of the units within the project ■ The financial stability and viability of the project ■ Project-level litigation ■ Restrictions on Shareholders’ rights to occupy the unit; and ■ The adequacy of insurance coverage to protect the project from damage and loss Freddie Mac expects the Seller to have staff that is experienced and knowledgeable about Cooperative Project risks and to place as much emphasis on the adequacy of the Cooperative Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-2 Interest as collateral as it does on underwriting the Borrower’s creditworthiness. The quality of a Cooperative Share Loan can be impacted by the financial stability and viability of the particular project, among other project characteristics. The conclusion that a Cooperative Share Loan is acceptable to Freddie Mac must be based on the determination that the Borrower is creditworthy and the Cooperative Interest in the Cooperative Corporation is adequate collateral for the Cooperative Share Loan transaction. (b) Seller approval for Cooperative Share Loans To be approved to sell Cooperative Share Loans, Sellers/Servicers must meet minimum requirements to be considered for approval to sell Cooperative Share Loans, including: 1. Possess sufficient expertise with Cooperative Projects and Cooperative Share Loans, along with the capacity and resources to ensure that the Cooperative Project is likely to be successful does not expose Freddie Mac to material credit risk and meets eligibility requirements 2. Possess substantial experience in the geographic market in which Cooperative Share Loans are being originated 3. Demonstrate volume of Cooperative Share Loans correlates to years of experience 4. Engage dedicated project review staff with experience in underwriting Cooperative Projects, and retain legal counsel (or have access to legal counsel) familiar with Cooperative Projects and Cooperative Project eligibility requirements 5. Maintain written policies and procedures consistent with Freddie Mac’s project eligibility requirements. The policies and procedures must address pre-sale and owner-occupancy requirements, declining market trends, project completion and any other issues that layer additional risk for Cooperative Share Loans. The policies and procedures for identifying the Cooperative Share Loans to be sold to Freddie Mac may be no less stringent than the policies and procedures for the Seller’s investment decisions. 6. Maintain controls for monitoring performance of Cooperative Share Loans it originates (e.g., a 60-day Delinquency within the first three months or any 90 or more day Delinquency ever). Sellers must also maintain policies and procedures to implement default management corrective actions that also evaluate and monitor the performance of the Cooperative Share Loans following implementation of such corrective action. Seller/Servicer must not be aware of any quality or servicing issues related to the Cooperative Share Loans it originates. 7. Provide project-related reporting and any project underwriting documentation or Cooperative Project Documents upon request from Freddie Mac or request the documentation from the Cooperative Corporation on Freddie Mac’s behalf, if applicable Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-3 (c) Glossary definitions and other terms used in this chapter (i) Glossary definitions The Seller should be familiar with Freddie Mac’s Glossary definitions of the following terms: Glossary definitions for Critical Repairs and Routine Repairs C Critical Repairs (includes material deficiencies and significant deferred maintenance) Repairs and replacements that significantly impact the safety, soundness, structural integrity or habitability of the project’s building(s) and/or that impact unit values, financial viability or marketability of the project. These include: ■ Material deficiencies which, if left uncorrected, have the potential to result in or contribute to critical element or system failure within one year ■ Any mold, water intrusions or potentially damaging leaks to the project’s building(s) that have not been repaired ■ Advanced physical deterioration ■ Any project that failed to pass state, county, or other jurisdictional mandatory inspections and/or certifications specific to structural soundness, safety, and habitability; or ■ Any unfunded repairs costing more than $10,000 per unit that should be undertaken within the next 12 months (does not include repairs made by the unit owner or repairs funded through a special assessment) Examples of some items to consider include, but are not limited to, sea walls, elevators, waterproofing, stairwells, balconies, foundation, electrical systems, parking structures or other load- bearing structures. R Routine Repairs These repairs are not considered to be critical and include work that is: ■ Preventative in nature or part of normal capital replacements (e.g., focused on keeping the project fully functioning and serviceable); and Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-4 ■ Accomplished within the project’s normal operating budget or through special assessments that are within guidelines (ii) Other terms used in this chapter The following additional terms are used in this chapter: Additional defined terms B Blanket Mortgage A Mortgage secured by a Cooperative Project; is also referred to as an “underlying mortgage.” E Established Cooperative Project An Established Cooperative Project is a Cooperative Project in which: ■ The Cooperative Project is complete, and is not subject to additional phasing, and ■ The sponsor/developer (or Holder of Unsold Shares) has turned control of the Cooperative Corporation over to the Cooperative Unit owners H Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-5 Holder of Unsold Shares Any of the following persons or Entities that (a) hold Cooperative Shares in Cooperative Units, (b) except as described below, do not intend to cause the Cooperative Units to be occupied and (c) intend to lease the Cooperative Units or keep the Cooperative Units vacant: ■ Sponsor/developer ■ Persons/entities that the sponsor/developer designates as holders of unsold Cooperative Shares; and ■ Subsequent transferees of such unsold Cooperative Shares which retain their character as unsold Cooperative Shares until one of the occupancy events described below occurs For purposes of this definition, intending to cause the Cooperative Unit to be occupied means occupancy by the persons holding the Cooperative Shares in the Cooperative Unit (i.e., subsequent transferees) the principals of an Entity holding such Cooperative Shares or any family members of the persons holding the Cooperative Shares, employees or persons affiliated with such Entities holding the Cooperative Shares. N New Cooperative Project A New Cooperative Project is a Cooperative Project in which: ■ The Cooperative Project is not complete, or is subject to additional phasing, or ■ The sponsor/developer (or Holder of Unsold Shares) has not turned control of the Cooperative Corporation over to the unit owners 5705.2: Cooperative Project review and general Cooperative Project eligibility requirements (03/05/25) The Seller must determine compliance with Freddie Mac’s Cooperative Project review and eligibility requirements in this section. This section contains the following subsections: ■ Cooperative Project review requirements ■ General Cooperative Project eligibility requirements ■ Freddie Mac right to review Cooperative Projects (a) Cooperative Project review requirements Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-6 Except for Freddie Mac-owned “no cash-out” refinance Cooperative Share Loans delivered in accordance with the requirements in Section 5705.7 relating to Exempt from Review, the Seller must ensure that: 1. The Cooperative Project, the Cooperative Unit and Cooperative Share Loan comply with the following sections in this chapter: ■ Cooperative Project eligibility (see Section 5705.4) ■ Legal requirements for New Cooperative Projects (see Section 5705.6) 2. The project must not be an ineligible Cooperative Project (see Section 5705.3) 3. The Seller must review and determine that a Cooperative Project complies with Freddie Mac’s requirements as follows: Cooperative Project review expiration Type of Cooperative Project Expiration of project review Established Cooperative Project Within one year prior to the Note Date New and Newly Converted Cooperative Projects Within 180 days prior to the Note Date If the Cooperative Project does not meet Freddie Mac’s project eligibility requirements on the Note Date, the Seller may deliver the Cooperative Share Loan at the time the Cooperative Project complies with all of the project eligibility requirements as long as all other applicable requirements have been met. 4. The Cooperative Project, Cooperative Project Documents and Cooperative Share Loan documents must comply with all applicable laws, ordinances and regulations for the State and local jurisdiction in which the project is located, and all documents must be enforceable under the laws, ordinances and regulations of the applicable jurisdiction. (b) General Cooperative Project eligibility requirements The Seller must also review and determine compliance with the following requirements: 1. The project must have insurance that complies with the applicable requirements of Chapter 4703 2. The Cooperative Unit and the Cooperative Project must be covered by a title insurance policy that complies with requirements of Chapter 4702 Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-7 3. The Cooperative Project and Cooperative Unit must comply with all applicable requirements of Topic 5600 4. The Cooperative Project must be designed primarily for residential use 5. The Cooperative Share Loan must comply with all applicable requirements in Section 5705.5 6. A Cooperative Share Loan must be delivered to Freddie Mac within 120 days after the Note Date. If the Cooperative Share Loan is not delivered within 120 days after the Note Date, Seller must update the project review and eligibility determination prior to delivery. 7. The Seller must have policies and procedures in place and take appropriate steps to ensure that the Cooperative Unit, Cooperative Share Loan and Cooperative Project comply with applicable requirements 8. The Seller must retain all documentation related to the review of the Cooperative Project. Upon request, the Seller must provide the project information and documentation to Freddie Mac. (c) Freddie Mac right to review Cooperative Projects Freddie Mac reserves the right to conduct its own review of the Cooperative Project for Cooperative Share Loans delivered to Freddie Mac.

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