Freddie Mac Single-Family Seller/Servicer Guide 8701.1 — Servicing Community Land Trust Mortgages

This section contains information related to: ■ Key terms used in this chapter ■ Tracking Community Land Trust Mortgages ■ Servicing requirements applicable to Community Land Trust Mortgages ■ Community Land Trust Ground Lease Rider ■ Leasehold Mortgages ■ Resale restrictions ■ General notice, disclosure and foreclosure requirements ■ Cancelation of Borrower-paid mortgage insurance ■ Concurrent and Subsequent Transfers of Servicing with respect to Community Land Trust Mortgages ■ Excess proceeds

(a) Key terms used in this chapter Key terms and definitions used in this Chapter 8701 (e.g., Community Land Trust and Community Land Trust Mortgage) can be found in the Glossary. Servicers of Community Land Trust Mortgages should be familiar with such key terms and definitions found therein. Refer to Chapter 4502 for specific requirements for selling Community Land Trust Mortgages to Freddie Mac, including, but not limited to, requirements for the specified form of ground lease (the “Community Land Trust Ground Lease”) and Form 490, Community Land Trust Ground Lease Rider. References to “ground lease, as amended” in this chapter refer to the executed and recorded Community Land Trust Ground Lease, as amended by Form 490.

(b) Tracking Community Land Trust Mortgages Servicers of Community Land Trust Mortgages must implement policies, procedures and systems to identify and track Community Land Trust Mortgages to ensure that such Community Land Trust Mortgages are serviced in accordance with the Servicing requirements of the Guide and this chapter.

(c) Servicing requirements applicable to Community Land Trust Mortgages Servicers of Community Land Trust Mortgages must service Community Land Trust Mortgages in accordance with the Servicing requirements of the Guide and this chapter. The Servicing requirements of this chapter are applicable only to the Servicing of Community Land Trust Mortgages. If any Servicing requirement in this chapter is inconsistent with a Servicing requirement set forth elsewhere in the Guide (except for requirements to comply with applicable law, which supersede any other Servicing requirement in the Guide), the Servicer must comply with the Servicing requirement set forth in this chapter with respect to any Community Land Trust Mortgage. Servicers must not apply any of the requirements set forth in this chapter to a non-Community Land Trust Mortgage but rather should continue Servicing such Mortgages in accordance with all other Servicing requirements of the Guide and other applicable Purchase Documents.

(d) Community Land Trust Ground Lease Rider In accordance with Section 4502.7, a Community Land Trust Mortgage must be originated using Form 490, which must be completed and executed by both the lessor (Community Land Trust or its duly authorized representative) and each lessee (Borrower) and recorded in the land records along with the Community Land Trust Ground Lease and applicable Security Instrument. A Servicer must comply with the provisions of Form 490 when Servicing the Community Land Trust Mortgage including, but not limited to, provisions related to the following: ■ The Servicer must honor the lessor’s timely exercise of certain rights that may be available to it under the ground lease, as amended ■ The termination of any resale restrictions contained in the ground lease, as amended upon foreclosure (or expiration of any applicable redemption period) or recordation of a deedin-lieu of foreclosure ■ For a Borrower being considered for an alternative to foreclosure, the Servicer is not required to obtain the lessor’s approval of any proposed workout or relief options

(e) Leasehold Mortgages Unless inconsistent with a Servicing requirement set forth in this Chapter 8701, all Servicing requirements of the Guide governing Mortgages secured by leasehold estates (leasehold Mortgages) apply to Community Land Trust Mortgages. Additional requirements for Leasehold Mortgages Topic Guide location Requirements for Servicing leasehold Mortgages, if termination of the lease will jeopardize Freddie Mac’s lien position or interest in the property Sections 9301.6(d), 9401.1(c) and 9701.2(e)(iii)) Requirements to negotiate the extension of the current term of a lease (or applicable renewal options) in the event the current term of a lease (or applicable renewal options) terminate earlier than five years after the maturity date of the proposed modification of a leasehold Mortgage Section 9206.1(c)(ii)

(f) Resale restrictions As described in Chapter 4502, the Community Land Trust Ground Lease includes resale restrictions. Unless inconsistent with a Servicing requirement set forth in this Chapter 8701, all Servicing requirements of the Guide governing Mortgages secured by properties subject to resale restrictions that terminate upon foreclosure (or expiration of any applicable redemption period) or recordation of a deed-in-lieu of foreclosure apply to Community Land Trust Mortgages. Additional requirements for resale restrictions Topic Guide location Freddie Mac Standard Short Sale (“short sale”) evaluation requirements for Mortgages secured by properties subject to resale restrictions, unless inconsistent with a Servicing requirement set forth in this Chapter 8701 Sections 9208.1(b)(iii) and 9208.2(a) Foreclosure sale bidding requirements on properties subject to resale restrictions Section 9301.8(a)

(g) General notice, disclosure and foreclosure requirements In addition to any disclosures and notices required by applicable law, the Servicer must provide to the Borrower all disclosures and notices required under the ground lease, as amended, on a timely basis. The Servicer must retain copies of all such disclosures and notices in the Mortgage file. Regardless of the additional Servicing requirements specified in this chapter that are applicable only to Community Land Trust Mortgages, in the event a foreclosure sale occurs, the Servicer’s performance will be measured against Freddie Mac’s State foreclosure timelines (refer to Exhibit 83, Freddie Mac State Foreclosure Timelines).

(h) Cancelation of Borrower-paid mortgage insurance For the purpose of canceling Borrower-paid mortgage insurance based on the original value, for a Community Land Trust Mortgage, “value” is determined in accordance with the requirements of Section 4502.5 (see also Section 4203.1(a)).

(i) Concurrent and Subsequent Transfers of Servicing with respect to Community Land Trust Mortgages In addition to the requirements governing Concurrent Transfers of Servicing and Subsequent Transfers of Servicing set forth elsewhere in the Guide, the Transferor Servicer must inform the Transferee Servicer whether the Transfer of Servicing involves Community Land Trust Mortgages and, upon request, must provide a list of such Community Land Trust Mortgages (identified, at a minimum, by Transferor Servicer loan number and Freddie Mac loan number) to the Transferee Servicer.

(j) Excess proceeds The Community Land Trust may be entitled to any applicable excess proceeds when there is a transfer of title on a Community Land Trust property that occurs as a result of such property being sold by: ■ The Borrower for an amount exceeding the resale restricted price, or ■ Freddie Mac after acquiring title through a completed foreclosure sale or deed-in-lieu of foreclosure Excess proceeds on Community Land Trust properties are those proceeds that are above the amount required to satisfy the total indebtedness, including any additional liens, claims or encumbrances, in addition to any amount(s) incurred during an REO holding period if title was acquired by Freddie Mac via a completed foreclosure sale or deed-in-lieu of foreclosure. Upon satisfaction of the total indebtedness as outlined above, any excess proceeds should be distributed as outlined below: ■ For properties that are sold by the Borrower for an amount exceeding the resale restricted price agreed upon in the Community Land Trust Ground Lease: • First to the Borrower and Community Land Trust for equity due as agreed upon in the Community Land Trust Ground Lease, and • All remaining excess proceeds to Community Land Trust when the Community Land Trust Ground Lease includes terms for excess proceeds to be distributed to the Community Land Trust ■ For properties that are sold by Freddie Mac after acquiring title through a completed foreclosure sale or deed-in-lieu of foreclosure: • First to Freddie Mac for any amount(s) incurred during an REO holding period, as applicable, and • All remaining excess proceeds to the Community Land Trust when the Community Land Trust Ground Lease includes terms for excess proceeds to be distributed to the Community Land Trust Note: Servicers will not be responsible for these REO activities. For more information on Servicer responsibilities on REO properties, see Chapter 9601.