Freddie Mac Single-Family Seller/Servicer Guide 9201.2 — Freddie Mac loss mitigation evaluation hierarchy

This section contains requirements related to: ■ Loss mitigation evaluation hierarchy ■ Streamlined eligibility for certain Borrowers ■ Charge-offs ■ Borrowers impacted by an Eligible Disaster ■ Ineligible Borrowers

(a) Loss mitigation evaluation hierarchy If a Borrower contacts the Servicer for loss mitigation assistance, the Servicer must first determine if the Borrower can bring the loan current through reinstatement. If reinstatement is not feasible, the following information outlines the order in which a Borrower must be evaluated: 1. The Servicer must first determine if the Borrower has a temporary or permanent hardship ■ Temporary hardship: exists if the Borrower is experiencing or has experienced a temporary hardship from a short-term decrease in income or increase in expenses ■ Permanent hardship: exists if the Borrower is experiencing a hardship that results in a permanent or long-term decrease in income or increase in expenses 2. The Servicer must then determine based on the Borrower’s individual circumstance which relief or workout option they should be evaluated for in accordance with the table below. Temporary hardship If the hardship has… Servicer must evaluate the Borrower for a… Not been resolved Forbearance (see Section 9203.3) Been resolved and the Borrower does not have the ability to bring the loan current through reinstatement Repayment plan (see Section 9203.2) Temporary hardship If the hardship has… Servicer must evaluate the Borrower for a… Been resolved and the Borrower cannot afford a repayment plan Payment Deferral (see Section 9203.4) Permanent hardship If it was determined that the Borrower has a permanent hardship, the Servicer must evaluate the Borrower for a workout option in the following order: 1. Freddie Mac Flex Modification® in accordance with the requirements of Chapter 9206 2. If a Borrower is ineligible for, does not accept or fails to complete the Trial Period Plan, a Freddie Mac Standard Short-Sale pursuant to Chapter 9208 3. If a Borrower is ineligible for a short sale or a short sale is not a viable option, a Freddie Mac Standard Deed-in-lieu of Foreclosure in accordance with the requirements of Chapter 9209 If a Borrower requests to be evaluated for a liquidation workout option, the Servicer must first evaluate the Borrower for a liquidation option.

(b) Streamlined eligibility for certain Borrowers Certain eligibility exceptions apply to the following Borrowers: If: Then: ■ Borrower is 90 days delinquent or greater, or ■ Has a Step-Rate Mortgage and: • Becomes 60 days delinquent within the 12 months following the first payment due date resulting from an interest rate adjustment • Has not submitted a complete Borrower Response Package The Servicer must evaluate the Borrower for eligibility for a proactive offer for a Freddie Mac Flex Modification in accordance with the requirements of Section 9206.1(c)(iii). A Borrower who was on a forbearance plan completes the forbearance without a solution to the Delinquency The Servicer must evaluate the Borrower for a proactive Payment Deferral and/or Freddie Mac Flex Modification in accordance with the requirements of Section 9203.3 (c)(ii). If: Then: A Borrower attempts but is unable to resolve their Delinquency with a repayment plan The Servicer must evaluate the Borrower for a proactive Payment Deferral and/or Freddie Mac Flex Modification in accordance with the requirements of Section 9203.2 (b)(iii). The Borrower has accepted a Payment Deferral and: • Subsequently becomes 60 days delinquent within 6 months of the Payment Deferral effective date, and • The Servicer is unable to establish quality right party contact The Servicer must evaluate the Borrower for a Freddie Mac Flex Modification in accordance with the requirements of Section 9203.4(h)(vii).

(c) Charge-offs Freddie Mac has a charge-off option available to cease collection and loss mitigation activities on a Mortgage under certain conditions. (See Sections 9210.1 through 9210.5 for requirements related to the charge-off option.)

(d) Borrowers impacted by an Eligible Disaster If the Servicer determines that the Borrower is unable to resolve a Delinquency resulting from an Eligible Disaster through a reinstatement, the information in the table below outlines the order in which a Borrower must be evaluated: For Borrowers who were current or less than 60 days delinquent as of the date the Eligible Disaster occurred If the hardship has… Servicer must evaluate the Borrower for a… Been resolved and the Borrower does not have the ability to bring the loan current through reinstatement Repayment plan (see Section 9203.1) Been resolved and the Borrower cannot afford a repayment plan Disaster Payment Deferral (see Section 9203.4(i)) Has been resolved but the Borrower is not capable of maintaining the full contractual payment Disaster Flex Modification (see Section 9206.1(c)(v)) If a Borrower is ineligible for, does not accept, or fails to complete the Trial Period Plan, the Servicer must next consider the Borrower for a Freddie Mac Standard Short-Sale pursuant to Chapter 9208. If a Borrower is ineligible for a short sale or a short sale is not a viable option, the Servicer must evaluate the Borrower for a Freddie Mac Standard Deed-in-lieu of Foreclosure in accordance with the requirements of Chapter 9209. For Borrowers who were 60 days delinquent or greater as of the date the Eligible Disaster occurred If the Borrower was not current or less than 60 days delinquent (i.e., less than two months delinquent) as of the date of the Eligible Disaster, the Servicer must conduct all loss mitigation evaluations in accordance with the standard loss mitigation evaluation hierarchy as described in Section 9201.2(a) or submit an exception request. If a Borrower who was on a disaster-related forbearance completes the forbearance plan without a solution to the delinquency, the Servicer must conduct reviews for proactive Disaster Payment Deferral and proactive Freddie Mac Flex Modification offers in accordance with Sections 9203.4 (i)(vii), (i)(viii), (i)(ix), and (i)(x). For the full requirements related to Servicing Mortgages impacted by a disaster, see Section 8404.1.

(e) Ineligible Borrowers If the Borrower is not eligible for a relief or workout option but the Servicer believes that a relief or workout option is still the best solution to the Delinquency, then the Servicer may submit a recommendation to Freddie Mac for review along with the reason for the recommendation, in accordance with the requirements in the relevant chapters for relief or workout options.