Freddie Mac Single-Family Seller/Servicer Guide 9206.3 — Loan modification expenses, capitalization and reimbursement

This section contains requirements related to: ■ Loan modification expenses ■ Expenses, delinquent amounts, capitalization rules and expense reimbursements for modifications

(a) Loan modification expenses Subject to applicable law, loan modification expenses may include, but are not limited to: 1. Notary fees 2. Recordation fees if they meet the requirements in Section 9206.2(c) 3. Title report according to the requirements of Section 9206.2(c). To reduce the expenses, order any required title report from a vendor that is an agent of the current title insurer, when possible. 4. Updated title endorsement or a new title insurance policy according to the requirements of Section 9206.2(c) 5. Legal and settlement fees 6. Property inspection The Servicer may not charge the Borrower any processing fee or other administrative fee in connection with the processing of a loan modification. If the Servicer does not modify the Mortgage, the Servicer must refund to the Borrower all prepaid but unused expense funds.

(b) Expenses, delinquent amounts, capitalization rules and expense reimbursements for modifications (i) Expenses and delinquent amounts Whenever possible, the Borrower must pay, subject to applicable federal, State and local law and the Mortgage, the following expenses and delinquent amounts in the form of a cash contribution as a condition of the modification: ■ Delinquent accrued interest ■ Expenses paid to a third party specifically related to the loan modification (e.g., title costs, not to exceed the reimbursable expense limits in Exhibit 57A, Approved Attorney, Foreclosure, Mediation, Postponement Fees and Title Expenses; notary fees; recordation fees, if applicable; and credit report fees) ■ Funds advanced by the Servicer, or to be advanced and paid to a third party, prior to the date the Borrower executes the loan modification agreement for the payment of any property taxes and property and mortgage insurance premiums ■ Incurred foreclosure costs, including attorney fees and title costs incurred as part of the foreclosure process, not to exceed the reimbursable expense limits in Exhibit 57A ■ Property preservation expenses and property inspection fees, not to exceed the reimbursable limits in Exhibit 57, 1- to 4-Unit Property Approved Expense Amounts, and further subject to limitations on the amount or frequency of inspections under applicable federal, State or local law ■ Any other expenses that were advanced and paid to a third party related to the preservation of Freddie Mac’s lien priority, as specified in Sections 9301.6(e) and 9701.2(e) ■ Escrow shortages (i.e., the amount needed to establish the Escrow account or to bring it current that, together with the monthly Escrow payment included in the monthly Mortgage payment, will be sufficient to pay the next twelve months of property taxes, property and mortgage insurance premiums, etc., when they fall due) ■ Any other amounts due and owing that are secured indebtedness under the current Mortgage The Borrower must contribute funds held in a buydown account, if any, to reduce the Delinquency or amount capitalized unless otherwise prohibited in the buydown agreement. At the end of a Trial Period Plan, if amounts held in a suspense funds account per the requirements in Section 9206.2(b)(ii) are in excess of the total amount of arrearages and expenses and remain unapplied, those funds must be applied to reduce the postcapitalized UPB. The Servicer may not charge the Borrower or capitalize any processing fee or other administrative fees in connection with the processing of a loan modification. (ii) Capitalization rules If the Borrower has inadequate cash reserves or assets that he or she cannot liquidate to pay all of the expenses and delinquent amounts in the form of a cash contribution under Section 9206.3(b)(i), any cash contribution the Borrower is able to make must be applied to expenses and amounts that may be capitalized. Generally, a Borrower is expected to pay all expenses and other amounts due. If the Mortgage has mortgage insurance, the Servicer must contact the MI prior to capitalizing any amounts to determine if the MI will pay all or a portion of the expenses and delinquent amounts due. The Servicer may capitalize any expense or delinquent amount set forth in the table below provided that such capitalization is not prohibited by applicable federal, State or local law, the amount to be capitalized is part of the indebtedness secured by the current Mortgage, and the expense complies with Exhibits 57 and 57A. Expenses or delinquent amount that can be capitalized Expense or delinquent amount May be capitalized (if part of the secured indebtedness and subject to applicable law) Delinquent accrued interest Yes Expenses paid to a third party specifically related to the loan modification (e.g., title costs; notary fees; recordation fees, if applicable; and credit report fees) No Funds advanced by the Servicer, or to be advanced and paid to a third party, prior to the date the Borrower executes the loan modification agreement for the payment of any property taxes and property and mortgage insurance premiums Yes Escrow shortages to fund an Escrow account for future post-modification advances No Expenses or delinquent amount that can be capitalized Expense or delinquent amount May be capitalized (if part of the secured indebtedness and subject to applicable law) Incurred foreclosure costs, including attorney fees and title costs incurred as part of the foreclosure process Yes (not to exceed the reimbursable expense limits in Exhibit 57A) Property preservation expenses and property inspection fees Yes (not to exceed the reimbursable limits in Exhibit 57) Any other expenses that were advanced and paid to a third party related to the preservation of Freddie Mac’s lien priority, as specified in Sections 9301.6(e) and 9701.2(e) Yes With respect to Escrow shortages, if the Borrower is unable to pay the Escrow shortage as a lump sum, then the Borrower must pay the shortage as part of the monthly payment (“Projected Monthly Escrow Shortage Payments”) on the modified Mortgage. If the Borrower must pay Projected Monthly Escrow Shortage Payments, then the Servicer must: ■ Spread the repayment of the Escrow shortage amount in equal monthly payments over a period of 60 months, unless the Borrower chooses to pay off the shortage as a lump sum or over a shorter period of time, not to be less than 12 months ■ Take into account any remaining unpaid amount of the Escrow shortage in any subsequent Escrow analysis to ensure that the Borrower is able to continue to pay all Escrow shortage amounts over the remaining portion of either the current remaining Escrow shortage repayment period or a period up to 60 months. The Servicer may not accelerate or compress the remaining Escrow shortage amount into a new Escrow payment or shorter repayment period as a result of a future Escrow analysis. (iii)Reimbursement of expenses Servicers may use the PAID (Payments Automated Intelligent and Dynamic) (see Exhibit 88, Servicing Tools) to request reimbursement for the following mortgage modification expenses associated with all modification types that would otherwise be paid by the Borrower and that may not be capitalized: Reimbursement expense code, limit and notes Expense description Expense code Expense limit and notes Recordation fees 300003 Actual cost Title costs, if applicable (except with respect to title costs in connection with a foreclosure proceeding) 300004 Reimbursable amounts are in accordance with the limits specified in Exhibit 57A Notary fees 042001 $150 Additionally, Freddie Mac will reimburse certain expenses (e.g., legal fees and/or legal costs) considered unrecoverable from the Borrower under applicable federal, State or local law upon completion of a mortgage modification in accordance with Section 9701.1(e)(iv). All reimbursement requests must be received by Freddie Mac in accordance with Section 9701.1(e)(i). If the Servicer submits a reimbursement request for Mortgage modification expenses and the Mortgage modification settlement date does not exist in Freddie Mac’s systems, the expense request will not be eligible for payment. All modification types, excluding modifications with Mortgages insured by the FHA or guaranteed by the VA or RHS, must have been submitted to Freddie Mac for settlement in its systems to be eligible for expense reimbursement via PAID. For modifications with Mortgages insured by the FHA or guaranteed by the VA or RHS, refer to Section 9701.1(e)(i) for requirements related to expense submission time frames.