Freddie Mac Single-Family Seller/Servicer Guide 9209.1 — Deed-in-lieu of foreclosure eligibility requirements and Servicer approval authority

A Freddie Mac Standard Deed-in-Lieu of Foreclosure (“deed-in-lieu of foreclosure”) is a Borrower’s voluntary conveyance of clear and marketable title to the property to Freddie Mac in exchange for a discharge of debt. This section contains requirements related to: ■ Eligibility requirements for a deed-in-lieu of foreclosure ■ Servicer approval authority ■ Property requirements ■ Submitting a deed-in-lieu of foreclosure recommendation to Freddie Mac Servicers must use the Resolve® user interface (UI) to submit a deed-in-lieu of foreclosure recommendation to Freddie Mac. Servicers that elect to submit deed-in-lieu of foreclosure recommendations via the Resolve UI should refer to Resolve Online Help for details on the process. If the Borrower’s eligible hardship is permanent or long term and neither a home retention alternative to foreclosure nor a Freddie Mac Standard Short Sale (“short sale”) is a viable solution to the Delinquency or imminent Delinquency, then the Servicer must determine if the Borrower meets the eligibility requirements for a deed-in-lieu of foreclosure. The Servicer must evaluate the Borrower for a deed-in-lieu of foreclosure under this chapter once the Servicer has otherwise complied with the evaluation hierarchy in Section 9201.2. If the Mortgage is subject to a recourse agreement, the Mortgage is ineligible for a deed-in-lieu of foreclosure. Additionally, Mortgages for which the Borrower is engaged in litigation related to the Mortgage or Mortgaged Premises, with the exception of a foreclosure action, are ineligible for a deed-inlieu of foreclosure. If the Mortgage is an FHA, VA or Guaranteed Rural Housing Mortgage, the Servicer must comply with the requirements of the applicable agency when approving a deed-in-lieu of foreclosure in a manner that ensures continued coverage of the Mortgage. The Servicer must determine the Borrower’s Delinquency status for purposes of establishing eligibility, documentation requirements and Borrower contribution requirements in accordance with Sections 9209.1 through 9209.3. The Servicer must use the Delinquency status of the Mortgage on the date the Servicer begins the evaluation of the Borrower for a deed-in-lieu of foreclosure using the documentation required in Section 9209.2.

(a) Eligibility requirements for a deed-in-lieu of foreclosure Every Borrower, regardless of Delinquency status, is eligible to be considered for a deed-inlieu of foreclosure, provided the following requirements are met: ■ Borrowers who do not meet the requirements for a Streamlined Deed-in-Lieu of Foreclosure must be experiencing or have experienced one of the eligible hardships listed in Section 9202.1(b) ■ The Borrower must be able to convey clear and marketable title to the Mortgaged Premises to Freddie Mac ■ The Borrower has not acquired a new Mortgage in the six months preceding the Borrower’s Delinquency or, if the Borrower is current, in the six months preceding the evaluation of the Borrower for a deed-in-lieu of foreclosure. The Borrower is only permitted to have obtained a new Mortgage if the Borrower’s eligible hardship was distant employment transfer. If the debt secured by the Mortgaged Premises has been discharged in a bankruptcy proceeding filed pursuant to Chapter 7 of the U.S. Bankruptcy Code, the Borrower is eligible for a deed-in-lieu of foreclosure regardless of Delinquency, occupancy or property type. The Borrower must provide the Servicer a copy of the order and accompanying documents showing that the debt was discharged. The Servicer must retain those documents in the Mortgage file. A Borrower who is current or less than 60 days delinquent must meet the imminent default requirements as described in Section 9209.2(b)(iv).

(b) Servicer approval authority Unless otherwise notified by Freddie Mac, all Servicers are delegated to approve a deed-inlieu of foreclosure that meets the eligibility requirements of Section 9209.1(a). When evaluating a Borrower who is a service member with Permanent Change of Station orders and is current or less than 90 days delinquent, the Servicer is encouraged to submit a recommendation to Freddie Mac for review if the Servicer believes a deed-in-lieu of foreclosure is the most appropriate option given the Borrower’s circumstances. If a property inspection reveals that the property has been poorly maintained, needs major repairs or has structural or foundation problems, then the Servicer is not delegated to approve a deed-in-lieu of foreclosure. However, if the Servicer believes a deed-in-lieu of foreclosure is still the most appropriate remedy, then the Servicer must submit a recommendation to Freddie Mac for approval. Servicers must refer to the requirements in Sections 8801.3(d) and 9209.1 through 9209.6 for additional circumstances where Servicers are not delegated to approve a deed-in-lieu of foreclosure.

(c) Property requirements If the BPO obtained according to the valuation requirements in Section 9209.5(d) or any previous or subsequent Servicer inspection indicates that the Mortgaged Premises has been poorly maintained, needs major repairs or has structural or foundation problems, the Servicer is not delegated to approve a deed-in-lieu of foreclosure. However, if the Servicer believes a deed-in-lieu of foreclosure is still the most appropriate remedy, then the Servicer must submit a recommendation to Freddie Mac for approval in accordance with Section 9209.1(b). In addition, if the Servicer has any indication that the Mortgaged Premises contains environmental contamination or hazardous substances, the Servicer is not delegated to approve a deed-in-lieu of foreclosure. Examples of environmental contamination and hazardous substances include: ■ High sulfur building content, such as drywall ■ Interior mold ■ Exposed asbestos ■ Exposed or chipping lead-based paint ■ Evidence of illegal activity having taken place on the premises, such as growing or manufacturing illegal substances ■ Mortgaged Premises is or is part of a Superfund site ■ Mortgaged Premises exhibits other conditions that could negatively impact the health of occupants

(d) Submitting a deed-in-lieu of foreclosure recommendation to Freddie Mac For situations where a Borrower does not meet the eligibility requirements for a deed-in-lieu of foreclosure and the Servicer feels a deed-in-lieu of foreclosure may be the best option for addressing the Delinquency or imminent Delinquency, the Servicer may submit an exception review request through Resolve. For Cooperative Share Loans, the additional documentation listed in Section 8801.3(d) must be included with the Servicer’s recommendation.