Freddie Mac Single-Family Seller/Servicer Guide 8303.4 — Error management and reconciliation in reporting

This section contains requirements related to: ■ Correcting reporting errors ■ Monthly portfolio reconciliation ■ Freddie Mac’s reports to Servicers of discrepancies ■ Daily edit reports ■ Monthly reports provided to Servicer ■ Reports to reconcile monthly activity

(a) Correcting reporting errors The Servicer must monitor all Edit Error reports (Edits to be Cleared, System Cleared Edits, Warning and Loan Level Missing) provided by Freddie Mac daily. If the Servicer discovers an error after it has transmitted its accounting reporting information, the Servicer must take immediate action to: ■ Correct the source of the error ■ Transmit a revision to Freddie Mac that reflects the Borrower’s payment activity or disposition of the Mortgage If unable to resolve the issue, the Servicer should call Freddie Mac (see Directory 7) for instructions on how to correct the information. Servicers may refer to the Investor Reporting Training webpage for a detailed description of edit codes. The Edit Error reports may be accessed through the Loan Level Reporting tool (see Exhibit 88, Servicing Tools). If the Servicer fails to send Freddie Mac the appropriate information to clear any reporting errors within the applicable time frame, Freddie Mac will make those corrections on the Servicer’s behalf subject to the applicable fees. If the Servicer reports a payoff to Freddie Mac in error, the Servicer must transmit a revision within the same Accounting Cycle in which the Servicer erroneously reported it. If the Servicer reports a payoff to Freddie Mac in error and the Servicer does not reverse it within the same Accounting Cycle, Freddie Mac will not be able to reactivate the Mortgage for the Servicer. The Servicer must advance its own funds which Freddie Mac will draft to liquidate the Mortgage. The Servicer must maintain accurate records for Freddie Mac’s review and inspection of the actual principal reductions and adjustments made to correct any reporting errors.

(b) Monthly portfolio reconciliation Within 30 days after the end of each Accounting Cycle, the Servicer must reconcile each data element included in the monthly trial balance report (i.e., interest bearing UPB, non-interest bearing UPB, DDLPI, principal and interest constant, Note Rate and Accounting Net Yield (ANY)) to its internal records. Servicers must prepare a separate monthly reconciliation for each unique Seller/Servicer number on either the online version of Form 75, Reconciliation of Mortgage Portfolio, or a copy that is an exact replica of the form. Upon Freddie Mac’s request, the Servicer must be able to provide Freddie Mac with a copy of the completed Form 75, together with any supporting documentation, for up to one year from the date of the related reconciliation worksheet. All documentation must be received by Freddie Mac no later than the requested due date. Refer to the Form 75 Reconciliation for Mortgage Portfolio Tutorial available on the Investor Accounting Training webpage for additional information to complete Form 75.

(c) Freddie Mac’s reports to Servicers of discrepancies Freddie Mac will process the data the Servicer transmits, compare the data daily against Freddie Mac’s database and notify the Servicer of any discrepancies on the Edit Reports daily. The Servicer is responsible for ensuring the accuracy of the data the Servicer submits to Freddie Mac. If applicable, any discrepancies identified by Freddie Mac prior to the P&I Determination Date must be resolved on or before the P&I Determination Date. Discrepancies identified after the P&I Determination Date must be resolved prior to the end of the current Accounting Cycle. Note: Refer to Sections 8303.4(a) and 8303.4(c) for additional information.

(d) Daily edit reports The Servicer must monitor the daily edit reports provided by Freddie Mac through the Freddie Mac Loan Level Reporting tool available via Freddie Mac Gateway® (see Exhibit 88) and promptly correct the errors indicated on the reports (refer to Section 8303.4(b)). Failure to promptly correct the errors indicated on the reports may negatively impact the Servicer’s Servicer Success Scorecard. Note: See Section 3501.2 for additional information about the Servicer Success Scorecard. The daily edit reports provided by Freddie Mac are: ■ Freddie Mac Edits to be Cleared Report: This daily report identifies loan-level transaction edits that prevent Freddie Mac from processing transactions the Servicer has reported. The Servicer must take immediate action to resolve the edit errors and transmit revised transactions to Freddie Mac that reflect the Borrower’s payment activity. ■ Freddie Mac System Cleared Edits Report: This daily report identifies loan-level transaction edits that Freddie Mac’s system changed and continued processing. The Servicer must review and determine the cause of the edit and take action, if necessary, by the end of the current Accounting Cycle to prevent the edit from recurring in future Accounting Cycles. ■ Warning Report: This daily report identifies loan-level transactions that were accepted by Freddie Mac that don’t require the Servicer to take action but for which Freddie Mac recommends a review. Servicers must use this report to determine whether the correct loan transaction was processed. If the correct loan transaction was not processed, the Servicer must submit a revision. ■ Loan Level Missing Report: This report identifies Mortgages missing from the Servicer’s monthly loan-level transactions. This includes any Mortgage: ❑ That the Servicer did not report to Freddie Mac ❑ With unresolved edits on the Edits to be Cleared Report ❑ Reported to Freddie Mac with an invalid Freddie Mac loan number, and/or ❑ For which Freddie Mac received a transaction but the Mortgage was rejected by Freddie Mac’s system Freddie Mac will generate this report daily beginning two Business Days prior to the P&I Determination Date or when Freddie Mac processes 75% of the loan-level transactions for Mortgages the Servicer services for Freddie Mac, whichever occurs first. Servicers must analyze this report and ensure that any Mortgage due to be reported to Freddie Mac is reported no later than 2:00 a.m. Eastern Time on the day following the P&I Determination Date. ■ Response File: This report is an outbound file from Freddie Mac that is published multiple times per day and provides loan level details for each Loan Level Reporting file processed. This file contains both the successful and unsuccessful transactions. The Servicer will need a secure user ID and password to retrieve these reports through the Loan Level Reporting tool.

(e) Monthly reports provided to Servicer Freddie Mac provides to the Servicer the three monthly reports described below that the Servicer must use to reconcile the amounts reported to Freddie Mac and drafted by Freddie Mac from the Servicer’s designated Custodial Account. The Servicer must review the following reports timely and notify Freddie Mac in writing (see Directory 7) of any errors or discrepancies between its data and the report: 1. Loan Reconciliation Difference Report: Freddie Mac will make available to the Servicer the final Loan Reconciliation Difference Report through the Freddie Mac Loan Level Reporting tool (see Exhibit 88) on the second Business Day of the month following the end of the Accounting Cycle. This report provides the Servicer with detailed information about transactions that: ■ Freddie Mac processed differently than the Servicer reported ■ Freddie Mac added manually ■ The Servicer reported as revisions that Freddie Mac did not process ■ The Servicer reported as revisions that Freddie Mac did process ■ The Servicer reported more than once during the Accounting Cycle ■ The Servicer reported with an invalid Freddie Mac loan number ■ The Servicer reported on Mortgages belonging to another Servicer The differences identified on this report may be outstanding items on the Servicer’s designated Custodial Account reconciliation or adjustments that the Servicer needs to make to the Servicer’s cash remittance. 2. Monthly Account Statement (MAS): Freddie Mac will make available to the Servicer the final MAS through the Loan Level Reporting tool on the second Business Day of the month following the end of the Accounting Cycle. This report summarizes the total amount due to Freddie Mac as of the Accounting Cycle. The ending balance on the MAS includes principal and interest due to Freddie Mac, amounts drafted from the Servicer and adjustments made by Freddie Mac. The ending balance is the amount outstanding (pending Freddie Mac’s draft) and non-sufficient funds, if applicable, due to Freddie Mac as of the end of the Accounting Cycle. The Servicer must reconcile the ending balance to the Principal and Interest Custodial Account balance using Form 59, Principal and Interest Custodial Account Reconciliation Worksheet—Monthly Account Statement, in accordance with Freddie Mac’s requirements in Sections 8304.4(a) through 8304.4(e). If the Servicer disagrees with the ending balance on the MAS, the Servicer must notify Freddie Mac in writing (see Directory 7) within 90 days of the end of the Accounting Cycle. Call Customer Service at 800-FREDDIE for further information. 3. Draft Report: The Draft Report will provide summary and loan-level detail of the amounts due and offsetting adjustments associated with revisions, based on Servicer reporting. A preliminary Draft Report will be available in the Cash Manager tool (see Exhibit 88) and updated based on daily reporting. A final version of the Draft Report for the current Accounting Cycle will be available in the Cash Manager tool on the morning after the P&I Determination Date. The Draft Report details are as follows: ■ If the principal and forecasted scheduled interest are reported on or prior to the P&I Determination Date, then: ❑ The principal will be reflected on the Draft Report for the current Accounting Cycle ❑ The forecasted scheduled interest will be reflected on the Draft Report for the next Accounting Cycle ■ If the principal and forecasted scheduled interest are reported after the P&I Determination Date, then the principal and forecasted scheduled interest amounts will be reflected on the Draft Report for the next Accounting Cycle ■ If a principal and interest revision in the current Accounting Cycle is reported on or before the P&I Determination Date, then: ❑ An offsetting principal adjustment will be reflected on the same day as the original transaction ❑ An offsetting interest adjustment will be reflected on the same day as the original transaction ■ If a principal and interest revision is reported after the P&I Determination Date, then an offsetting principal and interest adjustment will be reflected on the Draft Report for the next Accounting Cycle ■ If a payoff is reported by the Payoff Determination Date, the payoff transaction will be reflected on the Draft Report and drafted on the fifth Business Day after the Payoff Date ■ If a payoff is reported after the Payoff Determination Date, the payoff transaction will be reflected on the Draft Report and drafted on the second Business Day after the payoff transaction is successfully reported to Freddie Mac ■ If a payoff is revised prior to the Payoff Determination Date, an offsetting adjustment to the previously accepted payoff amount will be reflected on the Draft Report ■ If a payoff is revised after the Payoff Determination Date, an offsetting adjustment will be reflected on the Draft Report on the second Business Day after the payoff revision is successfully reported to Freddie Mac ■ If an REO was reported and the Mortgage was inactive as of the previous Accounting Cycle, a credit for the reimbursement of advanced interest (calculated from the DDLPI up to, but not including, the month the Servicer inactivated the Mortgage), if applicable, will be reflected in the current Accounting Cycle Draft Report if reported as REO on or before the P&I Determination Date, or the next Accounting Cycle if reported as REO after the P&I Determination Date ■ If an REO was reported and the Mortgage was active as of the previous Accounting Cycle, a credit for the reimbursement of advanced interest (calculated from the DDLPI through the end of the previous Accounting Cycle), if applicable, will be reflected in the current Accounting Cycle Draft Report if reported as REO on or before the P&I Determination Date, or the next Accounting Cycle if reported as REO after the P&I Determination Date

(f) Reports to reconcile monthly activity Freddie Mac will provide preliminary and final versions of the reports listed in Section 8303.4(d) as follows: (i) Preliminary If the Servicer reports and resolves all data discrepancies prior to the close of the Accounting Cycle, the preliminary Loan Reconciliation Difference Report will be available in the Freddie Mac Loan Level Reporting tool (see Exhibit 88), and the Draft Report will be available through the Freddie Mac Cash Manager tool. The Servicer may use the preliminary reconciliation reports to begin reconciling its monthly Mortgage activity and Principal and Interest Custodial Account or use them to make revisions to the Servicer’s loan-level transactions. (ii) Final reports After Freddie Mac closes its Accounting Cycle, Freddie Mac will provide the Servicer the final MAS and the Loan Reconciliation Difference Reports through the Freddie Mac Loan Level Reporting tool. Freddie Mac will provide the final Draft Report to the Servicer through the Cash Manager tool on the second Business Day of the month following the end of the Accounting Cycle. The Servicer should use these reports to reconcile its investor reporting and the Servicer’s Custodial Account activity for the month in accordance with Chapter 8304.