Freddie Mac Single-Family Seller/Servicer Guide 9208.3 — Closing, reporting and compliance for short sales

Freddie Mac Single-Family Seller/Servicer Guide 9208.3 — Closing, reporting and compliance for short sales

Effective 2025-12-17 · Freddie Mac's stamp for this section

This section contains information related to: ■ Closing, reporting, drafting and remittance requirements for short sales and make-whole preforeclosure sales ■ Fraudulent transactions related to short sales (a) Closing, reporting, drafting and remittance requirements for short sales and makewhole preforeclosure sales (i) Servicer review of the Freddie Mac Standard Short Sale (“short sale”) closing documentation The Servicer must: 1. Prior to and outside of the transaction, pay any delinquent property taxes, ground rents and assessments or other charges that are or may become First Liens on the property or that if not paid would result in the subordination of Freddie Mac’s interests. (See Section 9301.6(e) regarding expenses that may become First Liens on the property.) Freddie Mac will reimburse the Servicer for these expenses in accordance with Chapter 9701. 2. Ensure that the Borrower pays all cash contributions in the form of cash or certified funds at settlement 3. Ensure that the title is conveyed directly from the Borrower to the buyer 4. Complete the short sale closing within 60 days of approving the purchase offer 5. Waive its rights to any accrued late fees or property inspection costs 6. Maintain the original short sale affidavit in the Mortgage file in accordance with the requirements of Section 3302.1(c) and provide Freddie Mac with a copy of the short sale affidavit upon request 7. Review the Settlement/Closing Disclosure Statement prior to closing to ensure proper transfer of title directly from the Borrower to the buyer 8. Review the Settlement/Closing Disclosure Statement and deed within five Business Days after closing to validate compliance with this chapter and the Servicer’s approval instructions, including: ■ The name of the buyer on the Settlement/Closing Disclosure Statement is the same as shown on the sales contract ■ The Settlement/Closing Disclosure Statement is consistent with the closing instructions, especially regarding ineligible transfer of title to related parties; and ■ The deed will be recorded in the name of the buyer and contains resale restriction language as required in Section 9208.2(c)(ix) 9. For Cooperative Share Loans, comply with the requirements in Section 8801.3(c) (ii) Reporting the transaction, remitting the proceeds and submitting the settlement data To close a short sale or a make-whole preforeclosure sale in Freddie Mac’s systems, complete the following accounting, reporting and remittance steps: 1. Report the Mortgage as a “Short Sale/Charge-off/Make-whole” via the Freddie Mac Loan Level Reporting tool (see Exhibit 88, Servicing Tools) by the second Business Day after the Servicer receives the settlement proceeds. When reporting, ensure that the: ■ Ending UPB is zero ■ Principal collected is the ending balance of the Mortgage (not the proceeds collected from the sale of the property) ■ Payoff date is the date the Servicer received the settlement proceeds ■ DDLPI reflects the due date of the last fully paid installment Freddie Mac will draft the full UPB plus exception interest. Refer to Section 8303.3(c) for details on payoff requirements and charge-off adjustments. See Sections 8303.3(c) and 8303.3(d) for additional requirements related to short sale reporting and drafting. 2. Complete the “Short Sales Settlement” screen in Resolve® and transmit the data to Freddie Mac. In circumstances where a short sale settlement requires a manual settlement review by Freddie Mac, Freddie Mac may request copies of documentation including, but not limited to, the following: ■ A copy of the Settlement/Closing Disclosure Statement ■ Copies of the sales contract and any addenda to the sales contract (iii)Make-whole preforeclosure sale To notify Freddie Mac that the Servicer has approved a make-whole preforeclosure sale, the Servicer must submit the following to Freddie Mac (see Directory 5): ■ Completed and signed Form 710, Mortgage Assistance Application (or other documentation as permitted in Section 9208.1(c)) ■ Copy of the executed sales contract ■ Copy of the MI’s approval letter (if applicable and if not previously delegated by the MI) ■ A breakdown of the transaction to show how the sale of the Mortgaged Premises plus any other proceeds will result in a total satisfaction of the debt Upon receipt of the required documentation as described above, Freddie Mac will review the file and contact the Servicer with a decision in Resolve based on the Servicer’s input. Once the Servicer receives the decision, it must process the file accordingly and report and close the transaction in accordance with the requirements in this Section 9208.3(a). Freddie Mac will draft the full UPB plus exception interest. Refer to Section 8303.3(d) for details on payoff requirements and charge-off adjustments. (iv) Charging off the deficiency The amount that Freddie Mac has determined to be charged off will be reflected on the Draft Report. The Servicer must review the Draft Report and report any discrepancies between its records and the amount on the Draft Report to Freddie Mac via the Freddie Mac Servicing Data Corrections tool (see Exhibit 88) within the same Accounting Cycle in which Freddie Mac posts the amount to the Draft Report. Servicers may access the Draft Report through the Cash Manager tool (see Exhibit 88). When reporting a discrepancy, Servicers must input the calculation used to determine the variance and upload a copy of the Settlement/Closing Disclosure Statement and of the sales contract and any addenda to the sales contract in the Servicing Data Corrections tool to support the request and explain why the short sale and any related deficiency was not initially settled with data elements matching these documents. Discrepancies submitted after the Accounting Cycle in which the initial adjustment is posted to the Draft Report closes will be processed at Freddie Mac’s discretion and may be subject to a contract noncompliance and contract change compensatory fee (see Section 8303.5(i)). If the postsettlement correction request is denied, the Servicer may be liable for any additional losses. Additionally, Freddie Mac may recover any workout incentives that were paid. (v) Remitting additional proceeds If there are any proceeds that were not included in the proceeds check (e.g., property insurance premium rebate, refunded Escrow advance prepayments), remit the full amount of such proceeds to Freddie Mac by wire transfer or check and send it to Freddie Mac (see Directory 5) within five Business Days of receipt of the proceeds. (vi) Release of deficiency if participants have acted in good faith and in compliance with all applicable law If the Borrower has acted in good faith and in compliance with the Guide and all applicable local, State and federal law, then Freddie Mac will not pursue the Borrower for the entire amount owed under the current Mortgage. Freddie Mac will accept the proceeds of sale and the cash contribution by the Borrower and the Servicer must instruct the closing agent to release the lien on the Mortgaged Premises and mark the previous Note as canceled. For a short sale completed with respect to an eMortgage (as defined in Section 1402.1(b)), the Servicer must also comply with the requirements in Section 1402.5(c). However, if the Borrower had knowledge of and/or consented to a transaction that was not in compliance with the Guide and all applicable local, State and federal law, Freddie Mac reserves its rights to pursue any and all participants including, but not limited to, the Borrower, for the full amount owed under the Mortgage, the amount of any other loss or damage Freddie Mac may have suffered and other costs and expenses, including, but not limited to, attorney fees. Failure to fully execute and provide the short sale affidavit required by Section 9208.2(c) is considered bad faith and noncompliance with the Guide. (vii) Requesting reimbursement Request reimbursement for any applicable expenses in accordance with the requirements in Chapter 9701. For claim submissions on Mortgages insured by the FHA or guaranteed by the VA or RHS not subject to recourse or indemnification, expense reimbursement will occur after Freddie Mac receives the claim payment from the applicable entity and determines that all other requirements for reimbursement have been satisfied. (Refer to Section 9603.2(a) on FHA/VA/RHS claim filing and Section 9603.2(d) on receipt of claim payment.) (b) Fraudulent transactions related to short sales Any party to the transaction who engages in fraudulent activity with respect to a short sale transaction may be added to the Freddie Mac Exclusionary List, barred from future involvement in Freddie Mac business and reported to applicable regulatory authorities. See Chapter 3201 for more information on Freddie Mac requirements for fraud prevention, detection and reporting.

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