Freddie Mac Single-Family Seller/Servicer Guide 9210.1 — Charge-off overview and recommendation process

This section contains requirements related to: ■ What is a charge-off? ■ When a Servicer must recommend a charge-off ■ Submitting a recommendation for a charge-off to Freddie Mac ■ Freddie Mac’s decision about a Servicer’s charge-off recommendation

(a) What is a charge-off? A charge-off ceases collection efforts on a Mortgage when all appropriate measures have been exhausted to collect on the delinquent Mortgage and the Servicer has deemed the debt to be uncollectible or that a foreclosure should not be completed. In most cases, a charge-off will be accompanied by a lien release and cancelation of the Note. A charge-off may be appropriate in varying situations, including: 1. A charge-off of a balance remaining after a short payoff. A short payoff may result from, among other things: ■ A negotiated settlement with the Borrower, a legal settlement or an agreement to resolve a legal dispute ■ A settlement related to: ❑ A Condominium Project or Cooperative Project (see Chapter 8801 for special Servicing requirements for Cooperative Share Loans) termination; or ❑ A unit of a Condominium Project or Cooperative Project that is damaged and its repair is not feasible ■ A court order ■ A bankruptcy cramdown (see Section 9401.2(e) regarding completing and transmitting the final terms of a confirmed bankruptcy cramdown to Freddie Mac via the “Custom Modification” functionality in Resolve®); or ■ A receivership 2. A full charge-off of: ■ A Mortgage that is secured by a Mortgaged Premises that is subject to property seizure ■ A Mortgage that is not subject to a recourse or repurchase obligation under the Purchase Documents, and it is not practical or possible to complete foreclosure or other enforcement of Freddie Mac’s rights under the Note or Mortgage and/or to obtain clear title to the Mortgaged Premises ■ A low balance Mortgage that is delinquent and Freddie Mac has determined to not complete a foreclosure of the Mortgage. (See Section 9210.1(b) for more details.) ■ A Mortgage or Cooperative Share Loan that is secured by a unit of a Condominium Project or Cooperative Project, respectively, and: ❑ The project is not presently economically viable; ❑ The project has been terminated; or ❑ The unit is damaged and its repair is not feasible ■ A Mortgage that is secured by a Mortgaged Premises for which has been impacted by a natural or manmade disaster, or other like circumstance, and rebuilding on the land is determined by the Servicer to be impracticable or impossible ■ A Mortgage that is secured by undeveloped land or any above-grade primary structure has been demolished and removed by the Borrower, jurisdiction or other party; and the vacant land (and any remaining outbuilding, if applicable) has been protected from waste, damage and vandalism ■ A Mortgage that is secured by a Mortgaged Premises that a third party is willing to accept any risk of liability if it becomes the owner of the property. (Note: This may also include a charge-off of a balance left over after a short payoff as the result of a negotiated settlement with the third party.) ■ A Mortgage that is secured by a Mortgaged Premises that has been identified as posing a Risk of Property Ownership. (See Section 9202.2(b) for more details)

(c) Submitting a recommendation for a charge-off to Freddie Mac Servicers must use the Resolve user interface (UI) to submit a charge-off recommendation to Freddie Mac. Servicers that elect to submit charge-off recommendations via the Resolve UI must use Resolve in accordance with (A) the requirements in this section, (B) the charge-off 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. The Servicer must take the steps listed below in this section when it recommends a chargeoff of a Mortgage to Freddie Mac. Before making the recommendation, the Servicer must have filed and settled any property insurance claim(s) with the applicable property insurer. To submit a charge-off recommendation, the Servicer must complete the charge-off template and upload the following via Resolve: 1. A detailed explanation of the Servicer’s recommendation 2. Documentation describing the condition of the property, including copies of the most recent six consecutive months of property inspection reports with photographs. For charge-off recommendations on low balance Mortgages (see Section 9210.1(b)), the Servicer may submit less than six consecutive months of property inspection reports depending on the level of Delinquency. Note: If the Servicer has previously provided this information in accordance with Sections 8403.1(a) and (b), the Servicer does not need to submit this information again as part of the charge-off recommendation. 3. A Hazard Distressed BPO obtained through BPOdirect®, if applicable, if the recommendation to charge off a Mortgage is due to condemnation, disaster or other Risk of Property Ownership (see Section 9202.2(b)). The Hazard Distressed BPO must be less than 90 days old on the date the Servicer makes the recommendation to charge off the Mortgage, unless expressly approved by Freddie Mac. 4. A payoff statement, when applicable 5. A copy of any property insurance claims filed, including a copy of either: ■ An explanation of benefits and proof of payment received by the Servicer on any paid claim(s); or ■ Any notification documenting reason(s) for non-payment of a claim and if an appeal was filed by the Servicer that was also denied for payment of a claim 6. A copy of any estimates that may have been obtained by the Servicer for necessary repairs 7. If the Mortgage is secured by a Manufactured Home, the documentation specified in Section 9301.2(f)(iii) or 9301.2(f)(iv) to evidence that the Manufactured Home and the land are real property under the laws of the State where the property is located. If the Manufactured Home is located in a certificate of title State (see Section 5703.4(f)(iii)), then the Servicer must provide the documentation specified in Section 9301.2(f)(v). Freddie Mac will contact the Servicer should it require additional documentation following the submission of a recommendation to charge off a Mortgage.

(d) Freddie Mac’s decision about a Servicer’s charge-off recommendation Freddie Mac will review the documentation the Servicer submits and make a decision to approve or deny the charge-off request. (i) Approval of request Freddie Mac will notify the Servicer if the charge-off recommendation is approved and whether the lien has been released through Resolve. Upon approval of the request, the Servicer must not incur any new expenses for taxes, insurance, property preservation, legal fees or any other fees or costs if Escrow is insufficient to pay charges when due without Freddie Mac’s prior approval (see Directory 5). In most cases, when Freddie Mac approves a charge-off request, Freddie Mac will instruct the Servicer to release its lien on the property and cancel the Note as part of the closing of an approved charge-off request (see Section 9210.2). However, in situations in which future funds are anticipated (e.g., when Freddie Mac or the Servicer is negotiating a settlement with the Borrower or a third party), Freddie Mac will retain its lien on the property and will instruct the Servicer not to release the lien or cancel the Note on the Request Details Screen in Resolve until such time that funds are received by Freddie Mac. (ii) Denial of request If Freddie Mac denies the charge-off request, Freddie Mac will provide the Servicer the response in Resolve, stating the reason Freddie Mac denied the request together with the course of action the Servicer must take to resolve the Delinquency, including the resumption of normal default Servicing activity, including all Escrow advances, property preservation and legal activities, if applicable.