Freddie Mac Single-Family Seller/Servicer Guide 9206.1 — Freddie Mac Flex Modification® overview, eligibility and requirements

This section contains requirements related to: ■ What is a loan modification? ■ When to consider a Freddie Mac Flex Modification® ■ Eligibility and documentation requirements for a Freddie Mac Flex Modification ■ Ineligibility for Freddie Mac Flex Modification ■ Determining imminent default for a Freddie Mac Flex Modification ■ Property valuation requirements for a Freddie Mac Flex Modification

(a) What is a loan modification? A modification is a written agreement that the Servicer enters into with the Borrower that permanently changes one or more of the original terms of the Note, such as: ■ An increase in the amount of the UPB caused by capitalization of interest or non-interest arrearages, Escrow amounts and/or other advances ■ A change in the Note Rate ■ A change in the monthly payment ■ A change in the maturity date ■ A forbearance of a portion of the principal balance (no write-off or permanent reduction of the UPB, delinquent interest or other non-interest arrearages of the Mortgage is allowed) ■ Change in the product type (e.g., an ARM to a fixed-rate Mortgage)

(b) When to consider a Freddie Mac Flex Modification The Servicer must evaluate the Borrower for a Freddie Mac Flex Modification under Chapter 9206 in accordance with the evaluation hierarchy in Section 9201.2. Unless otherwise notified by Freddie Mac, all Freddie Mac Servicers are delegated to approve, and must offer, a Freddie Mac Flex Modification to eligible Borrowers in accordance with the requirements of the Guide and other applicable Purchase Documents. Refer to Section 1301.2(i) for additional information about delegated authority and adverse action notice requirements.

(c) Eligibility and documentation requirements for a Freddie Mac Flex Modification To be eligible for a Freddie Mac Flex Modification, the Servicer must ensure that the following Borrower and Mortgage eligibility requirements are met and that the Mortgage is not otherwise excluded from eligibility as set forth in Section 9206.1(d). If any of the eligibility requirements are not met, but the Servicer believes, based on an evaluation of a complete Borrower Response Package, that the Borrower should be considered for a Freddie Mac Flex Modification, the Servicer must transmit the exception request via Resolve® to Freddie Mac. Refer to Section 9206.2(a) for additional information on Resolve. In addition, if there is a Risk of Property Ownership (see Section 9202.2(b)) and the Mortgage is not otherwise eligible for a Freddie Mac Flex Modification, the Servicer may submit a recommendation to Freddie Mac to consider a Freddie Mac Flex Modification. In the event Freddie Mac participated in evaluating a Borrower for a Freddie Mac Flex Modification and Freddie Mac denied the request, the Servicer must refer to Section 1301.2(i) for more information on adverse action notices that must be provided to the Borrower on behalf of Freddie Mac under certain limited circumstances. (i) Borrower eligibility The Borrower must: ■ Submit a complete Borrower Response Package and: ❑ Have an eligible hardship as described in Section 9202.1(b). The hardship must currently be causing or be expected to cause a long-term or permanent decrease in the Borrower’s income or increase in the Borrower’s expenses. Note: Unemployment is considered a temporary hardship. Servicers must consider unemployed Borrowers for a forbearance plan under Sections 9203.3(a) through 9203.3(f). ❑ Have verified income ■ Be 60 days or more delinquent, or ■ Is determined to be in imminent default in accordance with Section 9206.1(e) (ii) Mortgage eligibility ■ The Mortgage must have been originated at least 12 months prior to the evaluation date for the Freddie Mac Flex Modification ■ The Mortgage must be a conventional First Lien Mortgage currently owned or guaranteed in whole or in part by Freddie Mac ■ The Freddie Mac Flex Modification must result in a principal and interest payment that is less than or equal to the pre-modification principal and interest payment. (Refer to Section 9206.2(a) for additional payment reduction requirements that may apply.) When determining whether the modification results in a principal and interest payment that is less than or equal to the pre-modification principal and interest payment, the Servicer must consider the following: ❑ If the Borrower has been granted interest rate relief under the Servicemembers Civil Relief Act (SCRA), the Servicer must consider the principal and interest payment in effect prior to the date the SCRA relief was granted rather than the temporarily reduced monthly payment based on the SCRA interest rate cap ❑ If the Mortgage being modified is an ARM or an interest-only Mortgage, the Servicer must consider the principal and interest payment or interest-only payment as applicable, in effect at the time the Servicer determines eligibility for a Freddie Mac Flex Modification Trial Period Plan ■ If the Mortgage is subject to an indemnification agreement and is otherwise eligible under the requirements of this chapter, the Servicer has discretion to approve the Mortgage modification provided the following conditions are met: ❑ The modified Mortgage retains its credit enhancement ❑ If the Servicer is not the credit enhancement provider, the Servicer must first obtain in writing any required approval under the terms of the credit enhancement from the entity providing the enhancement to enter into a modification agreement that complies with the requirements of this chapter; and ❑ The Servicer remits to Freddie Mac an annual payment for the amount of all modification-related costs (e.g., interest rate shortfall) as calculated by Freddie Mac pursuant to Freddie Mac’s “Modification Loss Amount” methodology. The Modification Loss Amounts due will be calculated on a monthly basis and billed on an annual basis for the life of the modified Mortgage. If the Mortgage is subject to a partial indemnification, each year, the Servicer will be billed the appropriate percentage of the Modification Loss Amount that corresponds with the partial indemnification agreement. Modification Loss Amounts will be determined by Freddie Mac in accordance with a process described in Bulletins 2016-5 and 2021-14. Note: Pursuant to Section 9204.3(a), the Servicer is not eligible to receive an incentive for completing a modification on a Mortgage that is subject to an indemnification agreement. ■ If the Mortgage is secured by a leasehold estate, the term of the lease (or any exercised option to renew the lease or any renewal options that are enforceable by the leasehold mortgagee, whichever is applicable) must not terminate earlier than five years after the maturity date of the proposed modified Mortgage. In the event that the current term of the lease (or applicable renewal options) terminates earlier than five years after the maturity date of the proposed modified Mortgage, the term of the lease must be renegotiated in order to satisfy this requirement prior to offering the Borrower a Trial Period Plan. Servicers must refer to the special requirements in Section 9206.1(c)(v) for Borrowers who experience a hardship as a result of an Eligible Disaster and who were current or less than 31 days delinquent as of the date of the disaster. (iii)Streamlined eligibility for certain Borrowers Certain eligibility exceptions apply for a Borrower who: ■ Is 90 days delinquent or greater as of the evaluation date; or ■ Has a Step-Rate Mortgage and: ❑ Becomes 60 days delinquent within the 12 months following the first payment due date resulting from an interest rate adjustment ❑ Has not submitted a complete Borrower Response Package For these Borrowers, the eligibility requirements in Section 9206.1(c)(i) are not applicable. In these instances, a Borrower Response Package is not required, and the Servicer is not required to confirm a Borrower’s hardship or income. The Servicer must continue to comply with the requirements in Sections 9206.1(c)(ii) and 9206.1(d) to determine eligibility. Note: Payments received after the evaluation date do not impact Borrower eligibility even if the payments result in the Mortgage becoming less than 90 days delinquent. The Servicer must evaluate the Borrower for a Freddie Mac Flex Modification Trial Period Plan offer in accordance with the eligibility requirements described in this section and the solicitation requirements in Section 9102.5 to an eligible Borrower who: ■ Becomes 90 days delinquent, or ■ Has a Step-Rate Mortgage and becomes 60 days delinquent within the 12 months following the first payment due date resulting from an interest rate adjustment Before offering such Borrower a Freddie Mac Flex Modification Trial Period Plan, Servicers must either obtain the applicable MI’s approval of the terms of each modification on a case-by-case basis or ensure that the applicable MI has provided a delegation of authority that applies to the requested modification. Note: Payments received after the evaluation date do not impact Borrower eligibility even if the payments result in the Mortgage becoming less than 90 days delinquent. Refer to Section 9102.5 for additional information on solicitation of delinquent Borrowers. (iv) Complete Borrower Response Package received If the Borrower submits a complete Borrower Response Package prior to the Borrower becoming 90 days delinquent, the Servicer must acknowledge receipt of the package and review it in accordance with the evaluation hierarchy found in Section 9201.2. The Servicer must send an eligible Borrower an offer for a Freddie Mac Flex Modification in accordance with the requirements of Section 9206.1(c)(iii) once the Borrower reaches the applicable Delinquency threshold if: ■ The Servicer has not received a complete Borrower Response Package, or ■ The Servicer previously conducted an evaluation of a complete Borrower Response Package and determined that the Borrower was not eligible for any alternative to foreclosure, or ■ The Borrower has rejected all other alternatives to foreclosure offered by the Servicer In addition, if a Borrower with a Step-Rate Mortgage submits a complete Borrower Response Package prior to becoming 90 days delinquent, and the Borrower has not yet accepted the offer for a Freddie Mac Flex Modification, the Servicer must complete its review of the package for all alternatives to foreclosure in accordance with the Guide. If the Borrower is eligible for additional payment relief, then the Servicer must permit the Borrower to continue making the existing Trial Period Plan payments but must update the modification agreement to reflect the lower payment amount. The post-modification principal and interest payment must reflect the lower payment amount in these instances. (v) Special requirements for Borrowers impacted by an Eligible Disaster The requirements of this Section 9206.1(c)(v) apply to Borrowers who were current or less than 60 days delinquent as of the date the Eligible Disaster occurred, experienced a hardship as a result of the Eligible Disaster and were at least 90 days delinquent as of the evaluation date. Note: Payments received after the evaluation date do not impact eligibility even if the payment results in the Mortgage becoming less than 90 days delinquent. The following special requirements apply when the Freddie Mac Flex Modification is offered as a result of the Borrower experiencing a hardship as the result of an Eligible Disaster: ■ The Servicer is not required to have previously solicited the Borrower for a foreclosure prevention alternative ■ The following Mortgages are ineligible for a Freddie Mac Flex Modification. These exclusions are in lieu of the requirements described in Section 9206.1(c)(ii) above and Section 9206.1(d) below: ❑ The Mortgage is an FHA, VA or Guaranteed Rural Housing Mortgage ❑ The Mortgage is subject to recourse ❑ With the exception of a disaster-related forbearance plan, the Mortgage is currently performing under another forbearance plan, Trial Period Plan or repayment plan ❑ The Mortgage is subject to an approved short sale or deed-in-lieu of foreclosure ❑ The Mortgage is currently subject to an unexpired offer to the Borrower for another modification or other foreclosure prevention alternative, such as a nondisaster-related forbearance or repayment plan ❑ The Mortgage is not a conventional First Lien Mortgage currently owned or guaranteed in whole or in part by Freddie Mac ❑ The Freddie Mac Flex Modification would result in a principal and interest payment that is greater than the pre-modification principal and interest payment ❑ The Mortgage is secured by a leasehold estate and the term of the lease does not meet the requirements described in Section 9206.1(c)(ii) If the Servicer was not collecting Escrows on the existing Mortgage, the Borrower is not required to establish an Escrow account as a condition of the modification unless otherwise required by applicable law, or the Servicer confirms that the taxes and insurance premiums have not been paid and are past due. For special requirements related to solicitations for streamlined offers for Freddie Mac Flex Modifications for certain Borrowers, the Servicer must refer to Section 9203.4(i). If the Borrower is ineligible for streamlined offers under the requirements of Section 9203.4(i) and this section but is at least 90 days delinquent, the Servicer must evaluate the Borrower in accordance with the requirements of Section 9206.1(c)(iii).

(d) Ineligibility for Freddie Mac Flex Modification The following Mortgages and Borrowers are ineligible for a Freddie Mac Flex Modification: ■ FHA, VA and Guaranteed Rural Housing Mortgages ■ Mortgages subject to recourse ■ Mortgages secured by second homes or non-owner-occupied properties (i.e., Investment Properties) where the Borrower is current or less than 60 days delinquent The following Mortgages and Borrowers are also ineligible for a Freddie Mac Flex Modification. However, if the Servicer believes, based on the Borrower’s individual circumstances, that the Borrower should be considered for a Freddie Mac Flex Modification, the Servicer should submit the request to Freddie Mac (refer to Section 9206.1(c) for information on submitting an exception request to Freddie Mac): ■ Mortgages that have been previously modified three or more times ■ Mortgages previously modified with the Freddie Mac Flex Modification terms determined in accordance with Section 9206.2(a) where: ❑ The Mortgage became 60 or more days delinquent within 12 months of the Modification Effective Date, and ❑ The Borrower has not brought the Mortgage current following the Delinquency ■ Borrowers who, within 12 months of the evaluation date, failed a Freddie Mac Flex Modification Trial Period Plan and the terms of that Trial Period Plan were determined in accordance with Section 9206.2(a) ■ The Mortgage is subject to an approved short sale or deed-in-lieu of foreclosure transaction ■ The Borrower is currently performing under another Trial Period Plan, forbearance plan or repayment plan ■ The Mortgage is currently subject to an unexpired offer to the Borrower for another modification or other alternative to foreclosure, such as a forbearance, repayment plan or Payment Deferral Any Borrower who is ineligible for a Freddie Mac Flex Modification must provide a complete Borrower Response Package in order to be evaluated for the most appropriate workout solution in accordance with the evaluation hierarchy in Section 9201.2.

(f) Property valuation requirements for a Freddie Mac Flex Modification Based on the information provided by the Servicer, Resolve will determine the property value of each Mortgage under consideration for a Freddie Mac Flex Modification.