Freddie Mac Single-Family Seller/Servicer Guide 8302.1 — Custodial Account requirements and management

This section contains information related to: ■ Custodial Accounts required ■ Opening Custodial Accounts ■ Custodial Account and custodial clearing account designation requirements ■ Custodial Account documentation requirements ■ What funds to deposit to the Custodial Accounts ■ When to deposit funds to the Custodial Account ■ Administering and reconciling Custodial Accounts ■ Honoring sight drafts

(a) Custodial Accounts required For all Mortgages serviced for Freddie Mac, the Servicer must: ■ Open and maintain a Custodial Account for Principal and Interest Payments and a separate Custodial Account for Escrow Funds for each Seller/Servicer number ■ Open these accounts in accordance with the requirements of this section and use these accounts exclusively for the Mortgages it services for Freddie Mac ■ Hold any funds the Servicer receives for Freddie Mac-owned Mortgages in a Custodial Account at all times ■ Ensure that the accounts are adequately funded at all times and do not carry a negative balance, even if permitted by the depository institution ■ Maintain these funds in their respective Custodial Accounts until Freddie Mac drafts the funds or the Servicer pays for allowed Mortgage expenses with the Escrow Funds in the Escrow Custodial Account (i) Principal and Interest Custodial Account The Servicer must open a Principal and Interest Custodial Account for each Seller/Servicer number to deposit Principal and Interest Payments solely for the Mortgages the Servicer services for Freddie Mac. The Servicer has the option to open more than one Principal and Interest Custodial Account. If the Servicer opens more than one Principal and Interest Custodial Account, the Servicer must designate one of them as the primary account from which Freddie Mac will draft principal and interest payments and payoffs. Alternatively, the Servicer may open a separate Principal and Interest Disbursement Clearing Custodial Account. Refer to Section 8302.2(a) for Principal and Interest Disbursement Clearing Account requirements. Note: See Section 8304.2(b) for information on maintaining the Principal and Interest Custodial Account. (ii) Escrow Custodial Account The Servicer must hold Escrow Funds in a separate Escrow Custodial Account for each Seller/Servicer number. Even if the Servicer does not collect Escrow Funds, the Servicer must open an Escrow Custodial Account in the event that the Servicer receives funds for insurance claims proceeds, partial payments or buydown funds. In addition, although Freddie Mac allows the Servicer to hold buydown funds in an Escrow Custodial Account, the Servicer has the option to open a separate Buydown Custodial Account for buydown funds. Note: See Section 8304.2(c) for information on maintaining the Escrow Custodial Account.

(b) Opening Custodial Accounts The Servicer must open and maintain all Custodial Accounts at an Eligible Depository. If the Servicer’s institution is an Eligible Depository that meets the requirements contained in this chapter, the Servicer may open and maintain Custodial Accounts within its own financial institution. The Servicer must indemnify Freddie Mac for and hold it harmless from any loss, damage or expenses (including court costs and attorney fees) that Freddie Mac sustains as a direct or indirect result of the financial institution’s bankruptcy, receivership, liquidation or insolvency. Note: Refer to Sections 8302.2(b) and 8302.2(c) for Eligible Depositories. The Servicer agrees to safeguard at all times the funds it maintains in Custodial Accounts on behalf of Freddie Mac. Even if the Servicer has complied with all Guide and Purchase Document requirements, Servicer agrees to indemnify and hold Freddie Mac harmless for any loss of funds deposited in a Custodial Account and any damages Freddie Mac suffers because of delays in obtaining the funds from a Custodial Account. If the Servicer itself is a depository institution that meets the requirements contained in this chapter for an Eligible Depository or the Servicer is a subsidiary of or under common ownership of such a depository institution, the Servicer may open and maintain a custodial clearing account and Custodial Accounts within such depository institution. The Servicer may initially deposit Freddie Mac funds into one or more custodial clearing accounts prior to transferring such funds to the appropriate Custodial Account, and the Servicer may record that initial deposit in a general ledger account or internal operating account for record-keeping purposes, provided that: ■ The Servicer opens separate Custodial Accounts as otherwise required under the Guide and applicable Purchase Documents ■ The institution at which any custodial clearing accounts are maintained meets the requirements to be an Eligible Depository ■ The custodial clearing account is titled in accordance with Section 8302.1(c)(v); and ■ The Servicer and the institution maintain adequate records and audit trails to support all credits to and charges from the Borrower’s payment records and the custodial clearing accounts and separate Custodial Accounts Each Custodial Account must be a Demand Deposit Account or Interest-Bearing Deposit Account. The Servicer’s use of an Interest-Bearing Deposit Account is conditioned upon Freddie Mac’s ability to present a sight draft and draft monthly principal and interest payments and payoffs when due. If a Custodial Account limits the number of withdrawals or requires prior notice for withdrawals, the Servicer is responsible for any payments or penalties that result from excessive withdrawals or withdrawals where advance notice is insufficient. The Servicer must maintain its books and records in good faith and in the regular course of business, and the Custodial Accounts and the funds held therein must be free and clear of any and all liens or claims of others, including security agreements. If the Custodial Accounts are maintained in an Eligible Depository that is an FDIC-Insured Depository or an NCUSIF-Insured Depository, then: ■ The Servicer’s books and records must reflect that the funds in the Custodial Accounts are held in a custodial capacity for the benefit of Freddie Mac and/or other specified parties and must identify the respective interests of all such persons ■ The Servicer must maintain the Custodial Accounts and its books and records in accordance with all requirements for full federal insurance coverage The Custodial Accounts must permit Freddie Mac to directly draft funds for principal and interest payments and payoffs.

(c) Custodial Account and custodial clearing account designation requirements The Servicer must designate Custodial Accounts exactly as stated in subsections (i) through (iv) below and custodial clearing accounts stated in subsection (v) below. If the Servicer has an approved Servicing Agent relationship, the Subservicer (Servicing Agent) name must be captured within the account designation along with the Servicer’s name. The Servicer’s books and records pertaining to Custodial Accounts and custodial clearing accounts must comply with these account designation requirements at all times. The Servicer represents and warrants to and covenants and agrees with Freddie Mac that all books and records of the Eligible Depository pertaining to such Custodial Accounts and custodial clearing accounts shall at all times comply with requirements in subsections (i) through (v) below. (i) Principal and Interest Custodial Accounts The following account designation must be used: “(Name of Depositor/Servicer), as Custodian and/or bailee for Federal Home Loan Mortgage Corporation and/or various owners of interests in mortgages and/or mortgage-related securities and/or various mortgagors.” Alternatively, a Principal and Interest Custodial Account may be designated by the following abbreviated designation: “(Name of Depositor/Servicer), Freddie Mac P & I Custodial Account.” However, if the abbreviated designation is used, then for all purposes of the Purchase Documents and with respect to all rights and interests of Freddie Mac and/or various owners of interests in Mortgages and/or Mortgage-related securities and/or mortgagors, the abbreviated account designation shall be deemed to be the same as the unabbreviated account designation and shall be deemed to confer upon Freddie Mac and such persons the same rights and interests with respect to the Principal and Interest Custodial Account and the funds deposited or held therein. (ii) Principal and Interest Disbursement Clearing Custodial Accounts The following account designation must be used: “(Name of Depositor/Servicer), as custodian and/or bailee for Federal Home Loan Mortgage Corporation and/or various owners of interests in mortgages and/or mortgage-related securities and/or various mortgagors.” Alternatively, a Principal and Interest Disbursement Clearing Custodial Account may be designated by the following abbreviated designation: “(Name of Depositor/Servicer), Freddie Mac P & I Clearing Custodial Account.” However, if the abbreviated designation is used, then for all purposes of the Purchase Documents and with respect to all rights and interests of Freddie Mac and/or various owners of interests in Mortgages and/or Mortgage-related securities and/or mortgagors, the abbreviated account designation shall be deemed to be the same as the unabbreviated account designation and shall be deemed to confer upon Freddie Mac and such persons the same rights and interests with respect to the Principal and Interest Disbursement Clearing Custodial Account and the funds deposited or held therein. (iii) Escrow Custodial Accounts The following account designation must be used: “(Name of Depositor/Servicer), as trustee and/or custodian for Federal Home Loan Mortgage Corporation and various mortgagors, respectively.” Alternatively, an Escrow Custodial Account may be designated by the following abbreviated designation: “(Name of Depositor/Servicer), Freddie Mac Escrow Custodial Account.” However, if the abbreviated designation is used, then for all purposes of the Purchase Documents and with respect to all rights and interests of Freddie Mac and/or mortgagors, the abbreviated account designation shall be deemed to be the same as the unabbreviated account designation and shall be deemed to confer upon Freddie Mac and such persons the same rights and interests with respect to the Escrow Custodial Account and the funds deposited or held therein. (iv) Buydown Custodial Accounts If an optional Buydown Custodial Account is used in accordance with the provisions of Section 8302.1(a)(ii), the following account designation must be used: “(Name of Depositor/Servicer), as trustee and/or custodian of mortgage loan subsidy buydown funds for Federal Home Loan Mortgage Corporation and various mortgagors, respectively.” Alternatively, a Buydown Custodial Account may be designated by the following abbreviated designation: “(Name of Depositor/Servicer), Freddie Mac Buydown Custodial Account.” However, if the abbreviated designation is used, then for all purposes of the Purchase Documents and with respect to all rights and interests of Freddie Mac and/or mortgagors, the abbreviated account designation shall be deemed to be the same as the unabbreviated account designation and shall be deemed to confer upon Freddie Mac and such persons the same rights and interests with respect to the Buydown Custodial Account and the funds deposited or held therein. (v) Custodial clearing accounts Servicers using custodial clearing accounts must title the account to indicate it is custodial in nature and include at a minimum “for the benefit of the Federal Home Loan Mortgage Corporation” in the account title.

(d) Custodial Account documentation requirements The Servicer must submit the following documentation to Freddie Mac upon opening the Servicer’s Custodial Accounts at an Eligible Depository. If the Servicer has an approved Servicing Agent relationship, the letter agreements should be completed by the Servicer or Servicing Agent that opened the Fund Custodian accounts on behalf of the Servicer. The Servicer Tax ID information provided on the letter agreement would depend on whether the Servicer or Servicing Agent opened the Fund Custodian accounts. Freddie Mac bases the required documentation on whether the Servicer opens the accounts at its own financial institution or at another Eligible Depository. (i) Custodial Accounts opened at the Servicer’s own financial institution If the Servicer is an Eligible Depository and opens Custodial Accounts at its own financial institution, the Servicer must complete, execute and return the following documentation to Freddie Mac (see Directory 1) for each Custodial Account: ■ Form 1059SF, Letter Agreement for Single-Family Principal and Interest, or P & I Disbursement Clearing Custodial Account ■ Form 1060SF, Letter Agreement for Single-Family Buydown or Escrow Custodial Account ■ Form 1060CR, Letter Agreement for Single-Family Custodial Account for Renovation Funds The Servicer must also send Freddie Mac a copy of the bank statement or signature card for each account, designated as required in Section 8302.1(c). The documentation must identify the Eligible Depository at which the account is maintained and the bank account number. (ii) Custodial Accounts opened at another Eligible Depository If the Servicer opens Custodial Accounts at an Eligible Depository other than its own financial institution, both the Servicer and the depository’s representative must complete, execute and return the following documentation to Freddie Mac (see Directory 1) for each Custodial Account: ■ Form 1057SF, Letter Agreement for Servicer’s Single-Family Principal and Interest, or P & I Disbursement Clearing Custodial Account ■ Form 1058SF, Letter Agreement for Servicer’s Single-Family Buydown or Escrow Custodial Account ■ Form 1058CR, Letter Agreement for Seller/Servicer’s Single-Family Custodial Account for Renovation Funds The Servicer must also send Freddie Mac a copy of the bank statement or signature card for each account, designated as required in Section 8302.1(c). The documentation must identify the Eligible Depository at which the account is maintained and the bank account number. (iii) Additional requirements For each Seller/Servicer number for the Principal and Interest Custodial Account or Principal and Interest Disbursement Clearing Custodial Account the Servicer selects as its remittance drafting account according to the requirements of Sections 8302.1(a)(i) and 8302.2(a)(i), Freddie Mac requires the Servicer to submit a copy of the Letter of Authorization (Exhibit 58, Draft Letter of Authorization), printed on the Servicer’s institution’s letterhead, to Freddie Mac (see Directory 1). The sample letter included in Exhibit 58 provides the Servicer with the information that must be included in the letter of authorization. Even if the Servicer opens its Custodial Account at its own financial institution, the Servicer must execute this letter. The depository where the Servicer opened and maintains the account must keep a copy of this letter.

(e) What funds to deposit to the Custodial Accounts The Servicer must deposit the following funds for Mortgages in which Freddie Mac holds an ownership interest to a Principal and Interest Custodial Account or an Escrow Custodial Account. The Servicer must not deposit funds from Mortgages that Freddie Mac does not own or from other investors into the Custodial Accounts that the Servicer maintains to hold funds for Freddie Mac’s Mortgages. (i) Principal and Interest Custodial Accounts The Servicer must deposit only funds due to Freddie Mac into a Principal and Interest Custodial Account. As an exception, the Servicer may deposit the full Principal and Interest Payment received into the Principal and Interest Custodial Account and subsequently withdraw its Servicing fee. Following is a list of the funds the Servicer must deposit into the Principal and Interest Custodial Account for Freddie Mac’s Mortgages: 1. Principal and Interest Payments on all of Freddie Mac’s Mortgages whether received from the Borrower or paid on the Borrower’s behalf, applied from the buydown account or advanced by the Servicer 2. Biweekly payments that require biweekly amortization based on the Note terms of Mortgages originally sold to Freddie Mac as biweekly 3. Principal curtailments 4. Payoff proceeds, including those from short sales and third-party foreclosure sales 5. Prepayment penalties, if applicable 6. Repurchase proceeds (ii) Escrow Custodial Accounts The Servicer must deposit all Escrow Funds for Freddie Mac’s Mortgages into an Escrow Custodial Account opened and maintained according to Freddie Mac’s requirements. Following is a list of the funds that the Servicer must deposit into the Escrow Custodial Account for Freddie Mac’s Mortgages: 1. All Escrow Funds paid by or on behalf of the Borrower or advanced by the Servicer 2. Funds deposited by the Servicer on a Borrower’s behalf such as property insurance claim proceeds 3. Payments held as unapplied or in suspense pending proper distribution such as partial payments and biweekly payments from plans that allow for biweekly collection of payments on monthly amortizing Mortgages 4. Buydown funds scheduled for future application as part of a Borrower’s Principal and Interest Payment. The Servicer may also choose the option of maintaining buydown funds separately as provided in Section 8302.1(a)(ii).

(f) When to deposit funds to the Custodial Account Servicers that use a custodial clearing account must deposit all funds the Servicer receives for Freddie Mac’s Mortgages into the custodial clearing accounts on the day the Servicer receives the funds. Servicers must deposit all funds the Servicer receives for Freddie Mac’s Mortgage into Custodial Accounts no later than the first Business Day after the Servicer receives them. However, if the Servicer uses a lockbox service or other service to collect payments, the Servicer must apply the payment and deposit the funds to Freddie Mac’s corresponding Custodial Accounts no later than the second Business Day after the day on which the lockbox or other service received the payment. Other than a Borrower’s payment, the Servicer must make all additional required deposits to the Custodial Accounts as referenced in Section 8302.1(e) so the funds are available by the remittance drafting or Escrow disbursement due date.

(g) Administering and reconciling Custodial Accounts The Servicer must reconcile all of Freddie Mac’s Custodial Accounts on a monthly basis. Refer to Chapter 8304 for Freddie Mac’s administration and reconciliation requirements.

(h) Honoring sight drafts The Eligible Depository the Servicer selects must honor sight drafts Freddie Mac may present at any time against any Custodial Account that the Servicer maintains. Freddie Mac’s authorized officer, employee, representative, agent or attorney must sign the sight draft. Freddie Mac will identify the authorized individual in Form 1061, Certificate of Incumbency and Authority to Draft Against Custodial Accounts, or a similar form containing identical information, including a photocopy or facsimile copy. The sight draft Freddie Mac presents may be an original; a photographic or facsimile copy of Form 1062, Sight Draft; or a similar form containing identical information. Honoring such a sight draft is one of the requirements in the letter agreements referenced in Section 8302.1(d)(i) or 8302.1(d)(ii).