Freddie Mac Single-Family Seller/Servicer Guide 8406.3 — File retention, fees and special provisions for Transfers of Ownership and assumptions

Freddie Mac Single-Family Seller/Servicer Guide 8406.3 — File retention, fees and special provisions for Transfers of Ownership and assumptions

Effective 2025-09-10 · Freddie Mac's stamp for this section

This section contains information related to: ■ File retention for Transfers of Ownership and assumptions ■ Transfer of Ownership fees ■ Assumability provisions and rate cap requirements for ARMs ■ Transfers of Ownership and buydown accounts (a) File retention for Transfers of Ownership and assumptions All original documents relating to the application for a Transfer of Ownership must be kept in the Mortgage file, including the Last Assumption Feedback Certificate, as defined in Section 8406.2(b), if Loan Product Advisor® was used to assess Transferee creditworthiness. If the application is approved, the documentation must be maintained in the Mortgage file for at least seven years from the date that Freddie Mac’s interest in the Mortgage is satisfied. If the application is declined, the documentation must be kept for the duration required under the Equal Credit Opportunity Act, Fair Credit Reporting Act or any other applicable law or regulation. Copies of documents may be scanned and stored as: ■ Portable Document Format (PDF) ■ Tagged Image File (TIF) format ■ Joint Photograph Experts Group (JPEG) format; or ■ Other electronic document formats commonly used by the Mortgage industry in the regular course of business Note: Refer to Chapter 3302 for Mortgage file retention requirements including those requirements regarding documents for which the paper originals must be maintained. (b) Transfer of Ownership fees The Servicer may charge and retain a fee for processing a Transfer of Ownership of, or an interest in, the Mortgaged Premises securing a Mortgage purchased by Freddie Mac as permitted by applicable law. Where applicable law or regulation limits the amount of the allowable fee, the Servicer may not charge more than the lesser of: ■ The maximum fee allowed under applicable law or regulation, or ■ The maximum fee allowed by Freddie Mac as stated below This fee must be set in accordance with the following provisions: (i) Security Instruments without a due-on-transfer clause The fee charged by the Servicer for changing its records for a Transfer of Ownership for which its consent was not required must not exceed $100. (ii) Security Instruments with a due-on-transfer clause When determining the creditworthiness of a transferee for a Transfer of Ownership, the Servicer may charge and retain a fee based on the following guidelines: ■ The fee may not exceed the greater of $400 or 1% of the UPB, capped at a maximum fee of $900 ■ The Transfer fee excludes out-of-pocket expenses paid to independent third parties for services required to comply with the application and approval process (per sections 8406.2(a) through 8406.2(d)) and to record the change of ownership ■ Any additional services requested by the transferee, such as surveys, owner’s title policies, etc., are the sole responsibility of the transferee ■ Loan discount fees, yield enhancement fees, lost opportunity fees and similar devices designed to circumvent these limitations or increase the effective interest rate or yield of the Mortgage previously sold to Freddie Mac, regardless of the Servicer’s retained interest in the Mortgage, are expressly prohibited The Servicer may implement a transfer fee schedule that results in charges less than those permitted by Freddie Mac. However, if any fee charged by the Servicer on Mortgages sold to Freddie Mac exceeds the amounts stated above, it will be considered a breach of this Guide and, unless refunded to the Borrower, Freddie Mac may exercise any remedy available under this Guide or applicable law to remediate the violation. (c) Assumability provisions and rate cap requirements for ARMs (i) Assumability provisions The loan instruments used to originate an ARM contain the provisions governing the right of the lender to accelerate the loan, in the event of a Transfer of Ownership. These provisions determine whether or not the ARM is assumable by the party to whom the Mortgaged Premises is transferred, and, if it is assumable, the transferee must agree to assume the Mortgage loan obligation. Some loan instruments provide that the ARM is assumable for the life of the loan. Other loan instruments provide that the ARM is assumable only after the initial fixed-rate period has expired or until a specified event has occurred and is thereafter not assumable. The Servicer must review the loan instruments to determine the assumption provisions for an ARM. Regardless of whether a loan instrument indicates that an ARM is not assumable, the ARM may be assumed as a workout Mortgage assumption or a simultaneous modification and assumption. Servicers must refer to and follow the requirements in Section 9207.1 for these assumptions. (ii) Rate cap requirements If the Note for an ARM sold to Freddie Mac does not provide for a Lifetime Ceiling, the following provision or substantially similar provision must be included in the Mortgage assumption and release of liability agreement: The interest rate I am required to pay after I assume this Mortgage obligation and for the entire term of this Mortgage will never be greater than (see note below) percent. Note: To determine the appropriate interest rate to insert in the preceding provision, the Servicer must add six percentage points to the sum of the Margin and the Index value in effect on the date of the Mortgage assumption and release of liability agreement, subject to applicable law, such as the Servicemembers Civil Relief Act (SCRA). Refer to Chapter 8503. (d) Transfers of ownership and buydown accounts Where a Transfer of Ownership is approved, any funds remaining in a related buydown account may continue to be used to reduce the Mortgage payments when: ■ The Mortgaged Premises is sold and the Mortgage is assumed by the purchaser, and ■ The terms of the original buydown plan allow for the continued application of the buydown funds if the Mortgage is assumed

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