Freddie Mac Single-Family Seller/Servicer Guide 4202.3 — Prohibited practices and restrictions

Freddie Mac Single-Family Seller/Servicer Guide 4202.3 — Prohibited practices and restrictions

Effective 2025-11-05 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Credit insurance Freddie Mac Single Family Seller/Servicer Guide ■ Mortgages with private transfer fee covenants ■ Mandatory arbitration (a) Credit insurance Freddie Mac will not purchase or securitize any Mortgage if the Borrower obtained a prepaid single-premium credit-life, credit disability, credit unemployment or credit property insurance policy in connection with the origination of the Mortgage, regardless of whether the premium was financed in the Mortgage amount or paid from the Borrower’s funds. This prohibition does not apply to credit insurance products where premiums are calculated, earned and paid on a monthly or other regular periodic basis or to prepaid hazard, flood or mortgage insurance policies. (b) Mortgages with private transfer fee covenants Mortgages on properties encumbered by private transfer fee covenants prohibited by 12 C.F.R. Part 1228 are ineligible for purchase by Freddie Mac if those covenants were created on or after February 8, 2011. In addition, the Seller/Servicer represents and warrants that: ■ It has controls in place to ensure that it does not inadvertently deliver an ineligible Mortgage to Freddie Mac as described above, and ■ If applicable, it has received representations and warranties from any person or entity from which the Seller purchased the Mortgage that the property securing the Mortgage is not encumbered by private transfer fee covenants created on or after February 8, 2011 However, private transfer fees are permissible if all of the following conditions are met for the Mortgage secured by a property encumbered by a private transfer fee: ■ The Mortgage is a shared equity loan ■ The Mortgage meets the Duty to Serve shared equity loan program criteria identified in 12 CFR 1282.34(d)(4) (other than the Duty to Serve 100% of Area Median Income limit) ■ The Mortgage has a Note Date on or after July 1, 2023 (c) Mandatory arbitration Freddie Mac will not purchase any Mortgage if any of the Mortgage documents—including the Note, any Note addendum, the Security Instrument or any Security Instrument rider— contain a “mandatory arbitration” clause (i.e., a clause that obligates the Borrower to submit to arbitration any dispute arising out of or relating in any way to the Mortgage transaction). Freddie Mac Single Family Seller/Servicer Guide Freddie Mac’s Uniform Instruments do not provide for mandatory arbitration, and the addition of a mandatory arbitration clause is not an authorized change to the Uniform Instruments. No ancillary Mortgage document may contain a mandatory arbitration provision.

Source: Freddie Mac Single-Family Seller/Servicer Guide 4202.3 — Prohibited practices and restrictions · source URL · snapshot 4c94f67729042dd6