Freddie Mac Single-Family Seller/Servicer Guide 4606.3 — Mortgage requirements

This section contains requirements related to: ■ Mortgages used to finance eligible improvements ■ Mortgages used to pay an Existing Debt

(a) Mortgages used to finance eligible improvements When the GreenCHOICE Mortgage® proceeds are used to finance eligible improvements completed after the Note Date and prior to the Settlement Date, the requirements in the table below must be met. GreenCHOICE Mortgage proceeds used to finance improvements completed after the Note Date and prior to the Settlement Date Topic Requirement Appraisal report The Seller/Servicer must obtain an interior and exterior inspection appraisal with an “as completed” appraised GreenCHOICE Mortgage proceeds used to finance improvements completed after the Note Date and prior to the Settlement Date Topic Requirement value of the Mortgaged Premises, subject to all eligible improvements being completed. See Section 5601.4 for additional appraisal report requirements. Documentation of cost of improvements The Seller/Servicer must obtain and retain in the Mortgage file copies of all invoices and/or receipts, as applicable, related to the cost of the eligible improvements. Maximum permitted improvement cost The maximum amount of the proceeds that may be used for the purchase, installation, repair or upgrade of eligible improvements is limited to 15% of the “as completed” appraised value of the Mortgaged Premises. Completion escrow account On the Note Date, funds sufficient to cover the cost of the eligible improvements must be deposited into a completion escrow account. The Seller and the Borrower must execute a written escrow agreement detailing how the funds will be managed and disbursed. A copy of the escrow agreement must be retained in the Mortgage file. A contingency reserve is not required. Completion escrow account disbursements Funds in the completion escrow account may be used to reimburse the Borrower for the cost of materials purchased to complete the eligible improvements. The Seller/Servicer may not reimburse the Borrower for any self-performed labor. After all eligible disbursements have been made, any remaining funds must be applied: ■ If the Mortgage is delinquent, in accordance with the application of payment requirements in the Note and Security Instrument ■ If the Mortgage is not delinquent, to reduce the UPB Completion deadline All eligible improvements must be completed no more than 180 days after the Note Date. Completion report After completion of all eligible improvements, the Seller/Servicer must have the appraiser: ■ Inspect the Mortgaged Premises to verify the eligible improvements have been completed, and GreenCHOICE Mortgage proceeds used to finance improvements completed after the Note Date and prior to the Settlement Date Topic Requirement ■ Provide the Seller/Servicer with a completion report that includes photographs of the completed improvements. The Seller/Servicer must retain the completion report in the Mortgage file. Energy report An energy report meeting the energy report requirements in Section 4606.4 may be required. When GreenCHOICE Mortgage proceeds are used to finance eligible improvements completed after the Settlement Date, the requirements in the table below must be met. GreenCHOICE Mortgage proceeds used to finance improvements completed after the Settlement Date Topic Requirement Appraisal report The Seller/Servicer must obtain an interior and exterior inspection appraisal with an “as completed” appraised value of the Mortgaged Premises, subject to all eligible improvements being completed. See Section 5601.4 for additional appraisal report requirements. Documentation of cost of improvements The Seller/Servicer must obtain and retain in the Mortgage file copies of all invoices and/or receipts, as applicable, related to the cost of the eligible improvements. Maximum permitted improvement cost The maximum amount of the proceeds that may be used for the purchase, installation, repair or upgrade of eligible improvements is limited to 15% of the “as completed” appraised value of the Mortgaged Premises. Property condition rating The incomplete renovations must not represent deficiencies consistent with a C6 condition rating (e.g., active roof leak(s), damaged or failing foundation). Completion escrow account On the Note Date, funds sufficient to cover the cost of the eligible improvements must be deposited into a completion escrow account. The Seller and the Borrower must execute a written escrow agreement detailing how the funds will be managed and disbursed. A copy of the GreenCHOICE Mortgage proceeds used to finance improvements completed after the Settlement Date Topic Requirement escrow agreement must be retained in the Mortgage file. A contingency reserve is not required. Completion escrow account disbursements Funds in the completion escrow account may be used to reimburse the Borrower for the cost of materials purchased to complete the eligible improvements. The Seller/Servicer may not reimburse the Borrower for any self-performed labor. After all eligible disbursements have been made, any remaining funds must be applied: ■ If the Mortgage is delinquent, in accordance with the application of payment requirements in the Note and Security Instrument ■ If the Mortgage is not delinquent, to reduce the UPB Completion deadline All eligible improvements must be completed no more than 180 days after the Note Date. If the eligible improvements are not completed by the required completion date, the Seller/Servicer must notify Freddie Mac Quality Control pursuant to the reporting requirements in Section 3402.3(b). Completion report After the Settlement Date and upon completion of all eligible improvements, the Seller/Servicer must have the appraiser: ■ Inspect the Mortgaged Premises to verify the eligible improvements have been completed, and ■ Provide the Seller/Servicer with a completion report that includes photographs of the completed improvements. The Seller/Servicer must retain the completion report in the Mortgage file. Energy report An energy report meeting the energy report requirements in Section 4606.4 may be required. Mortgage insurance The mortgage insurance must be maintained in compliance with the master policy and applicable guides of the selected MI. GreenCHOICE Mortgage proceeds used to finance improvements completed after the Settlement Date Topic Requirement Title Insurance The title to the Mortgaged Premises must not be impaired or adversely affected by the delayed completion of all eligible improvements.

(b) Mortgages used to pay an Existing Debt GreenCHOICE Mortgage proceeds used to pay an Existing Debt Topic Requirement Appraisal An interior and exterior inspection appraisal is required. The appraisal must reflect all eligible improvements that were made. See Section 5601.4 for additional appraisal requirements. Use of proceeds The maximum payment towards an Existing Debt is limited to 15% of the appraised value of the Mortgaged Premises. Mortgage file documentation The Mortgage file must include documentation (e.g., invoices, receipts) of the eligible improvements completed before the Note Date and their costs. Remaining Existing Debt Any remaining balance of the Existing Debt must be included in the calculation of the monthly debt payment-to-income ratio. If the remaining balance is reamortized, the Seller/Servicer must obtain and retain in the Mortgage file sufficient documentation evidencing the new payment, including a copy of the new promissory note, if applicable. Settlement/Closing Disclosure Statement requirements The Settlement/Closing Disclosure Statement must reflect that the proceeds were paid directly to the holder of the Existing Debt. The total amount of proceeds disbursed to the Borrower at closing must not exceed the maximum amount allowed pursuant to the “no cash-out” refinance Mortgage requirements in Section 4301.4. Note: See Sections 4301.4 and 4301.8 for payoff of Property Assessed Clean Energy obligation requirements.

11/02/26) This section contains requirements related to: ■ Mortgages used to finance eligible improvements ■ Mortgages used to pay an Existing Debt

(a) Mortgages used to finance eligible improvements When the GreenCHOICE Mortgage® proceeds are used to finance eligible improvements completed after the Note Date and prior to the Settlement Date, the requirements in the table below must be met. GreenCHOICE Mortgage proceeds used to finance improvements completed after the Note Date and prior to the Settlement Date Topic Requirement Appraisal report The Seller/Servicer must obtain an interior and exterior inspection appraisal with an “as completed” appraised value of the Mortgaged Premises, subject to all eligible improvements being completed. See Section 5601.4 for additional appraisal report requirements. Documentation of cost of improvements The Seller/Servicer must obtain and retain in the Mortgage file copies of all invoices and/or receipts, as applicable, related to the cost of the eligible improvements. Maximum permitted improvement cost The maximum amount of the proceeds that may be used for the purchase, installation, repair or upgrade of eligible improvements is limited to 15% of the “as completed” appraised value of the Mortgaged Premises. Completion escrow account On the Note Date, funds sufficient to cover the cost of the eligible improvements must be deposited into a completion escrow account. The Seller and the Borrower must execute a written escrow agreement detailing how the funds will be managed and disbursed. A copy of the escrow agreement must be retained in the Mortgage file. A contingency reserve is not required. GreenCHOICE Mortgage proceeds used to finance improvements completed after the Note Date and prior to the Settlement Date Topic Requirement Completion escrow account disbursements Funds in the completion escrow account may be used to reimburse the Borrower for the cost of materials purchased to complete the eligible improvements. The Seller/Servicer may not reimburse the Borrower for any self-performed labor. After all eligible disbursements have been made, any remaining funds must be applied: ■ If the Mortgage is delinquent, in accordance with the application of payment requirements in the Note and Security Instrument ■ If the Mortgage is not delinquent, to reduce the UPB Completion deadline All eligible improvements must be completed no more than 180 days after the Note Date. UAD Completion Report After completion of all eligible improvements, the Seller/Servicer must have the appraiser: ■ Inspect the Mortgaged Premises to verify the eligible improvements have been completed, and ■ Provide the Seller/Servicer with a UAD Completion Report that includes photographs of the completed improvements. The Seller/Servicer must retain the completion report in the Mortgage file. Energy report An energy report meeting the energy report requirements in Section 4606.4 may be required. When GreenCHOICE Mortgage proceeds are used to finance eligible improvements completed after the Settlement Date, the requirements in the table below must be met. GreenCHOICE Mortgage proceeds used to finance improvements completed after the Settlement Date Topic Requirement Appraisal report The Seller/Servicer must obtain an interior and exterior inspection appraisal with an “as completed” appraised value of the Mortgaged Premises, subject to all eligible GreenCHOICE Mortgage proceeds used to finance improvements completed after the Settlement Date Topic Requirement improvements being completed. See Section 5601.4 for additional appraisal report requirements. Documentation of cost of improvements The Seller/Servicer must obtain and retain in the Mortgage file copies of all invoices and/or receipts, as applicable, related to the cost of the eligible improvements. Maximum permitted improvement cost The maximum amount of the proceeds that may be used for the purchase, installation, repair or upgrade of eligible improvements is limited to 15% of the “as completed” appraised value of the Mortgaged Premises. Property condition rating The incomplete renovations must not represent deficiencies consistent with a C6 condition rating (e.g., active roof leak(s), damaged or failing foundation). Completion escrow account On the Note Date, funds sufficient to cover the cost of the eligible improvements must be deposited into a completion escrow account. The Seller and the Borrower must execute a written escrow agreement detailing how the funds will be managed and disbursed. A copy of the escrow agreement must be retained in the Mortgage file. A contingency reserve is not required. Completion escrow account disbursements Funds in the completion escrow account may be used to reimburse the Borrower for the cost of materials purchased to complete the eligible improvements. The Seller/Servicer may not reimburse the Borrower for any self-performed labor. After all eligible disbursements have been made, any remaining funds must be applied: ■ If the Mortgage is delinquent, in accordance with the application of payment requirements in the Note and Security Instrument ■ If the Mortgage is not delinquent, to reduce the UPB Completion deadline All eligible improvements must be completed no more than 180 days after the Note Date. If the eligible improvements are not completed by the required completion date, the Seller/Servicer must notify Freddie GreenCHOICE Mortgage proceeds used to finance improvements completed after the Settlement Date Topic Requirement Mac Quality Control pursuant to the reporting requirements in Section 3402.3(b). UAD Completion Report After the Settlement Date and upon completion of all eligible improvements, the Seller/Servicer must have the appraiser: ■ Inspect the Mortgaged Premises to verify the eligible improvements have been completed, and ■ Provide the Seller/Servicer with a UAD Completion Report that includes photographs of the completed improvements. The Seller/Servicer must retain the completion report in the Mortgage file. Energy report An energy report meeting the energy report requirements in Section 4606.4 may be required. Mortgage insurance The mortgage insurance must be maintained in compliance with the master policy and applicable guides of the selected MI. Title Insurance The title to the Mortgaged Premises must not be impaired or adversely affected by the delayed completion of all eligible improvements.

(b) Mortgages used to pay an Existing Debt GreenCHOICE Mortgage proceeds used to pay an Existing Debt Topic Requirement Appraisal report An interior and exterior inspection appraisal report is required. The appraisal report must reflect all eligible improvements that were made. See Section 5601.4 for additional appraisal requirements. Use of proceeds The maximum payment towards an Existing Debt is limited to 15% of the appraised value of the Mortgaged Premises. GreenCHOICE Mortgage proceeds used to pay an Existing Debt Topic Requirement Mortgage file documentation The Mortgage file must include documentation (e.g., invoices, receipts) of the eligible improvements completed before the Note Date and their costs. Remaining Existing Debt Any remaining balance of the Existing Debt must be included in the calculation of the monthly debt payment-to-income ratio. If the remaining balance is reamortized, the Seller/Servicer must obtain and retain in the Mortgage file sufficient documentation evidencing the new payment, including a copy of the new promissory note, if applicable. Settlement/Closing Disclosure Statement requirements The Settlement/Closing Disclosure Statement must reflect that the proceeds were paid directly to the holder of the Existing Debt. The total amount of proceeds disbursed to the Borrower at closing must not exceed the maximum amount allowed pursuant to the “no cash-out” refinance Mortgage requirements in Section 4301.4. Note: See Sections 4301.4 and 4301.8 for payoff of Property Assessed Clean Energy obligation requirements.

This section contains requirements related to: ■ Maximum eligible renovation costs ■ Mortgages used to finance eligible renovations ■ Mortgages used to pay off or pay down an Existing Debt

(a) Maximum eligible renovation costs (i) Mortgages not secured by Manufactured Homes The table below lists the maximum financed eligible renovation costs based on the Mortgage purpose for Mortgages not secured by Manufactured Homes. CHOICEReno eXPress® maximum financed eligible renovation costs for Mortgages not secured by Manufactured Homes The maximum financed eligible renovation costs for… Must not exceed Of the… Purchase transaction Mortgages 15% Lesser of the: ■ Sum of the purchase price of the property plus either the estimated total of the eligible renovation costs or payoff of a Property Assessed Clean Energy obligation, or ■ “As completed” value of the property as determined by the appraiser pursuant to the appraisal requirements in Section 4606.4 “No cash-out” refinance Mortgages used to finance eligible renovations 15% “As completed” value of the property as determined by the appraiser pursuant to the appraisal requirements in Section 4606.4 “No cash-out” refinance used to pay an Existing Debt 15% Appraised value of the property (ii) Mortgages secured by Manufactured Homes The table below lists the maximum financed eligible renovation costs based on the Mortgage purpose for Mortgages secured by Manufactured Homes. The maximum financed eligible renovation costs are applicable when the Mortgage is used to finance eligible renovations or an Existing Debt. CHOICEReno eXPress maximum financed eligible renovation costs for Mortgages secured by Manufactured Homes The maximum financed eligible renovation costs for… Must not exceed Of the… Purchase transaction Mortgages The lesser of $50,000 or 15% “As completed” value of the property as determined by the appraiser pursuant to the appraisal requirements in Section 4606.4 “No cash-out” refinance Mortgages

(b) Mortgages used to finance eligible renovations (i) Eligible renovations completed after the Note Date and prior to the Settlement Date When the CHOICEReno eXPress Mortgage proceeds are used to finance eligible renovations completed after the Note Date and prior to the Settlement Date, the requirements in the table below must be met. CHOICEReno eXPress Mortgage proceeds used to finance eligible renovations completed after the Note Date and prior to the Settlement Date Topic Requirement Appraisal report The appraisal report must be completed subject to completion or subject to repairs or alterations. Documentation of cost of eligible renovations The Seller/Servicer must obtain and retain in the Mortgage file copies of all invoices and/or receipts, as applicable, related to the cost of the eligible renovations. Completion escrow account The Seller must establish a completion escrow account for the eligible renovations. The Seller and the Borrower must execute a written escrow agreement detailing how the funds will be managed and disbursed. A copy of the escrow agreement must be retained in the Mortgage file. A contingency reserve is not required. Completion escrow account disbursements Funds in the completion escrow account may be used to reimburse the Borrower for the cost of materials purchased to complete the eligible renovations. The Seller/Servicer may not reimburse the Borrower for any self-performed labor. CHOICEReno eXPress Mortgage proceeds used to finance eligible renovations completed after the Note Date and prior to the Settlement Date Topic Requirement After all eligible disbursements have been made, any remaining funds must be applied: ■ If the Mortgage is delinquent, in accordance with the application of payment requirements in the Note and Security Instrument ■ If the Mortgage is not delinquent, to reduce the UPB Completion deadline All eligible renovations must be completed no more than 180 days after the Note Date. UAD Completion Report After completion of all eligible renovations, the Seller/Servicer must have the appraiser: ■ Inspect the Mortgaged Premises to verify the eligible renovations have been completed, and ■ Provide the Seller/Servicer with a UAD Completion Report that includes photographs of the completed improvements. The Seller/Servicer must retain the completion report in the Mortgage file. (ii) Eligible renovations completed after the Settlement Date When CHOICEReno eXPress Mortgage proceeds are used to finance eligible renovations completed after the Settlement Date, the requirements in the table below must be met. CHOICEReno eXPress Mortgage proceeds used to finance eligible renovations completed after the Settlement Date Topic Requirement Appraisal report The appraisal report must be completed subject to completion or subject to repairs or alterations. Documentation of cost of eligible renovations The Seller/Servicer must obtain and retain in the Mortgage file copies of all invoices and/or receipts, as applicable, related to the cost of the eligible renovations. Completion escrow account The Seller must establish a completion escrow account for the eligible renovations. The Seller and the Borrower must execute a written escrow agreement detailing how the funds CHOICEReno eXPress Mortgage proceeds used to finance eligible renovations completed after the Settlement Date Topic Requirement will be managed and disbursed. A copy of the escrow agreement must be retained in the Mortgage file. A contingency reserve is not required. Completion escrow account disbursements Funds in the completion escrow account may be used to reimburse the Borrower for the cost of materials purchased to complete the eligible renovations. The Seller/Servicer may not reimburse the Borrower for any self-performed labor. After all eligible disbursements have been made, any remaining funds must be applied: ■ If the Mortgage is delinquent, in accordance with the application of payment requirements in the Note and Security Instrument ■ If the Mortgage is not delinquent, to reduce the UPB Completion deadline All eligible renovations must be completed no more than 180 days after the Note Date. If the eligible renovations are not completed by the required completion date, the Seller/Servicer may request an extension through Loan Status Hub® as described in Section 4606.1(g)(iii). UAD Completion Report After the Settlement Date and upon completion of all eligible renovations, the Seller/Servicer must have the appraiser: ■ Inspect the Mortgaged Premises to verify the eligible renovations have been completed, and ■ Provide the Seller/Servicer with a UAD Completion Report that includes photographs of the completed eligible renovations. The Seller/Servicer must retain the completion report in the Mortgage file and submit the completion report to Loan Status Hub. Mortgage insurance The mortgage insurance must be maintained in compliance with the master policy and applicable guides of the selected MI. Title insurance The title to the Mortgaged Premises must not be impaired or adversely affected by the delayed completion of all eligible renovations.

(c) Mortgages used to pay off or pay down an Existing Debt Existing Debt includes: (i) Energy/water efficiency debt Debt that financed energy and/or water efficient eligible renovations completed prior to the Note Date, provided the following requirements are met: ■ All eligible renovations financed by the debt must be completed prior to the Note Date of the CHOICEReno eXPress Mortgage ■ All eligible renovations financed by the debt must be completed prior to the appraisal, which must reflect these eligible renovations having been made. The appraisal report obtained in accordance with CHOICEReno eXPress Mortgage appraisal requirements in Section 4606.4 must only be completed subject to completion of any proposed eligible renovations also being financed with the CHOICEReno eXPress Mortgage. ■ The Mortgage file must include all relevant documentation (e.g., invoices, receipts, payoff statement) of the eligible renovations completed before the Note Date and their costs ■ Any remaining balance of the Existing Debt must be included in the calculation of the monthly debt payment-to-income ratio. If the remaining balance is reamortized, the Seller/Servicer must obtain and retain in the Mortgage file sufficient documentation evidencing the new payment, including a copy of the new promissory note, if applicable. (ii) Short-term financing Short-term financing for eligible renovations (including the addition or renovation of an ADU) completed prior to the Note Date, provided the following requirements are met: ■ The CHOICEReno eXPress Mortgage is not secured by a Manufactured Home ■ The Borrower on the CHOICEReno eXPress Mortgage must be the Borrower on, and obligated to repay, the short-term financing. Exceptions: ❑ A Borrower may be omitted in the event of death or divorce, or ❑ A Borrower who is a Related Person may be added, provided that all Borrowers on the CHOICEReno eXPress Mortgage are owner-occupants of the Mortgaged Premises and considered in the underwriting of the CHOICEReno eXPress Mortgage ■ All eligible renovations financed by the short-term financing must be completed prior to the Note Date of the CHOICEReno eXPress Mortgage with no outstanding obligations related to such financing ■ All eligible renovations financed by the short-term financing must be completed prior to the appraisal, which must reflect these eligible renovations having been made. The appraisal report obtained in accordance with CHOICEReno eXPress Mortgage appraisal requirements in Section 4606.4 must only be completed subject to completion of any proposed eligible renovations also being financed with the CHOICEReno eXPress Mortgage. ■ The Mortgage file must contain copies of all relevant documentation, including: ❑ The short-term financing agreement ❑ Sufficient documentation (e.g., purchase contracts, plans and specifications, receipts, invoices, lien waivers, etc.) on which to validate the actual cost of all eligible renovations financed by the short-term financing ❑ A document clearly showing the calculation of the short-term financing ❑ The Settlement/Closing Disclosure Statement or an alternative form required by law for the closing of the short-term financing ❑ The payoff statement (iii) Payoff of a PACE obligation Payoff of a PACE obligation, provided the requirements in Section 4606.1(f) are met. When CHOICEReno eXPress Mortgage proceeds are used to pay off or pay down Existing Debt, the requirements in the table below must be met. CHOICEReno eXPress Mortgage proceeds used to pay off or pay down an Existing Debt Topic Requirement Appraisal report An interior and exterior inspection appraisal report is required. The appraisal report must reflect all eligible renovations that were made. Use of proceeds The maximum payment towards an Existing Debt is limited to 15% of the appraised value of the Mortgaged Premises. CHOICEReno eXPress Mortgage proceeds used to pay off or pay down an Existing Debt Topic Requirement Mortgage file documentation The Mortgage file must include documentation (e.g., invoices, receipts) of the eligible renovations completed before the Note Date and their costs. Settlement/Closing Disclosure Statement requirements The Settlement/Closing Disclosure Statement must reflect that the proceeds were paid directly to the holder of the Existing Debt. The total amount of proceeds disbursed to the Borrower at closing must not exceed the maximum amount allowed pursuant to the “no cash-out” refinance Mortgage requirements in Section 4301.4.