Freddie Mac Single-Family Seller/Servicer Guide 9209.5 — Deed-in-lieu of foreclosure transaction and processing requirements

Freddie Mac Single-Family Seller/Servicer Guide 9209.5 — Deed-in-lieu of foreclosure transaction and processing requirements

Effective 2025-11-01 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Prior to approval ■ Post-approval activities ■ Resolve® ■ Waiver of buydown funds ■ Property valuation requirements for deeds-in-lieu of foreclosure In order for the Freddie Mac Standard Deed-in-Lieu of Foreclosure (“deed-in-lieu of foreclosure”) to be completed by the Servicer, the Servicer must work with and assist the Borrower to ensure that the deed-in-lieu of foreclosure transaction meets the following requirements. (a) Prior to approval The Servicer must: ■ Ensure the Borrower meets all eligibility requirements and negotiates a Borrower contribution, if applicable ■ Obtain mortgage releases from all applicable subordinate mortgage holders as follows: ❑ The Servicer may authorize payment to subordinate mortgage holders in an aggregate amount of six thousand dollars ($6,000.00). The subordinate mortgage holders must not receive any other payments from the Borrower, in cash, promissory note or otherwise, in connection with approval of the deed-in-lieu of foreclosure. ❑ If there are multiple subordinate mortgage holders, the Servicer has the discretion to divide the payment among those mortgage holders so as to maximize the chances that all subordinate mortgage holders will approve the deed-in-lieu of foreclosure. Payment of any amount to subordinate mortgage holders is contingent upon agreement by all mortgage holders to release their Mortgage and, if they are accepting a payment from Freddie Mac, extinguish the indebtedness secured by the Mortgaged Premises. In addition, subordinate mortgage holders accepting payment from Freddie Mac must agree in writing to waive all rights to seek a deficiency judgment against the Borrower. If a subordinate mortgage holder releases its Mortgage to allow the deed-in-lieu of foreclosure to close but does not extinguish the indebtedness, the mortgage holder will not receive a payment from Freddie Mac. Regardless of whether payment is made to a subordinate mortgage holder, the Servicer must obtain written commitment from the subordinate mortgage holder(s) to release the Mortgage(s). All payments made to subordinate mortgage holders must be documented, and the documentation must be provided to Freddie Mac upon request. The Servicer must have established written policies governing how subordinate mortgage payments are paid and evidence of their agreement is provided to the Borrower. For deeds-in-lieu of foreclosure completed in accordance with this chapter, the Servicer must advance the amount to the subordinate mortgage holder or holders and request reimbursement for such advancement from Freddie Mac via PAID (Payments Automated Intelligent and Dynamic) (see Exhibit 88, Servicing Tools). Note: Only Mortgages or deeds of trust recorded in the land records and constituting a valid lien against the property are eligible for a payment from Freddie Mac. Any and all other types of liens, including, but not limited to, judgments, mechanic’s and materialman’s liens and common interest association liens, are not eligible for the subordinate mortgage payment. ■ Approve and process a deed-in-lieu of foreclosure in compliance with all requirements of applicable mortgage insurance policies and any delegated authority granted to the Servicer by the MI so as to preserve and not to impair existing mortgage insurance coverage, if any. If the MI indicates that it will curtail or deny a claim for any reason, including, but not limited to, failure of the Servicer to comply with mortgage insurance conditions such as payment of a Borrower contribution, the Servicer may not approve the deed-in-lieu of foreclosure; however, the Servicer must submit the proposed deed-in-lieu of foreclosure to Freddie Mac. (b) Post-approval activities ■ The Servicer must obtain clear and marketable title to the property ■ The Borrower must: ❑ Contribute to any loss, according to the requirements in Section 9209.3(a) ❑ Vacate the property and leave it in undamaged, broom-swept condition and provide the Servicer with the keys to the property at the time of conveyance, unless the property is a 2- to 4-unit property and Freddie Mac allows one tenant to remain in the property ❑ For leasehold Mortgages, obtain the consent of the fee simple landowner/lessor, if required under the lease, and provide evidence of consent to the Servicer ❑ Execute a personal property release for any personal property the Borrower has left at or in the Mortgaged Premises. The Servicer may use Exhibit 100, Personal Property Release, as a template and revise it as necessary to comply with applicable law or to incorporate it into the Servicer’s own forms. ■ The Servicer must obtain the executed deed-in-lieu of foreclosure and all other required deed-in-lieu of foreclosure documents (including the personal property release). For leasehold Mortgages, the Servicer must obtain either an assignment of the lease or a new lease of the same priority. (c) Resolve Servicers must use Resolve to submit deed-in-lieu of foreclosure transactions on Freddie Mac-owned Mortgages. Each Servicer must use Resolve in accordance with (A) the requirements in this section, (B) the deed-in-lieu of foreclosure and other instructions provided in Resolve Online Help and any other documentation and (C) any other applicable provisions of the Guide, including Sections 2401.1 and 2404.2. If a Servicer is unable to complete a submission via Resolve, the Servicer should call Customer Service at 800-FREDDIE. (d) Waiver of buydown funds The Borrower must waive reimbursement of any buydown funds, if applicable. (e) Property valuation requirements for deeds-in-lieu of foreclosure Based on the information provided by the Servicer, Resolve will determine if there is an existing valid valuation in Freddie Mac systems. If one is not available, Resolve will use the information provided by the Servicer to order a BPO.

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