Freddie Mac Single-Family Seller/Servicer Guide 2301.1 — Disqualification or suspension of Seller’s eligibility to sell

This section contains requirements related to: ■ Disqualification or suspension of Seller’s eligibility to sell ■ Disqualification or suspension of the Seller or the Servicer ■ Notice of intent to disqualify or suspend the Seller or the Servicer

(a) Disqualification or suspension of Seller’s eligibility to sell Freddie Mac, in its discretion, may disqualify or suspend a Seller from eligibility to sell Mortgages to Freddie Mac. The Seller will be ineligible to obtain new purchase commitments during a period of disqualification or suspension. During the period of Seller disqualification or suspension, Freddie Mac may, in its discretion, determine whether outstanding commitments held by the Seller must be honored or the outstanding balance of the commitment fulfilled by using the pairoff procedure (see Section 6401.1). Freddie Mac will determine the length of any suspension period and may prescribe the terms and conditions for reinstatement. The notice of disqualification or suspension and the opportunity of a Seller to respond to and appeal the action are governed by the procedures in this chapter. For information regarding outstanding purchase commitments when Freddie Mac terminates the Servicing Contract and related Servicing Contract Rights with or without cause, see Section 3602.2(b).

(b) Disqualification or suspension of the Seller or the Servicer (i) Disqualification or suspension with cause Without limiting Freddie Mac’s right to take whatever other action it deems appropriate to protect its interests and enforce its rights (including disqualification or suspension for reasons not listed below), Freddie Mac may disqualify or suspend a Seller or a Servicer for any of the following reasons: 1. Impending or actual insolvency of the Seller/Servicer, its parent, an affiliate or a subsidiary 2. Filing of a voluntary petition by the Seller/Servicer, its parent, or an affiliate or subsidiary under federal bankruptcy or State insolvency laws 3. Filing of an answer by the Seller/Servicer, its parent, an affiliate or a subsidiary in an involuntary proceeding admitting insolvency or inability to pay debts 4. Adjudication of the Seller/Servicer, its parent, an affiliate or a subsidiary as bankrupt 5. Appointment of a trustee or receiver for the Seller/Servicer or its property or for its parent, an affiliate or a subsidiary or for the property of such entities 6. Execution by the Seller/Servicer, its parent, an affiliate or a subsidiary of an assignment for the benefit of creditors 7. Failure of the Seller/Servicer, its parent, or affiliate or a subsidiary to obtain a vacation or stay of involuntary proceedings brought for its reorganization, dissolution or liquidation 8. Failure of the Seller/Servicer to maintain qualified loan origination or Servicing staff and/or adequate facilities to assure (i) the investment quality of the Mortgages sold to Freddie Mac, or (ii) the adequacy of the Servicing of Mortgages purchased by Freddie Mac 9. Any weakness or notable change in the financial or organizational status or management of the Seller/Servicer, its parent, an affiliate or a subsidiary, including any adverse change in profitability or liquidity, that, in the opinion of Freddie Mac, could adversely affect Freddie Mac 10. Failure of the Seller/Servicer to meet any requirement as may be prescribed by Freddie Mac for eligibility as a Seller or a Servicer, including, but not limited to, a Seller/Servicer’s failure to maintain a minimum Tangible Net Worth and/or failure to meet any other financial requirements related to the Seller/Servicer’s eligibility required by Freddie Mac (see Section 2101.2) 11. Placement of the Seller/Servicer, its parent, an affiliate or a subsidiary on probation or restriction of its activities or the activities of its parent, an affiliate or a subsidiary of the Seller/Servicer, in any manner by a federal or State government agency 12. Any judgment, order, finding or regulatory action to which the Seller/Servicer (or its management), its parent, an affiliate or a subsidiary is subject that would adversely affect the Seller/Servicer’s ability to comply with the terms and conditions of the Purchase Documents 13. Freddie Mac’s determination that the Seller/Servicer’s warranty obligations are disproportionate to its capital and/or assets 14. Failure of the Seller to deliver any documents under a Freddie Mac mandatory delivery purchase program 15. Failure of the Seller/Servicer to observe or comply with any term or provision of the Purchase Documents 16. Misstatement, misrepresentation or omission of any material fact on any application, certification or other document submitted, or in any oral representation made, by the Seller/Servicer to Freddie Mac 17. Assignment or attempt to assign its interests, rights or obligations under the Purchase Documents by the Seller/Servicer without Freddie Mac’s written consent 18. Failure or inability to account properly for the disposition of all moneys required to be safeguarded in Custodial Accounts or buydown accounts by the Servicer 19. Default or failure of the Seller/Servicer to perform under any contract with Freddie Mac, including, but not limited to, contracts not directly related to the sale or Servicing of Mortgages and contracts relating to Mortgages purchased or serviced other than pursuant to this Guide 20. Having a 30-, 60- or 90+-day Delinquency rate or an REO rate more than 50% higher than the average 30-, 60- or 90+-day Delinquency rate or REO rate for any or all Mortgages owned or guaranteed by Freddie Mac nationally or in the same geographical area (which may include Standard Metropolitan Statistical Area, county or State) in which the Mortgaged Premises that secure the Mortgages either sold by the Seller or serviced by the Servicer are located and with similar Mortgage and Borrower characteristics, such as origination year, loan-to-value ratio and documentation type (e.g., full documentation, reduced documentation) 21. Failure of the Seller/Servicer to submit a complete and accurate Annual Certification Report within the time frame prescribed by Section 2101.11 22. Failure of the Seller/Servicer that is a mortgage banker to submit a complete and accurate Form 1055, Mortgage Bankers’ Financial Reporting Form, within the time frame prescribed by Section 2101.5 23. Failure of the Seller/Servicer to comply with the provisions of Section 3101.1 regarding the Freddie Mac Exclusionary List 24. Placement on the Exclusionary List of the Seller/Servicer, its parent, an affiliate or a subsidiary 25. Failure of the Seller/Servicer to submit a complete and accurate Change and Activity Report within the time frame required in Section 2101.12 or 2101.13 26. Freddie Mac’s determination that the Servicer’s overall performance is unacceptable pursuant to Section 3501.2. Freddie Mac considers the Servicer Success Scorecard results (see Section 3501.2), together with other factors (including, but not limited to, Servicer Success File Reviews, trends in performance, adequacy of staffing, audit results and/or compliance with all requirements of the Purchase Documents) in evaluating whether the Servicer’s overall performance is unacceptable 27. Failure of the Seller to deliver a minimum volume of Mortgages (measured by dollar amount or number of Mortgages) within the time frame specified by Freddie Mac 28. Failure of the Seller/Servicer to maintain the confidentiality of the Exclusionary List or information contained on the Exclusionary List 29. Failure of the Seller/Servicer to fulfill any obligation to Freddie Mac when due, including, but not limited to, the failure to repurchase a Mortgage, pay fees or other moneys and remit custodial or buydown funds 30. Failure of the Seller/Servicer to provide audited or reviewed financial statements for its parent, subsidiaries and affiliates upon Freddie Mac request When the Seller is also a Servicer, suspension or disqualification as a Seller is sufficient cause for suspension or disqualification as a Servicer or termination of all or a portion of the Servicing Contract and related Servicing Contract Rights with cause. When the Servicer is also a Seller, suspension or disqualification as a Servicer or termination of all or a portion of the Servicing Contract and related Servicing Contract Rights with cause under Chapter 3603 is sufficient cause for suspension or disqualification as a Seller. Whether or not Freddie Mac terminates the Servicing Contract and related Servicing Contract Rights, any of the above events is cause for revocation of the power of attorney granted to the Servicer in accordance with Section 8101.1(b). (ii) Disqualification or suspension without cause Freddie Mac may disqualify or suspend a Seller or a Servicer without cause. Disqualification or suspension of a Seller or a Servicer without cause will be effective immediately upon notice of the disqualification or suspension, unless the notice specifies a later date. During the period of Seller disqualification or suspension, Freddie Mac may, at its discretion, determine whether outstanding commitments held by the Seller must be honored or the outstanding balance of the commitment fulfilled by using the pairoff procedure (see Section 6401.1). A Seller will not be entitled to a termination fee or any other compensation from Freddie Mac for any reason or cause relating to any consequential, incidental or indirect damages arising out of, or in connection with, its disqualification or suspension without cause. Notwithstanding Sections 2301.1(c) through 2301.3, Freddie Mac’s decision to suspend or disqualify a Seller without cause or to terminate Servicing without cause is conclusive.

(c) Notice of intent to disqualify or suspend the Seller or the Servicer Freddie Mac will not provide the Seller or the Servicer with prior written notice of an intent to disqualify or suspend the Seller or the Servicer, unless Freddie Mac determines, in its discretion, that the giving of prior notice will in no way adversely affect Freddie Mac’s interests. In such cases, 30 days’ prior written notice will be given. Certain violations of this Guide (such as the commission of fraudulent acts or the failure to deliver under a mandatory delivery purchase program) are viewed with particular seriousness by Freddie Mac. In such cases, Freddie Mac will tend to act without prior written notice to disqualify or suspend the Seller. If prior written notice is not provided, disqualification or suspension will become effective upon oral notice from Freddie Mac to the Seller. Written confirmation of that oral notice will follow. Any prior written notice or written confirmation of oral notice will contain a brief statement of the basis for the disqualification or suspension and may advise the Seller or the Servicer of its right to obtain a review of Freddie Mac’s action or proposed action if permitted in accordance with the procedures in Section 2301.3(a). Before giving notice of disqualification or suspension, Freddie Mac may, in its discretion, notify a Seller or a Servicer that it has violated, is violating or may be about to violate provisions of this Guide or other Purchase Documents and that, unless corrective action is taken within a specified time period, disqualification or suspension may result. Freddie Mac may give the notification as part of an audit report or as a result of any other review or investigation of the Seller or the Servicer by Freddie Mac. Any such notification may be issued by means determined by Freddie Mac, including, but not limited to, electronic mail to the Seller’s or Servicer’s e-mail address provided to Freddie Mac by the Seller or Servicer in accordance with Freddie Mac’s requirements.