Freddie Mac Single-Family Seller/Servicer Guide 9401.1 — Bankruptcy overview, general requirements and Freddie Mac’s rights

This section contains information related to: ■ Bankruptcy ■ Freddie Mac’s rights ■ Bankruptcy general requirements

(a) Bankruptcy This chapter provides Servicers with Freddie Mac’s requirements for Servicing Mortgages subject to bankruptcy proceedings or litigation. The Servicer must take appropriate action to protect Freddie Mac’s interest during bankruptcy proceedings in which the Borrower is the debtor. Note: Refer to Chapter 9402 for requirements for Servicing Mortgages subject to other litigation.

(b) Freddie Mac’s rights In addition to any other remedies it may have at law or in equity, Freddie Mac reserves the right, at its sole discretion, to: 1. Require the Servicer to submit copies of any and all records related to Freddie Mac’s Mortgages 2. Require the Servicer to compensate Freddie Mac and hold Freddie Mac harmless for any loss, damage or expense that result from the Servicer’s failure to comply with the provisions in this chapter, Chapters 8402 and 8403, Sections 9402.1(a) and 8601.7(a) or that result from errors, omissions or delays by the Servicer or the Servicer’s agent, including without limitation to: ■ Previously paid incentives ■ Expense reimbursements ■ Court costs and ■ Attorney fees Freddie Mac Single-Family Seller/Service Guide 3. Use or require the Servicer to use Freddie Mac’s counsel or trustee for any Freddie Mac Default Legal Matter 4. Limit the amount of a reimbursement for attorney fees if those fees exceed the limits in: ■ Exhibit 57B, Approved Bankruptcy Attorney Fees, or ■ Fees commonly charged for similar services in the area where the affected property is located 5. Limit the amount of a reimbursement for preservation and maintenance expenses if those expenses exceed the limits in Exhibit 57, 1- to 4-Unit Property Approved Expense Amounts 6. If the Servicer does not obtain Freddie Mac’s prior written approval as required, deny the Servicer’s request for reimbursement of expenses incurred as a result of Servicing Freddie Mac’s Mortgages under the requirements of this chapter and Chapter 8402 7. If the Servicer fails to comply with the requirements contained in this chapter, Chapters 8402 and 8403 and Sections 9402.1(a) and 8601.7(a): ■ Assess compensatory and other fees ■ Exercise any remedies provided by the Guide and the other Purchase Documents Refer to Chapter 3602 regarding repurchases, repurchase alternatives and other remedies.

(c) Bankruptcy general requirements When the Servicer receives notice or confirms information that a Borrower has filed a bankruptcy petition, at a minimum, the Servicer must: 1. Comply with all applicable laws and regulations, including working with the debtor’s pre-bankruptcy credit counseling agency on a debt management plan, if applicable 2. Obtain a copy of the Borrower’s (debtor’s) bankruptcy petition or other bankruptcy notice 3. Accurately complete and file a proof of claim, including all required proof of claim forms, within the time limitations set by the bankruptcy court. This may include but is not limited to providing: ■ Timely information ■ Documentation (e.g., Borrower payment history) and Freddie Mac Single-Family Seller/Service Guide ■ Payoff and reinstatement figures necessary for bankruptcy counsel to meet the time limits set by the bankruptcy court if counsel is representing the Servicer in the case If additional costs are incurred after confirmation of the bankruptcy plan, the Servicer must work with the trustee to ensure all steps are taken to recover those costs allowable by applicable law from the debtor through the plan, if applicable. The Servicer must, prior to filing any proof of claim or motion for relief from the stay with respect to a Mortgage registered on the MERS® System, prepare and execute (using the Servicer’s employee who is a MERS authorized “signing officer”) an assignment of the Security Instrument from MERS to the Servicer. The Servicer must record the prepared assignment where required by State law. State mandated recordings are non-reimbursable by Freddie Mac, are not considered part of the Freddie Mac allowable foreclosure counsel fees and must not be billed to the Borrower. 4. Monitor the bankruptcy filing and obtain status of the proceedings from the trustee in a timely manner. This includes, at a minimum, assisting with any motions for relief of stay and monitoring the first meeting of creditors, proof of claim and/or confirmation of the bankruptcy plan, pre- and post-petition payments, pleadings and notices. If counsel requests additional documentation and/or information from the Servicer at any time, the Servicer must provide such requested information and/or documents within three Business Days after receipt of the request, or within such earlier time frame if necessary, to comply with timing requirements under applicable law or court orders and procedures. 5. Maintain copies of all relevant documents related to the bankruptcy, including the notice of first meeting of creditors, proof of claim, pleadings, notices, etc. 6. Determine whether the Borrower wishes to keep the property 7. Not require the Borrower to sign a reaffirmation of debt agreement. If the Servicer chooses to have the Borrower reaffirm the debt, the Servicer must comply with all applicable laws, including obtaining the court’s approval of the reaffirmation agreement, if necessary. Freddie Mac will not reimburse the Servicer for any legal costs incurred in obtaining a reaffirmation agreement. 8. Review any bankruptcy reorganization plan proposed under Chapters 11 or 13 of the U.S. Bankruptcy Code (refer to Section 9401.2(e) regarding the Servicer’s Servicing responsibilities should a bankruptcy judge order a bankruptcy cramdown) and respond in a manner that protects Freddie Mac’s interests. Likewise, the Servicer must review any bankruptcy plan proposed under Chapter 12 of the U.S. Bankruptcy Code and respond in a manner that protects Freddie Mac’s interests. Such review includes verifying that the bankruptcy repayment plan does not extend past the maturity date of the Mortgage and sets forth the proper monthly payment to include the outstanding debt and sufficient funds to pay property taxes and all property insurance and mortgage insurance premiums when they become due. If the bankruptcy repayment plan will extend past the maturity date of the Mortgage, the Servicer must object. Freddie Mac Single-Family Seller/Service Guide 9. If appropriate, file an action with the bankruptcy court to secure a determination that the property is abandoned. In the event the court considers the property abandoned, the Servicer must file an order lifting the automatic stay. 10. Monitor and properly apply payments received under any bankruptcy repayment plan. If the Borrower becomes delinquent in his or her payments under a bankruptcy repayment plan, pursuant to Sections 9401.2(c) and 9401.2(d), as applicable, the Servicer must instruct counsel to take immediate action to modify the stay order and initiate or resume foreclosure proceedings. 11. Conduct a monthly inspection of the property for any delinquent Mortgage unless a bankruptcy repayment plan is in place and being adhered to 12. Verify that the Borrower is current on his or her property taxes and property and mortgage insurance premiums, as applicable. If there is an Escrow account, the Servicer must perform an Escrow analysis to determine if a bankruptcy repayment plan must include additional Escrow Funds to maintain the Escrow account. In addition, the Servicer must perform a periodic Escrow analysis and notify the trustee of any change to the payment amount resulting from the analysis. 13. Immediately notify the trustee of any Transfer of Servicing. (Both the Transferor Servicer and Transferee Servicer must notify the trustee.) See Chapter 7101 for specific requirements for Transfers of Servicing, including Concurrent Transfers of Servicing and Subsequent Transfers of Servicing. 14. For leasehold Mortgages: ■ If termination of the lease will impair Freddie Mac’s lien position or interest in the property, take appropriate action to assume the lease payments to the lessor if the lease is rejected by the Chapter 7 trustee in bankruptcy and the Borrower ceases making payments required under the terms of the lease (i.e., ground rents) ■ Object to any Chapter 13 plan that does not provide for payment of ground rents 15. In cases when the trustee will pay post-petition payments, it is the Servicer’s responsibility to notify the trustee of all changes, including any missed post-petition payment, and to send copies of breach/acceleration letters to the trustee 16. Immediately upon release of bankruptcy, if the Mortgage is delinquent, the Servicer must either: ■ Resume foreclosure activities if the Mortgage was in foreclosure previous to the bankruptcy filing, in accordance with Chapter 9301, or ■ Initiate or resume collection activity in accordance with Chapter 9102 Freddie Mac Single-Family Seller/Service Guide Servicers must inform the Borrower, Borrower’s counsel or bankruptcy trustee that an approved modification is conditioned on obtaining the bankruptcy court’s approval, if necessary, to modify the Mortgage prior to the due date of the first modified payment.