Freddie Mac Single-Family Seller/Servicer Guide 9208.2 — Property valuation, communications, processing and transaction management for short sales

This section contains requirements related to: ■ Property valuation and minimum net proceeds for short sales ■ Communication timelines for short sales ■ Short sale transaction and processing requirements

(a) Property valuation and minimum net proceeds for short sales (i) When to obtain a property valuation If the Servicer has evaluated the Borrower for all other alternatives to foreclosure in accordance with Freddie Mac’s evaluation hierarchy set forth in Section 9201.2 and believes that the Borrower meets the eligibility requirements for a Freddie Mac Standard Short Sale (“short sale”), then, unless otherwise instructed by Freddie Mac, the Servicer must obtain an interior property valuation in accordance with the Guide, if the Borrower: 1. Has listed the Mortgaged Premises for sale; or 2. Has expressed interest in a short sale; or 3. Notifies the Servicer of a purchase offer on the Mortgaged Premises The Servicer must obtain a short sale property value from Freddie Mac, as applicable, when one of the above situations occurs. An evaluation for a Borrower contribution should not delay the Servicer’s request for a property valuation. (ii) How to obtain a short sale property value and minimum net proceeds With the exception of Mortgages secured by properties subject to resale restrictions (in accordance with Chapter 4406, 4502 or 4504, as applicable), the Servicer must submit a request to Freddie Mac for the short sale property value and the minimum net proceeds via the “Obtain Valuation” tab in Freddie Mac Real Estate Valuation and Pricing tool when considering a Borrower for a short sale. The Servicer must advise the Borrower that the person evaluating the Mortgaged Premises must be given interior access and that the Borrower must otherwise cooperate with the inspection. An “estimated market value” of the Mortgaged Premises and the “minimum net proceeds” as determined by Freddie Mac will be returned by the Real Estate Valuation and Pricing tool (see Exhibit 88, Servicing Tools) with a “good through date” indicating the expiration date of the property value and minimum net proceeds amount. If the Servicer is unable to render an evaluation decision on a purchase offer prior to the good through date, a new property value and minimum net proceeds must be obtained via the Real Estate Valuation and Pricing tool to evaluate the purchase offer. Refer to Chapter 2404 for terms and requirements for using Freddie Mac’s Servicing Tools. Note: If the Servicer enters a short sale into Resolve® without obtaining a property value or minimum net proceeds or if those values have expired, Resolve will obtain the property value and minimum net proceeds automatically. (iii)Listing price guidance If a short sale property value and minimum net proceeds were obtained, the Servicer should provide listing price guidance to the Borrower or real estate broker based upon the property value obtained from Freddie Mac. However, the Servicer must inform the Borrower or real estate broker of the following when providing such guidance: ■ The value provided is only guidance. Such guidance should not be presented as the required listing price to the Borrower or real estate broker. The Borrower and the real estate broker are responsible for determining the list price for the Mortgaged Premises. ■ All transactions must meet the minimum net proceeds required by Freddie Mac regardless of the value provided. An offer at or above the value provided by the Servicer may not necessarily result in an acceptable level of net proceeds. In addition to providing listing price guidance, Servicers must communicate a list of acceptable closing expense categories to the Borrower and the real estate broker as described in Section 9208.2(c)(iv). (iv) Mortgages secured by properties subject to resale restrictions Servicers are not required to obtain short sale property values and minimum net proceeds on Mortgages secured by properties subject to with resale restrictions (in accordance with Chapter 4406, 4502 or 4504, as applicable). If the Servicer is considering a Borrower for a short sale on a Mortgage secured by a property subject to resale restrictions, then the Servicer is not delegated to approve the short sale, and the file must be sent to Freddie Mac. Refer to Section 9208.1(b) regarding submission of a short sale to Freddie Mac. For listing price guidance and acceptable closing expense categories that may be specific to Mortgages secured by properties subject to resale restrictions, Servicers must refer to the applicable resale restrictions.

(b) Communication timelines for short sales The following chart sets forth the required response times when a short sale is being considered as a solution to the Delinquency for either a Mortgage that is not secured by a Primary Residence or a Mortgage that is secured by a Primary Residence and the Servicer is not evaluating the Borrower for a short sale using the First Complete Borrower Response Package received more than 37 days prior to a scheduled foreclosure sale date. Short sale: Submission of purchase offer and Servicer decision Days Action required 5 Business Days The Servicer must acknowledge receipt of the purchase offer within five Business Days. If the purchase offer is submitted with insufficient information, the Servicer must notify the Borrower of the information needed to evaluate the offer within five Business Days of receipt of the offer. Short sale: Submission of purchase offer and Servicer decision Days Action required 30 days The Servicer must respond to the Borrower with a purchase decision within 30 days of receipt of the purchase offer. If the purchase offer does not meet Freddie Mac’s minimum net proceeds threshold and/or is denied by Freddie Mac, the Servicer must notify the Borrower and include an acceptable counteroffer in its response. Note: In the event that a Borrower has submitted a complete Borrower Response Package and a purchase offer simultaneously, the response period for evaluating both the complete Borrower Response Package and the purchase offer is the same as outlined in this section (i.e., provide a decision within 30 days following receipt of purchase offer and Borrower Response Package). Short sale: Counteroffers (if purchase offer is less than the minimum net proceeds) Days Action required 5 Business Days Borrower must respond to the Servicer’s counteroffer within five Business Days of the date the counteroffer is received. 10 Business Days Servicer must respond to the Borrower within 10 Business Days of receipt of the Borrower’s response to the counteroffer The Servicer must maintain documentation of all communications to and from the Borrower, whether verbal or written, and including status updates, either in the Mortgage file or in the Servicer’s Servicing system. In addition, the Servicer must provide the information to Freddie Mac for review upon request. Refer to Section 9101.3 for foreclosure suspension requirements when the First Complete Borrower Response Package is received more than 37 days prior to a scheduled foreclosure sale. Refer to Sections 9102.5(c) and 9301.7(a) for foreclosure suspension requirements for a Mortgage that has been referred to foreclosure and is either not secured by a Primary Residence or secured by a Primary Residence and the Servicer is not evaluating the Borrower for a short sale using the First Complete Borrower Response Package received more than 37 days prior to a scheduled foreclosure sale date.

(c) Short sale transaction and processing requirements In order for the short sale to be approved by either the Servicer or Freddie Mac, the short sale transaction must meet the following requirements: (i) Sales proceeds The Servicer must review the executed sales contract and preliminary Settlement/Closing Disclosure Statement to ensure the minimum net proceeds amount provided by Freddie Mac via the Freddie Mac Real Estate Valuation and Pricing tool, if applicable, will result from the sale unless otherwise permitted by Freddie Mac in writing. The Borrower must not receive any proceeds from the sale of the Mortgaged Premises other than relocation assistance paid to the Borrower in accordance with the requirements of Section 9208.1(d) and reflected on the Settlement/Closing Disclosure Statement. (ii) Determining if the transaction meets the minimum net proceeds If applicable, when determining whether the transaction meets or exceeds the minimum net proceeds as provided by the Real Estate Valuation and Pricing tool, the Servicer must deduct from the gross sales price the following allowable transaction costs up to the maximum amount as described below: ■ Allowable Closing Costs reasonable and customary for the jurisdiction where the Mortgage Premises is located, including: ❑ Property taxes and other assessments prorated to the date of closing ❑ Typical and customary local and state transfer taxes and stamps ❑ Title and settlement charges typically paid by the seller ❑ Seller’s attorney fees for settlement services typically provided by a title or escrow company ❑ Wood-destroying pest inspections and treatment, when required by local law or custom ❑ Past-due condominium/homeowners association (HOA) or Cooperative Corporation assessments (see Chapter 8801 for special Servicing requirements for Cooperative Share Loans), Condominium Unit maintenance fees or Cooperative Unit Maintenance Fees and ground rents, as applicable ■ The following transaction costs are subject to more specific parameters, as indicated below: ❑ Real estate broker commission, including any short sale negotiation fees, if applicable, as described in Sections 9208.2(c)(v) and 9208.2(c)(vi) ❑ Borrower incentives (if applicable), as described in Section 9208.1(d) ❑ Payment to subordinate mortgage holders (if applicable), as provided in Section 9208.2(c)(iii) ❑ Any other amounts authorized by Freddie Mac ■ The following transaction costs are prohibited by Freddie Mac: ❑ Real estate sales commissions paid to the Borrower or the purchaser ❑ Buyer’s discount points or mortgage loan origination costs; or ❑ Fees that are not usual or customary to the local market ■ Borrower contributions must not be counted toward the minimum net proceeds Example: If the purchase offer submitted by the Borrower/real estate broker is $100,000, then the Servicer will determine whether the minimum net proceeds are met as follows: $100,000 (Gross sales price) -$9,000 (Allowable Closing Costs including real estate commission) -$6,000 (Payment to subordinate mortgage holders) -$7,500 (Borrower relocation assistance) _________________________________________ $77,500 (Determine whether this amount meets or exceeds the minimum net proceeds provided in the Real Estate Valuation and Pricing tool) The Servicer must not disclose the minimum net proceeds to any party, if applicable, including, but not limited to, the Borrower, the real estate broker and any prospective buyer, except as authorized by Freddie Mac. As applicable, the Servicer must ensure that the transaction meets or exceeds the minimum net proceeds amount prior to approving a short sale transaction. If the minimum net proceeds are not met, the Servicer must provide a counteroffer for an amount that would meet the minimum net proceeds in accordance with the response time frames set forth in Section 9208.2(b). Under no circumstances is the Servicer delegated to approve a transaction if the amount to be remitted to Freddie Mac at closing is less than the minimum net proceeds amount, if applicable. If the transaction does not meet the minimum net proceeds established by Freddie Mac, the Servicer may submit the Mortgage to Freddie Mac for further review. (Refer to Section 9208.1(b) for more information regarding the requirements for submitting a recommendation to Freddie Mac.) (iii)Payments to subordinate mortgage holders For each short sale completed in accordance with Sections 9208.1 through 9208.3(a), the Servicer may authorize the settlement agent closing the short sale transaction to pay subordinate mortgage holders an aggregate amount of six thousand dollars ($6,000.00) from sales proceeds at the same time that all other payments, including the payoff to Freddie Mac, are disbursed by the settlement agent. The subordinate mortgage holders may not receive any other payments, in cash, promissory note or otherwise, from the Borrower in connection with approval of the short sale. If there are multiple subordinate mortgage holders, the Servicer has the discretion to divide the subordinate mortgage payment among them so as to maximize the chances that all subordinate mortgage holders will approve the short sale. Payment of any amount to subordinate mortgage holders is contingent upon agreement by all mortgage holders to release their Mortgages and, if they are accepting a payment from Freddie Mac, extinguish the indebtedness secured by the Mortgaged Premises. In addition, subordinate mortgage holders accepting payment from Freddie Mac must agree in writing to waive all rights to seek a deficiency judgment against the Borrower. If a subordinate mortgage holder releases its Mortgage to allow the short sale to close but does not extinguish the indebtedness, the mortgage holder will not receive a payment from Freddie Mac. Regardless of whether payment is made to a subordinate mortgage holder, the Servicer must obtain written commitment from the subordinate mortgage holder(s) to release the Mortgage(s). All payments made to subordinate mortgage holders must be documented on the Settlement/Closing Disclosure Statement in accordance with applicable law. The Servicer must have established written policies governing how subordinate mortgage payments are paid and the Servicer must provide evidence to Borrowers that the subordinate mortgage holder has agreed to accept the payment, extinguish the secured indebtedness and waive all rights to seek a deficiency judgment against the Borrower. Note: Only Mortgages, deeds of trust or security deeds recorded in the land records and constituting a valid lien against the property are eligible for a payment from Freddie Mac. Any and all other types of liens, including, but not limited to, judgments, mechanic’s and materialman’s liens and common interest association liens, are not eligible for the subordinate mortgage payment. (iv) Closing Costs The Servicer is permitted to deduct reasonable Closing Costs customarily paid by a seller in the jurisdiction where the Mortgaged Premises are located. (v) Real estate broker commissions Unless a real estate broker’s sales commission exceeds 6% of the Mortgaged Premises sales price, the Servicer must not, as a condition of the Servicer’s acceptance of an offer, renegotiate the real estate broker’s sales commission to an amount that is lower than the amount that was originally agreed upon between the broker and the Borrower. In the event the sales commission exceeds 6%, the Servicer must renegotiate the commission to limit it to 6% of the Mortgaged Premises’ sales price. Neither the Borrower nor the purchaser may receive a commission from the sale of the Mortgaged Premises. (vi) Short sale negotiation fees Fees paid to any party to evaluate, negotiate or process a short sale with the Servicer, which are commonly referred to as “short sale negotiation fees,” “short sale processing fees,” “marketing fees,” or “administrative fees,” may be included as part of the real estate broker’s commission at the discretion of the real estate broker. Negotiation fees must not be deducted from sales proceeds or charged to the Borrower. Additionally, neither the Servicer nor its agents may charge Freddie Mac or the Borrower, either directly or indirectly, any fee whatsoever in connection with processing a short sale on any Mortgage. Standard and customary real estate commissions and settlement service fees agreed to by the Borrower and paid to the real estate brokerage and settlement agent are not prohibited. (vii) Waiver of Escrow funds or prepaid items The Borrower must waive reimbursement of any Escrow, buydown funds or prepaid items and assign any insurance proceeds to Freddie Mac, if applicable. (viii) Short sale affidavit The Servicer must obtain a short sale affidavit in which the parties to the transaction attest that the sale is an arm’s length transaction. An arm’s length transaction is a transaction between parties who are unrelated and unaffiliated by family, marriage or commercial enterprise, other than the purchase and sale of the Mortgaged Premises between the Borrower(s) and the purchaser(s) that is the specific subject of the proposed short sale as disclosed to the Servicer. This affidavit must be executed before or at the time of closing of the sale of the Mortgaged Premises by all Borrower(s), purchaser(s), real estate brokers representing any of the parties, the escrow/closing agent and the transaction facilitator (if any). Each signatory must certify under penalty of perjury that to the best of his or her knowledge and belief: ■ The sale of the Mortgaged Premises is an arm’s length transaction between parties who are unrelated and unaffiliated by family, marriage or commercial enterprise ■ There are no agreements, understandings or contracts between the parties that the Borrower will remain in the Mortgaged Premises as a tenant or later obtain title or ownership of the Mortgaged Premises, except if the Borrower is permitted to remain as a tenant on the Mortgaged Premises for a short term, but no longer than ninety (90) days, in order to facilitate relocation ■ Neither the Borrower(s) nor the purchaser(s) will receive any funds or commissions from the sale of the Mortgaged Premises. The Borrower may receive a relocation assistance payment if it is offered by the Servicer and reflected on the Settlement/Closing Disclosure Statement. ■ The seller(s)/listing agent has presented all offers for the purchase of the Mortgaged Premises to the Borrower and no offers have been held, concealed or delayed due to action or inaction by a real estate agent ■ There are no agreements, understandings or contracts relating to the current sale or subsequent sale of the Mortgaged Premises that have not been disclosed to the Servicer ■ All amounts to be paid to any party, including holders of other liens on the Mortgaged Premises, in connection with the short sale transaction have been disclosed to and approved by the Servicer and will be reflected on the Settlement/Closing Disclosure Statement ■ Each signatory understands, agrees and intends that the Servicer and Freddie Mac are relying upon the statements made in the affidavit as consideration for the reduction of the payoff amount of the Mortgage and agreement to the sale of the Mortgaged Premises ■ A signatory who makes a negligent or intentional misrepresentation agrees to indemnify the Servicer and Freddie Mac for any and all loss resulting from the misrepresentation, including, but not limited to, repayment of the amount of the reduced payoff of the Mortgage ■ The certification will survive the closing of the transaction; and ■ Each signatory understands that a misrepresentation may subject the party making the misrepresentation to civil and/or criminal liability The affidavit must contain the name of the Servicer, the Servicer loan number for the subject Mortgage, the property address of the Mortgaged Premises and the date the sales contract that is the subject of the short sale was ratified by the parties. The affidavit must contain the printed name and signature of each signatory, and all signatures to the affidavit must be dated. The signature of a real estate agent or settlement agent signing as a representative for the brokerage or settlement service provider is acceptable so long as the representative capacity is clearly identified. The Servicer may modify and integrate its own requirements into the affidavit so long as it contains the minimum requirements contained in this section. The short sale affidavit must be a separately identifiable document, distinct from other closing or pre-closing documents, such as the sales contract. (See Exhibit 97, Short Sale Affidavit, for an example of a short sale affidavit.) If the closing agent is prohibited from signing the affidavit by applicable local, State or federal law, the Servicer may waive the closing agent’s signature requirement upon request. The Servicer must condition the waiver upon the closing agent’s agreement that it will not also act as the closing agent on a subsequent transaction involving the Mortgaged Premises within one year of closing the short sale transaction. In all other circumstances, signatures from all parties identified above are required as a condition to Freddie Mac’s agreement to accept a short sale of the Mortgage. If a party reveals an agreement, understanding or contract relating to the current sale or subsequent sale of the Mortgaged Premises that indicates the transaction is not an arm’s length transaction or otherwise indicates bad faith, collusion or fraud on the part of the parties, the Servicer must withdraw agreement to the short sale and immediately notify Freddie Mac using Freddie Mac’s Tip Referral Tool, accessible via Freddie Mac Gateway®. (ix) Re-sale deed restriction The Servicer must instruct the settlement agent to ensure that the deed conveying the Mortgaged Premises from the Borrower to the purchaser contains a provision to restrict any re-sale of the Mortgaged Premises for 30 days following the short sale closing and to restrict re-sales of greater than 120% of the short sale’s sales price for the period beginning 31 days after the short sale closing and ending 90 days from the short sale closing. The deed must contain the following provision: Grantee herein is prohibited from conveying captioned property for any sales price for a period of 30 days from [DATE – short sale closing]. After this 30-day period, Grantee is further prohibited from conveying the property for a sales price greater than $ (120% of short sale price) until 90 days from [DATE – short sale closing]. These restrictions shall run with the land and are not personal to the Grantee. The provided language may be amended as necessary to comply with applicable law. Note: If the Servicer believes a re-sale restriction is not appropriate for a particular short sale transaction (such as a short sale transaction under the Homeowners Assistance Program provided by the U.S. Department of Defense), then the Servicer must submit the Mortgage to Freddie Mac for review prior to instructing the settlement agent to insert the above referenced deed provision. The Servicer’s submission must include a thorough explanation of the reason(s) why it is requesting additional review. (x) Resolve Services must use Resolve to submit short sale transactions on Freddie Mac-owned Mortgages. Each Servicer must use Resolve in accordance with (A) the requirements in this Chapter, (B) the short sale and other instructions provided in Resolve Online Help and any other Documentation and (C) any other applicable provisions of the Guide, including Sections 2401.1 and 2404.2. If a Servicer is unable to complete a submission via Resolve, the Servicer should contact Customer Service at 800-FREDDIE. (xi) Mortgage insurance The Servicer must approve and process a short sale in compliance with all requirements of applicable mortgage insurance policies so as to preserve and not to impair existing mortgage insurance coverage, if any. When approving and processing a short sale, unless Freddie Mac has delegations of authority with the MI, the Servicer must either obtain the applicable MI’s approval of the terms of each short sale on a case-by-case basis or ensure that the applicable MI has provided a delegation of authority to the Servicer that applies to the requested short sale. If the Servicer is notified that the MI will curtail or deny a claim for any reason, including, but not limited to, failure of the Servicer to comply with mortgage insurance conditions such as payment of a Borrower contribution, the Servicer may not approve the short sale; however, the Servicer must submit the proposed short sale to Freddie Mac.