Freddie Mac Single-Family Seller/Servicer Guide Section 2101.4 — Financial reporting

Freddie Mac Single-Family Seller/Servicer Guide Section 2101.4 — Financial reporting

2101.4: Financial reporting (03/31/24) (a) All Seller/Servicers The Seller/Servicer must at all times comply with the following reporting requirements: ■ Each Seller/Servicer must submit annual audited financial statements to Freddie Mac, except that: ❑ A federally insured depository institution need not submit such statements, and ❑ A Seller/Servicer that is approved only to sell Mortgages to Freddie Mac may submit Reviewed Financial Statements ■ Each Seller/Servicer that is a subsidiary of another institution and that is required to submit audited financial statements (as noted above) may submit audited financial statements prepared at the Seller/Servicer level or at its parent level, with a consolidating worksheet ■ An annual audited report on internal controls is required only if audited financial statements are required by Freddie Mac. This internal control report should be a separate report stating whether the independent public accountant (IPA) noted any material Freddie Mac Single-Family Seller/Servicer Guide Chapter 2101 As of 05/06/26 Page 2101-8 weaknesses during the audit of the financial statements. The report should be prepared in accordance with Interpretation 1 of Statement and Auditing Standards (SAS) No. 60, “Communication of Internal Control Structure Related Matters Noted in an Audit,” titled, “Reporting on the Existence of Material Weaknesses” (AICPA, Professional Standards, vol. I, AU sec. 9325). If audited financial statements and internal control reports are required by Freddie Mac, the audited financial statements and internal control reports must be prepared by an IPA who is a licensed certified public accountant (CPA) or a public accountant licensed on or before December 31, 1970, who complies with the applicable provisions of the public accountancy law and rules of the jurisdiction(s) where the audit is conducted and the jurisdiction(s) in which the IPA is licensed. Freddie Mac reserves the right to require audited financial statements, audited reports on internal controls, additional financial statements and other information relevant to the Seller/Servicer’s eligibility, including audited or Reviewed Financial Statements for the Seller/Servicer’s parent, subsidiaries and affiliates, at any time and regardless of the Seller/Servicer’s annual eligibility reporting requirements. (b) Seller/Servicers that are Large Non-Depository Institutions All Large Non-Depository Institutions, as defined in Section 2101.2, must obtain an assessment of the Seller/Servicer’s performance and creditworthiness by a qualified, independent third-party on an annual basis. The assessment must be made available to Freddie Mac upon request, must substantiate that the Seller/Servicer has adequate capacity to perform its financial obligations in an adverse stress environment and must meet the following criteria: ■ One primary Servicer Rating or master Servicing Rating, as applicable, as defined in Section 2101.2, for Large Non-Depository Institutions that have greater than or equal to $50 billion in Servicing UPB; and ■ One primary Servicer Rating or master Servicing Rating, as applicable, and one third- party Long-Term Senior Unsecured Debt Rating or Long-Term Corporate Family Rating, each as defined in Section 2101.2, for Large Non-Depository Institutions that have greater than $100 billion in Servicing UPB; and ■ One primary Servicer Rating or master Servicing Rating, as applicable, and issued by two Rating Agencies, each of which must issue either a third-party Long-Term Senior Unsecured Debt Rating or Long-Term Corporate Family Rating for Large Non- Depository Institutions that have greater than $150 billion in Servicing UPB Additionally, Large Non-Depository Institutions must submit to Freddie Mac, annually on or before March 31, a capital and liquidity plan that describes how the Seller/Servicer intends to manage its capital and liquidity consistent with Freddie Mac requirements. Capital and Freddie Mac Single-Family Seller/Servicer Guide Chapter 2101 As of 05/06/26 Page 2101-9 liquidity plans must be submitted to [email protected] and must, at a minimum: ■ Include a description of the Seller/Servicer’s corporate governance over the capital and liquidity planning process, such as oversight responsibilities of Senior Management and its board of directors, and a discussion of the Seller/Servicer’s risk management framework; ■ Describe processes to monitor and measure liquidity risks, such as business activity reports and financial forecast and cashflow projections; ■ Contain capital and liquidity contingency funding plans and provide for testing and reaffirmation of such plans at least annually; ■ Provide for an annual liquidity stress test, including a stress test of the value of Servicing Contract Rights in an adverse scenario (1) developed by the Seller/Servicer or (2) that may be prescribed by Freddie Mac, or both. The Servicing Contract Rights stress test may be conducted either in-house or using a third-party vendor; and ■ Require notice to Freddie Mac within five (5) Business Days following any material change to or material deviation from the plan. During times of stress, material changes must require immediate notification within one (1) Business Day. 2101.5: Mortgage bankers financial reporting (04/30/24) Each Seller/Servicer that is a mortgage banker must submit a complete and accurate Form 1055, Mortgage Bankers’ Financial Reporting Form, on a quarterly basis. For reporting purposes, mortgage bankers are firms other than federally insured depositories originating mortgages for sale in the secondary market and/or servicing mortgages. This includes Sellers/Servicers that are mortgage banker subsidiaries of federally insured depositories. Form 1055 must be completed and submitted as follows: ■ For reporting periods ending March 31, June 30 or September 30, Form 1055 must be filed no later than 30 days after the end of the reporting period. For reporting periods ending on December 31, the Form 1055 must be filed no later than 60 days after the end of the reporting period. Mortgage bankers with fiscal years that do not end on December 31 should refer to the instructions for Form 1055 at http://www.mbfrf.org. ■ Form 1055 may be printed from the website and must be completed and submitted online at http://www.mbfrf.org Freddie Mac Single-Family Seller/Servicer Guide Chapter 2101 As of 05/06/26 Page 2101-10 ■ Seller/Servicer’s chief executive officer (CEO), chief financial officer (CFO) or an equivalent officer must certify that Form 1055 was prepared in accordance with generally accepted accounting principles (GAAP) and that the information submitted is true and accurate Additionally, for each Seller/Servicer that completes Form 1055 quarterly reporting and is either (1) a Large Non-Depository Institution, as defined in Section 2101.2 or (2) separately identified by Freddie Mac through a written communication to that Seller/Servicer, such Seller/Servicer must submit a complete and accurate Form 1055A, Monthly Mortgage Bankers’ Financial Reporting Short Form, as follows: ■ Form 1055A must be filed no later than the last day of the month following the end of the reporting month for the first and second months of each fiscal quarter (e.g., Form 1055A will be effective for the April 2024 filing, due May 31, 2024). Seller/Servicers are not required to provide a monthly report for each third month of the fiscal quarter, as the data will be captured in the quarterly Form 1055 report. ■ Form 1055A may be printed from the website and must be completed and submitted online at http://www.mbfrf.org ■ Seller/Servicer’s CEO, CFO or an equivalent officer must certify that Form 1055A was prepared in accordance with GAAP and that the information submitted is true and accurate Failure to submit Form 1055 or 1055A as described herein may result in suspension or disqualification of the Seller/Servicer. 2101.6: Seller/Servicer insurance requirements (08/10/22) (a) Coverage levels (i) Limits of insurance The Seller/Servicer must maintain in effect, at all times and at its expense, a fidelity bond and a mortgagee’s errors and omissions (E&O) insurance policy. If the Seller/Servicer uses its parent’s bond or policy, as permitted in Section 2101.6, the minimum limit of insurance must be based on the consolidated base amount for the parent and for all institutions related to the parent that are covered by the parent’s bond or policy, as applicable. Freddie Mac will accept bonds or policies that provide for an aggregate limit of insurance for a bond’s or policy’s term provided that the aggregate at least equals the minimum limit per loss or occurrence calculated in accordance with this Section 2101.6. Freddie Mac Single-Family Seller/Servicer Guide Chapter 2101 As of 05/06/26 Page 2101-11 For fidelity bond and E&O insurance, the higher minimum Freddie Mac Multifamily coverage limit applies if: ■ The Seller/Servicer is also a Freddie Mac Multifamily Seller/Servicer ■ The required fidelity or mortgagee’s E&O coverage is provided under the same insurance contract that covers both Home Mortgages and Multifamily Mortgages and ■ The Freddie Mac Multifamily Seller/Servicer Guide requires a higher limit of fidelity or mortgagee’s E&O coverage (A) Limits of fidelity bond The minimum acceptable limits per fidelity loss or occurrence are as follows: Base* Minimum required insurance limit $100 million or less $300,000 $500 million or less $300,000 +0.15% of base over $100 million $1 billion or less $300,000 +0.15% of $400 million (i.e., $600,000) +0.125% of base over $500 million Over $1 billion $300,000 +0.15% of $400 million (i.e., $600,000) +0.125% of $500 million (i.e., $625,000) +0.1% of base over $1 billion * Base = The highest of total annual Home Mortgage and Multifamily Mortgage origination, sale or servicing volume including Home Mortgages and Multifamily Mortgages held in portfolio. (B) Limits of E&O insurance Mortgagee’s E&O coverage must be maintained at a minimum limit equal to the higher of (i) $300,000 or (ii) 20% of the fidelity coverage required in the table above. If the base consists of Home Mortgages only, the limit of mortgagee’s E&O insurance may be capped at $10 million. For mortgagee’s E&O insurance, Freddie Mac will accept policies providing coverage per Mortgage if the insurance limit per Mortgage is no less than the UPB of Freddie Mac Single-Family Seller/Servicer Guide Chapter 2101 As of 05/06/26 Page 2101-12 the largest Mortgage originated and/or sold by the Seller or serviced by the Servicer, whichever is highest. For mortgagee’s E&O insurance, Freddie Mac will accept a policy that provides lower limits of insurance for losses other than those caused by lack or insufficiency of property insurance on Mortgaged Premises, if any such lower limit of insurance is the maximum liability that the insurer will assume for similar losses by institutions similar to the Seller/Servicer. Examples of calculations of the required minimum insurance limits are as follows: Base Calculation Minimum required insurance limit for fidelity bond $90 million not applicable $300,000* $400 million $300,000 +0.15% of $300 million $750,000 $750,000* $750 million $300,000 +0.15% of $400 million +0.125% of $250 million $1,212,500 $1,212,500* $1.5 billion $300,000 +0.15% of $400 million +0.125% of $500 million +0.1% of $500 million $2,025,000 $2,025,000** * $300,000 in mortgagee’s E&O coverage (the higher of $300,000 or 20% of the required fidelity coverage) ** $405,000 in mortgagee’s E&O coverage (the higher of $300,000 or 20% of the required fidelity coverage) (ii) Deductibles The maximum deductible allowed for any one fidelity loss is the higher of: ■ 5% of the minimum limit of fidelity insurance required by Freddie Mac, or ■ $100,000 The maximum deductible allowed for any one mortgagee’s E&O loss is the higher of: Freddie Mac Single-Family Seller/Servicer Guide Chapter 2101 As of 05/06/26 Page 2101-13 ■ 5% of the minimum limit of mortgagee’s E&O insurance required by Freddie Mac, or ■ $100,000 The deductible may not be calculated based on the actual limit of insurance in force. For example, Freddie Mac requires a Servicer to maintain at least $5 million in fidelity insurance. The Servicer actually maintains $7 million in fidelity insurance. The maximum deductible allowed is 5% of $5 million or $250.000. (b) Acceptable insurer Freddie Mac will accept coverage underwritten by an insurer that is rated A- (A-minus) or better by the A.M. Best Company. (c) Parent institution’s coverage When the Seller/Servicer is a subsidiary of an institution with fidelity and/or mortgagee’s E&O insurance that meets Freddie Mac’s requirements, Freddie Mac will accept the insurance of the Seller/Servicer’s parent as adequate for the Seller/Servicer if: ■ The Seller/Servicer is named as joint insured, and ■ Coverage under the parent’s policy or policies of insurance does not restrict or otherwise limit the Seller/Servicer’s ability to comply with all of Freddie Mac’s insurance requirements (d) Other obligations of the Seller/Servicer The Seller/Servicer must maintain at its offices a complete and accurate copy of its fidelity bonds and mortgagee’s E&O policies for the current year and the past five years. Copies of these bonds and policies shall be provided to Freddie Mac upon request. The Seller/Servicer authorizes Freddie Mac to obtain copies of the bonds and policies and all related information from the Seller/Servicer’s insurer and/or agent or representative of the insurer. Freddie Mac’s requirements for fidelity and mortgagee’s E&O insurance do not diminish, restrict or otherwise limit the Seller/Servicer’s responsibilities and obligations stated in the Purchase Documents. The Seller/Servicer must familiarize itself with the terms of the fidelity and mortgagee’s E&O coverages and take all actions necessary to preserve the coverage and maximum benefits of such insurance for the Seller/Servicer and Freddie Mac, as applicable. Freddie Mac Single-Family Seller/Servicer Guide Chapter 2101 As of 05/06/26 Page 2101-14 2101.6: Seller/Servicer insurance requirements (Future effective date 06/08/26) (a) Coverage requirements The Seller/Servicer must maintain in effect, at all times and at its expense (i) a fidelity bond and (ii) a mortgagee’s errors and omissions (E&O) insurance policy. The required limits and deductibles/retentions for each coverage are set forth in Sections 2101.7 and 2101.8, respectively. If the Seller/Servicer uses a bond or policy that has been issued to its parent company, as permitted in Section 2101.6(c), the minimum limit of insurance must be based on the consolidated Base (as defined in Section 2101.7(c)) amount for the parent and for all institutions related to the parent that are covered by the parent’s bond or policy, as applicable. Freddie Mac will accept bonds or policies that provide for an aggregate limit of insurance for a bond’s or policy’s term on the condition that the aggregate at least equals the minimum limit per loss or occurrence calculated in accordance with this Section 2101.7 or 2101.8, as applicable. If the Seller/Servicer is also a Freddie Mac Multifamily Seller/Servicer and coverage required under this Guide and the Freddie Mac Multifamily Seller/Servicer Guide is provided under the same insurance contract, the higher minimum required coverage limit shall apply to the Seller/Servicer. If the Seller/Servicer maintains broader coverage and/or higher limits than required by this Guide, Freddie Mac requires and shall be entitled to the benefits of the broader coverage and/or higher limits maintained by the Seller/Servicer. Freddie Mac reserves the right to adjust the insurance requirements for any particular Seller/Servicer at Freddie Mac’s sole discretion. (b) Acceptable insurer Coverage required under this section must be underwritten by an insurer that is rated A- (A- minus) or better by the A.M. Best Company. (c) Parent institution’s coverage When the Seller/Servicer is a subsidiary of an institution with insurance that meets Freddie Mac’s requirements set forth in Sections 2101.6 through 2101.9, Freddie Mac will accept the insurance of the Seller/Servicer’s parent as adequate for the Seller/Servicer if: ■ The Seller/Servicer is named as joint insured, and Freddie Mac Single-Family Seller/Servicer Guide Chapter 2101 As of 05/06/26 Page 2101-15 ■ Coverage under the parent’s policy or policies of insurance does not restrict or otherwise limit the Seller/Servicer’s ability to comply with all of Freddie Mac’s insurance requirements (d) Other obligations of the Seller/Servicer The Seller/Servicer must maintain at its offices a complete and accurate copy of its required insurance bonds and policies for the current year and the past five years. Copies of these bonds and policies shall be provided to Freddie Mac upon request. The Seller/Servicer authorizes Freddie Mac to obtain copies of the bonds and policies and all related information from the Seller/Servicer’s insurer and/or agent or representative of the insurer. Freddie Mac’s requirements for Seller/Servicer insurance do not diminish, restrict or otherwise limit the Seller/Servicer’s responsibilities and obligations stated in the Purchase Documents. The Seller/Servicer must familiarize itself with the terms of the required insurance coverages and take all actions necessary to preserve the coverage and maximum benefits of such insurance for the Seller/Servicer and Freddie Mac, as applicable. In the event of bankruptcy where a stay is issued in relation to insurance coverage, the Seller/Servicer is required to cooperate with Freddie Mac and agree to any stipulation requested by Freddie Mac to lift the automatic stay in connection with Freddie Mac pursuing its rights and/or benefits under any of the bonds and policies required by this Guide. For any E&O policy provided on a “claims made” or “claims made and reported” basis, the Seller/Servicer must maintain continuous coverage dating back to the date on which the Seller/Servicer became subject to this Guide. In the event of termination or non-renewal of an E&O policy issued on a “claims made” or “claims made and reported” basis, the Seller/Servicer shall either procure replacement coverage that provides for the same continuity required by this section, or, if such continuity is not available in the marketplace, purchase an extended reporting period (sometimes referred to as tail coverage) on the terminated/non-renewed coverage for six years.

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