Freddie Mac Single-Family Seller/Servicer Guide 8203.3 — Borrower-requested cancelation of Borrower- paid mortgage insurance on a Non-HPA Mortgage

This section contains requirements related to: ■ Borrower-requested cancelation of Borrower-paid mortgage insurance based on the original value ■ Borrower-requested cancelation of Borrower-paid mortgage insurance based on the current value For Borrower-requested cancelation of Borrower-paid mortgage insurance, unless otherwise canceled pursuant to applicable law, the Seller/Servicer must cancel such mortgage insurance when the Borrower and the Non-HPA Mortgage meet the requirements of Section 8203.3(a) or 8203.3(b), respectively. In addition to processing and/or responding to Borrowers’ written or verbal requests to cancel mortgage insurance in accordance with this section, the Seller/Servicer also may: ■ Systematically identify all Mortgages that the Seller/Servicer services for Freddie Mac that may be close to, or have reached, the applicable mortgage insurance cancelation point set forth below; and ■ Notify the Borrowers of such Mortgages of next steps, if any, that must be taken to determine if mortgage insurance may be canceled Upon obtaining an eligible Borrower’s verbal and/or written request or affirmation, the Seller/Servicer must cancel the related mortgage insurance upon ascertaining that all applicable conditions have been met.

(a) Borrower-requested cancelation of Borrower-paid mortgage insurance based on the original value The table below lists the requirements for Borrower-requested cancelation of Borrower-paid mortgage insurance based on the original value (as “value” is defined in Section 4203.1): Requirements for Borrower-requested cancelation of Borrower-paid mortgage insurance based on the original value* Cancelation point Based on the Mortgage’s current UPB and the original value, the loan-to-value (LTV) ratio must be 65% or less. Note: As opposed to the conditions set forth in row 1, Cancelation point, of Section 8203.3(b), there is no required minimum period having elapsed since the Origination Date of a Mortgage when determining the cancelation point. Evidence of value The Seller/Servicer must warrant that the original value of the Mortgaged Premises, at a minimum, supports the LTV ratio required to cancel mortgage insurance. Payment history The Borrower’s payment history must show: ■ The Mortgage is current ■ There was no payment 30 days or more past due in the preceding 12 months (or since the Origination Date if the Mortgage was originated in the past 12 months); and ■ There was no payment 60 days or more past due in the preceding 24 months (or since the Origination Date if the Mortgage was originated in the past 24 months) Pursuant to Section 8203.1(f) regarding Borrowers impacted by an Eligible Disaster, any Delinquency that is a direct result of the Mortgage being subject to a disaster-related forbearance plan and, following the disaster-related forbearance, transition to a relief or workout option to cure the Delinquency (e.g., repayment plan or Trial Period Plan) in accordance with Section 8404.1(f) or other Purchase Documents, must be considered an exception to the payment history requirements set forth above. Note: The reference to a “preceding” period in the payment history requirements set forth above means the specified time period that immediately preceded the later of: ■ The date on which the required LTV ratio was reached, or ■ The date on which the Borrower submits the request to cancel mortgage insurance Other conditions In addition to the payment history requirements set forth in row 3 of this table, Payment history, as they relate to Delinquency, there must be no other default under the terms of the Security Instrument in the last 12 months. Other defaults under the terms of the Security Instrument may include, but are not limited to: ■ An impermissible Transfer of Ownership that requires acceleration of the debt under the terms of Chapter 8406 and the Security Instrument ■ The Borrower’s failure to pay taxes, ground rents, assessments and other charges requiring payment under the Security Instrument; or ■ The Borrower’s failure to maintain the Mortgaged Premises in accordance with the Security Instrument *”Value” is defined in Section 4203.1.

(b) Borrower-requested cancelation of Borrower-paid mortgage insurance based on the current value The table below lists the requirements for Borrower-requested cancelation of Borrower-paid mortgage insurance based on the current value: Requirements for Borrower-requested cancelation of Borrower-paid mortgage insurance based on the current value* Cancelation point Based on the Mortgage’s current UPB and the current value, the LTV ratio must be: ■ 65% or less if the Mortgage is seasoned at least 2 years The minimum two-year seasoning requirement is waived if the Servicer determines the increased market value of the Mortgaged Premises since the Origination Date of the Mortgage is due to substantial improvements; the LTV ratio must be 65% or less. Regarding canceling mortgage insurance because of substantial improvements to the Mortgaged Premises, the following conditions must be met: ■ The market value of the Mortgaged Premises must be calculated using the current market value estimate in a BPO or an appraisal that is ordered and obtained in accordance with row 2 of this table, Evidence of value, and prepared after the substantial improvements have been completed ■ The substantial improvements must conform to local zoning and building codes; and ■ The BPO or appraisal must state the specific nature, extent and cost of the improvements made and the effect of the improvements on the current estimated market value Note: The reference to “substantial improvements” in the cancelation point requirements set forth above means that the improvements, made since the Origination Date, were any type of renovation that substantially extended the useful life of the Mortgaged Premises. Examples of “substantial improvements” include, but are not limited to: ■ Significant structural alterations (including addition of square footage) ■ Construction requiring permits ■ Adding new components/appliances that previously didn’t exist (e.g., adding a bathtub, hardwood flooring, central air conditioning) ■ Replacing components/appliances with energy-efficient versions Repairs made to keep the Mortgaged Premises maintained and fully functional (e.g., replacing roofing/flooring/appliances with same materials) are not considered “substantial improvements.” Evidence of value At the Borrower’s expense, and performed no later than 120 days after the date on which the Borrower submits a request to cancel mortgage insurance, the Seller/Servicer must verify the current value by one of the following methods: ■ A new BPO ordered and obtained through BPOdirect®, unless applicable law requires that an appraisal be used or the Seller/Servicer determines that an appraisal is in the Borrower’s best interest (e.g., at the option of the Borrower). The BPO must be an interior and exterior BPO. (Refer to Sections 2406.1 and 9202.4(b) for details regarding Freddie Mac’s process to obtain a property value.) ■ If applicable law requires that an appraisal be used or the Seller/Servicer determines that an appraisal is in the Borrower’s best interest, a new appraisal with an interior and exterior inspection. The Seller/Servicer may order and obtain the appraisal either directly from Freddie Mac through BPOdirect or from an appraiser of its choice. If a Seller/Servicer does not obtain the appraisal directly from Freddie Mac, then the Seller/Servicer must ensure that the appraisal complies with the requirements of Topic 5600. Note: Prior to ordering a BPO or an appraisal in conjunction with a request to cancel mortgage insurance on the basis of substantial improvements to the Mortgaged Premises (see row 1 of this table, Cancelation point), the Seller/Servicer should request a list of substantial improvements, including the specific nature, cost and, when applicable, verification that the improvements conform to local zoning and building codes, from the Borrower and forward this list to [email protected] when ordering a BPO through BPOdirect. If the Servicer is unable to obtain this information from the Borrower, or otherwise believes the information provided does not support a substantial improvement of the Mortgaged Premises (e.g., expenses that maintain the existing property), the Servicer should not order a BPO as the request will not meet the requirements of Chapter 8203. Payment history The Borrower’s payment history must show: ■ The Mortgage is current ■ There was no payment 30 days or more past due in the preceding 12 months (or since the Origination Date if the Mortgage was originated in the past 12 months); and ■ There was no payment 60 days or more past due in the preceding 24 months (or since the Origination Date if the Mortgage was originated in the past 24 months) Pursuant to Section 8203.1(f) regarding Borrowers impacted by an Eligible Disaster, any Delinquency that is a direct result of the Mortgage being subject to a disaster-related forbearance plan and, following the disaster-related forbearance, transition to a relief or workout option to cure the Delinquency (e.g., repayment plan or Trial Period Plan) in accordance with Section 8404.1(f) or other Purchase Documents, must be considered an exception to the payment history requirements set forth above. Note: The reference to a “preceding” period in the payment history requirements set forth above means the specified time period that immediately preceded the later of: ■ The date on which the required LTV ratio was reached, or ■ The date on which the Borrower submits the request to cancel mortgage insurance Other conditions In addition to the payment history requirements set forth in row 3 of this table, Payment history, as they relate to Delinquency, there must be no other default under the terms of the Security Instrument in the last 12 months. Other defaults under the terms of the Security Instrument may include, but are not limited to: ■ An impermissible Transfer of Ownership that requires acceleration of the debt under the terms of Chapter 8406 and the Security Instrument ■ The Borrower’s failure to pay taxes, ground rents, assessments and other charges requiring payment under the Security Instrument; or ■ The Borrower’s failure to maintain the Mortgaged Premises in accordance with the Security Instrument *”Value” is defined in Section 4203.1.