Freddie Mac Single-Family Seller/Servicer Guide 4502.7 — Requirements for Community Land Trust Ground Leases and Ground Lease Riders

This section contains sub-sections related to: ■ Community Land Trust Ground Lease ■ Leasehold estate eligibility requirements ■ Community Land Trust Ground Lease Rider ■ Mortgage file requirements

(a) Community Land Trust Ground Lease (i) Ground lease requirements The Seller must review the Community Land Trust’s ground lease and determine whether it is based on the National Community Land Trust Network (NCLTN) 2011 Community Land Trust Network Model Ground Lease or the Institute for Community Economics (ICE) Model Ground Lease (collectively, the “model ground leases”). For Community Land Trust programs included in Fannie Mae’s Certified Shared Equity Program list, which is available at https://singlefamily.fanniemae.com/originatingunderwriting/mortgage-products/shared-equity-programs, the Seller may sell such Community Land Trust Mortgages to Freddie Mac, provided that, ■ If the Community Land Trust’s ground lease is based on one of the two model ground leases, the Seller is not required to comply with the additional ground lease requirements in Section 4502.7(a)(ii); or ■ If the Community Land Trust’s ground lease is not based on either of the two model ground leases, the Seller must confirm that the ground lease complies with the additional ground lease requirements in Section 4502.7(a)(ii) The resale restrictions in the Community Land Trust Ground Lease can be imposed by State or local governments, municipalities, instrumentalities or nonprofit entities to create and preserve affordable housing (including entities administering governmentalsponsored subsidy programs). For each Community Land Trust Mortgage sold to Freddie Mac, the Seller represents and warrants that the Community Land Trust Ground Lease is valid, enforceable and in full force and effect. (ii) Additional ground lease requirements The Seller must confirm that the Community Land Trust Ground Lease: ■ Has a term of at least 30 years ■ Includes a resale formula that limits the homeowner’s proceeds at resale. The restrictions must be binding on current and subsequent property owners and remain in effect (i.e., survive) until they are formally removed, are modified or terminate automatically in accordance with their terms, such as at a foreclosure sale or upon recordation of a deed-in-lieu of foreclosure. ■ Provides the Community Land Trust or its assignee the right to a preemptive option to purchase the home from the homeowner at resale (“the right of first refusal”) ■ Requires the Community Land Trust to review and approve any refinances and secondary financing, including Home Equity Lines of Credit (HELOCs) ■ Requires that the homeowner use the leased land and the improvements primarily for residential uses (iii) Freddie Mac prior written approval If the Community Land Trust’s ground lease is not based on either of the two model ground leases or is not included in Fannie Mae’s Certified Shared Equity Program list, Freddie Mac’s prior written approval is required. With prior written approval from Freddie Mac, Community Land Trusts certified under a Freddie Mac-approved certification program may be exempt from Seller review of the Community Land Trust’s ground lease, and Sellers will be relieved from enforcement of representations and warranties that the Community Land Trust Ground Lease is valid, enforceable and in full force and effect. The Seller must obtain Freddie Mac’s written approval before selling Mortgages without review of the Community Land Trust’s ground lease by contacting its Freddie Mac representative or Customer Service at 800FREDDIE. (iv) Excess proceeds for Community Land Trust Mortgages The Community Land Trust may be entitled to any applicable excess proceeds when there is a transfer of title on a Community Land Trust property that occurs as a result of such property being sold by: ■ The Borrower for an amount exceeding the resale restricted price, or ■ Freddie Mac after acquiring title through a completed foreclosure sale or deed-in-lieu of foreclosure Excess proceeds on Community Land Trust properties are those proceeds that are above the amount required to satisfy the total indebtedness, including any additional liens, claims or encumbrances, in addition to any amount(s) incurred during an REO holding period if title was acquired by Freddie Mac via a completed foreclosure sale or deed-inlieu of foreclosure. Upon satisfaction of the total indebtedness as outlined above, any excess proceeds should be distributed as outlined below: ■ For properties that are sold by the Borrower for an amount exceeding the resale restricted price agreed upon in the Community Land Trust Ground Lease: ❑ First to the Borrower and Community Land Trust for equity due as agreed upon in the Community Land Trust Ground Lease, and ❑ All remaining excess proceeds to the Community Land Trust when the Community Land Trust Ground Lease includes terms for excess proceeds to be distributed to the Community Land Trust ■ For properties that are sold by Freddie Mac after acquiring title through a completed foreclosure sale or deed-in-lieu of foreclosure: ❑ First to Freddie Mac for any amount(s) incurred during an REO holding period, as applicable, and ❑ All remaining excess proceeds to the Community Land Trust when the Community Land Trust Ground Lease includes terms for excess proceeds to be distributed to the Community Land Trust Note: Servicers will not be responsible for these REO activities. For more information on Servicer responsibilities on REO properties, see Chapter 9601.

(b) Leasehold estate eligibility requirements The leasehold estate created by the Community Land Trust Ground Lease must constitute real property under applicable law.

(c) Community Land Trust ground lease rider Freddie Mac has developed Form 490, Community Land Trust Ground Lease Rider, that must be completed, executed and recorded in the land records, together with the Community Land Trust Ground Lease. Fannie Mae’s Form 2100, Community Land Trust Ground Lease Rider, may be used in lieu of Form 490. Requirements pertaining to Form 490 in the Guide apply to Fannie Mae’s Form 2100, when applicable.

(d) Mortgage file requirements The Mortgage file must contain an original executed or certified copy of the Community Land Trust Ground Lease and the Form 490 containing the recordation information. If the Community Land Trust program is included in Fannie Mae’s Certified Shared Equity Program list, the Seller must include in the Mortgage file evidence that the Community Land Trust program is included in Fannie Mae’s list as of the Note Date.