Freddie Mac Single-Family Seller/Servicer Guide 8801.1 — Servicing Cooperative Share Loans

This section contains information related to: ■ Key terms for Cooperative Share Loans ■ Servicers of Cooperative Share Loans ■ Servicing requirements applicable to Cooperative Share Loans ■ Combined Cooperative Units ■ Amendments to the Proprietary Lease ■ Cooperative Share Loans recognized as personal property ■ Notifications to/from the Cooperative Corporation and insurers ■ Stock transfer fee (“flip tax”)

(a) Key terms for Cooperative Share Loans Key terms and definitions used in this Chapter 8801 (e.g., Cooperative Share Loan) can be found in the Glossary. Servicers of Cooperative Share Loans should be familiar with such key terms and definitions found therein. Note: The terms “Mortgage” and “Mortgaged Premises” as used in the Servicing requirements of the Guide include (as the context requires) the terms “Cooperative Share Loan” and “Cooperative Unit”, respectively. As such, Servicing requirements pertaining to Mortgages or Mortgaged Premises apply respectively to Cooperative Share Loans or Cooperative Units.

(b) Servicers of Cooperative Share Loans A Servicer does not need to obtain Freddie Mac’s prior written approval to service Cooperative Share Loans, nor must the Servicer be a Seller/Servicer approved to sell Cooperative Share Loans to Freddie Mac in accordance with Chapter 5705. Note: Refer to Chapter 5705 for specific requirements for selling Cooperative Share Loans to Freddie Mac, including, but not limited to, the approval process to sell Cooperative Share Loans to Freddie Mac. For each Cooperative Share Loan being serviced for Freddie Mac, the Servicer must: ■ Service the Cooperative Share Loan in accordance with the Servicing requirements of the Guide and this chapter ■ Verify that the UCC-1 Financing Statements are current and valid to perfect Freddie Mac’s security interest; and ■ Recognize that it is responsible for understanding the responsibilities, rights and available remedies under the Cooperative Project Documents and the Recognition Agreement between the Cooperative Corporation and the lender, its successors or its assigns and will protect Freddie Mac’s interest under the terms of such documents

(c) Servicing requirements applicable to Cooperative Share Loans The Servicing requirements of this chapter are applicable only to the Servicing of Cooperative Share Loans. If any Servicing requirement in this chapter is inconsistent with a Servicing requirement set forth elsewhere in the Guide (except for requirements to comply with applicable law, which supersede any other Servicing requirement in the Guide), then the Servicer must comply with the Servicing requirement set forth in this chapter with respect to any Cooperative Share Loan. Servicers must not apply any of the requirements set forth in this chapter to a non-Cooperative Share Loan but rather should continue Servicing such Mortgages in accordance with all other Servicing requirements of the Guide and other applicable Purchase Documents.

(d) Combined Cooperative Units A Cooperative Share Loan secured by a First Lien on the Cooperative Interest to Cooperative Units that were combined into a single unit must be serviced as a 1-unit dwelling, and, in the event of a foreclosure, the Cooperative Share Loan must be foreclosed as a 1-unit dwelling. Note: Refer to Section 5705.9 for selling requirements for combined Cooperative Units.

(e) Amendments to the Proprietary Lease Without the prior written consent of Freddie Mac, a Servicer must not approve or consent to any amendments to the Proprietary Lease if such amendment affects the rights of the Cooperative Share Loan Borrower. Note: See also Section 8801.3(b) for loan modification requirements for a Cooperative Share Loan and the Proprietary Lease.

(f) Cooperative Share Loans recognized as personal property If a Cooperative Share Loan is recognized as personal property and a title insurance policy cannot be issued (refer to Section 4702.6 for title insurance requirements for cooperatives): ■ In the event of a loan modification, when it is necessary to record the modification agreement to retain the modified Cooperative Share Loan’s First Lien position, where a title endorsement or similar title insurance product would otherwise need to be obtained pursuant to Section 9206.2(c) if a title insurance policy was issued, then the Servicer must warrant that: ❑ The Cooperative Share Loan Borrower continues to have good and marketable title to the Cooperative Shares; and ❑ The Cooperative Corporation continues to have good and marketable title to the Cooperative Project ■ When foreclosing on a Cooperative Share Loan, in lieu of supplying foreclosure counsel with a copy of the title insurance policy pursuant to Section 9301.2(f) (or, for Senior Subordinate Mortgages, pursuant to Section 8601.5(b)), then the Servicer must provide evidence of title supporting the warranty that: ❑ The Cooperative Share Loan Borrower has good and marketable title to the Cooperative Shares; and ❑ The Cooperative Corporation has good and marketable title to the Cooperative Project

(g) Notifications to/from the Cooperative Corporation and insurers The Servicer must have processes in place and must have given notice to all appropriate parties (including, but not limited to, the Cooperative Corporation and insurers, as applicable), as necessary, so that the Servicer is in receipt of the following notifications in a timely manner: ■ Notifications the Cooperative Corporation is legally bound to provide that are of a material and adverse nature to Sellers (refer to Section 5705.6(d) regarding the rights of cooperative Shareholders and Sellers) ■ Any notifications from the Cooperative Corporation relating to the rights granted to a lender, its successors or assigns, in the Cooperative Project Documents or Recognition Agreement (refer to Section 5705.6(h) regarding the Cooperative Corporation responsibilities and Seller/Servicer rights); and ■ Notifications regarding any substantive lapse in compliance with any of the insurance requirements. (Refer to Section 5705.6(d) regarding the rights of cooperative Shareholders and Sellers and Section 8801.2(b) for Servicing requirements in the event of a reduction or cancelation in insurance coverage.) Upon receipt of a notification regarding the following, the Servicer must notify Freddie Mac ([email protected]) and include the Servicer’s recommendation on how to proceed: ■ A proposed action that requires the consent of a specified percentage of eligible lenders of Cooperative Share Loans ■ A lender’s right to review and approve: ❑ Any surrender, cancelation, modification, assignment or pledge of any documents evidencing ownership, possession and use of the Shareholder’s Cooperative Unit ❑ Any further or additional pledge or mortgage of any documents evidencing ownership, possession, and use of the Shareholder’s Cooperative Unit ❑ Any action to change the size, existence or form of ownership of the Cooperative Project Freddie Mac must be provided sufficient opportunity, but no less than five Business Days before any deadline given, to review and provide comments.

(h) Stock transfer fee (“flip tax”) For Cooperative Share Loans where the imposition of a flip tax is permitted (refer to Section 5705.5(f) regarding Cooperative Share Loans subject to a stock transfer fee), Freddie Mac will reimburse the Servicer the paid flip tax in the event it is imposed as a result of a foreclosure, a transfer by the Cooperative Share Loan Borrower in lieu of foreclosure (“deed-in-lieu of foreclosure”) or a transfer of the Cooperative Share Loan Borrower’s interest in the Cooperative Unit as a result of a completed short sale. To be reimbursed, the Servicer must obtain written pre-approval from Freddie Mac by submitting a request for pre-approval (RPA) via the RPA functionality in PAID (Payments Automated Intelligent and Dynamic) (see Exhibit 88, Servicing Tools). Note: See also Section 8801.2(d) regarding reimbursement of expenses incurred on a Cooperative Share Loan.