Freddie Mac Single-Family Seller/Servicer Guide 9701.3 — Legal and foreclosure-related reimbursements

This section contains information related to: ■ Reimbursement of fees and costs incurred during legal proceedings ■ Reimbursement requirements when foreclosure must be restarted ■ Reimbursement of BPO/appraisal reports ■ REO related costs and expenses

(a) Reimbursement of fees and costs incurred during legal proceedings Certain legal fees and costs are reimbursable when the Servicer forecloses on a property or takes other routine or non-routine legal action. All foreclosure and related legal fees and costs must be reasonable and comparable to those customarily charged in the area where the property is located (see Section 9301.3(e) regarding foreclosure counsel fees). Those fees and costs include such items as: 1. Foreclosure attorney fees as set forth in Exhibit 57A, Approved Attorney, Foreclosure, Mediation, Postponement Fees and Title Expenses, and foreclosure attorney fees incurred that exceed the expense limits in Exhibit 57A, if the Servicer has submitted and Freddie Mac has granted written pre-approval of the Servicer’s request via PAID (Payments Automated Intelligent and Dynamic) (see Exhibit 88, Servicing Tools). Foreclosure attorney fees listed in Exhibit 57A are the approved attorney fees for an uncontested foreclosure. This generally includes but is not limited to: ■ All activities necessary to complete the first legal action ■ Review of supporting documentation and loan status ■ Verification that the Borrower is not a Servicemember currently serving a Period of Military Service (as those terms are referenced in Section 8503.1(a)), or if the Borrower was a Servicemember, that more than one year has elapsed since his or her Period of Military Service ended. (See Section 8503.1(b) regarding foreclosure relief options exclusive to Servicemembers and their Dependents.) Verification must be completed following the referral of a Mortgage to foreclosure but prior to the first legal action and again prior to foreclosure sale. ■ Review of title examination ■ Preparation and filing of all necessary papers and notices, including the publication and posting of notices of foreclosure or other legal proceedings as required by State or local law, as well as obtaining service of process on all defendants or parties entitled to notice ■ Obtain orders for alternate or special service if doing so will expedite service of process at little or no additional cost ■ All necessary court appearances required in an uncontested foreclosure ■ Preparing documentation for and obtaining entry of judgment in a judicial foreclosure action or preparing all documentation necessary to conduct the foreclosure sale in a non-judicial foreclosure action ■ Handling the foreclosure sale, including any actions required to postpone (see Section 9301.7(a) regarding foreclosure sale postponements), cancel, reset and set aside the sale ■ Preparation and recording of conveyance deeds ■ For Cooperative Share Loans, any transfer of the Cooperative Shares and Proprietary Lease (see Section 8801.4 regarding delinquency management for Cooperative Share Loans) If a Servicer relies on its foreclosure counsel, as a vendor, to perform or handle services normally performed by a Servicer, including Delinquency management requirements (and the Servicer has not submitted a request for pre-approval (RPA) and received Freddie Mac approval), then any additional fee or service charges billed by the law firm should be paid by the Servicer at its own expense. See the table below for details related to Delinquency management requirements. Note: Servicers should refer to Section 9701.4(a) for details regarding non-reimbursable expenses. Additional guidance related to Delinquency management requirements Topic Guide location Property seizure Abandoned Properties, distressed properties and properties that pose a Risk of Property Ownership Servicing Mortgages impacted by a Disaster Freddie Mac loss mitigation evaluation hierarchy and performance standards Evaluating the Borrower Reinstatements and relief options Freddie Mac workout options Home Affordable Modification ProgramSM Modifications Workout Mortgage assumption Freddie Mac Standard Short Sale Freddie Mac Standard Deed-in-Lieu of Foreclosure Charge-off Hardest Hit Fund Foreclosure Bankruptcy Other litigation involving Freddie Mac-owned or guaranteed Mortgages Selection, retention and management of law firms for Freddie Mac Default Legal Matters Deficiency recovery Post-sale reporting to other entities Non-reimbursable expenses Section 9701.4(a) 2. Filing costs are reimbursable for required paper and e-filing, including costs associated with third-party vendors, unless the option to file electronically can be done without vendor-related costs 3. The cost of obtaining a copy of a death certificate if needed to facilitate prompt and efficient completion of the legal proceeding 4. Costs as set forth in Exhibit 57A for title work required for foreclosures, which include the cost of an update to the title if required by the State or to ensure clear and marketable title to the Mortgaged Premises after the foreclosure sale. Freddie Mac will not reimburse for any additional title abstract, commitment or policy. If the Servicer must obtain an additional update to the title because the original is stale due to bankruptcy delay, Freddie Mac will reimburse the Servicer up to $125 for the update in Maryland, Ohio and Virginia and $75 for all other States. Servicers must contact Freddie Mac for written preapproval for an additional update if the title becomes stale for any other reason. 5. Costs of serving legal notices, when required by applicable law 6. Cost of publication of notices of foreclosure or other legal proceedings as required by State or local law. Reimbursable costs incurred for the publication of such legal notices include actual charges imposed by the newspaper or publication. The foreclosure attorney fees in Exhibit 57A cover fees for acquiring the publication, including the cost of preparing, submitting and verifying the legal notices. 7. Cost of posting of notices of foreclosure or other legal proceedings, as required by State or local law. Reimbursable costs incurred for the posting of such legal notices are for actual charges imposed for the physical posting of notices on the property. 8. Postage for certified or registered mail that is required for legal notices as required by applicable law 9. Bankruptcy costs and fees as set forth in Exhibit 57B, Approved Bankruptcy Attorney Fees, and bankruptcy expenses incurred that exceed the expense limits in Exhibit 57B if the Servicer has submitted and Freddie Mac has granted written pre-approval of the Servicer’s request via PAID. However, if the Borrower is delinquent and files for bankruptcy protection and a reorganization plan is approved, the Servicer must seek reimbursement for its allowable expenses through the Borrower’s bankruptcy plan. If the Borrower breaches the bankruptcy plan, the Servicer must not submit a claim for expense reimbursement until after the applicable event or activity described in Section 9701.1(e). 10. Contested foreclosure fees and court costs required to continue with the foreclosure process, if the Servicer has submitted and Freddie Mac has granted written pre-approval of the Servicer’s request via PAID. For legal expenses that are related to a non-routine litigation matter and are considered reimbursable, Servicers must first contact Freddie Mac with details of the non-routine litigation matter according to the reporting requirements in Section 9402.2(a)(ii) and include an estimate of the attorney’s fees and litigation costs, as well as the attorney’s hourly rate, in the Servicer’s request for Freddie Mac’s pre-approval via PAID. Contested foreclosure fees and court costs are: Contested foreclosure fees and court costs Contested foreclosure Fees and court costs Contested foreclosure resolved by motion for summary judgment (judicial) Foreclosure attorney fee for a contested foreclosure in which a defendant files an answer requiring the filing of a summary judgment motion. This includes work leading up to the filing of the summary judgment motion, all court appearances and all written discovery. Responding to a motion to dismiss (judicial) Foreclosure attorney fee for responding to a motion to dismiss, including the preparation and filing of a response and attendance at all hearings. Contested foreclosure resolved by trial (judicial) Foreclosure attorney fee for trial, set by court upon its own motion, including, but not limited to, pre-trial preparation and correspondence, preparation and filing documents necessary for trial, witness preparation and all necessary court appearances. Contested foreclosure resolved by motion to dismiss (non-judicial) Foreclosure attorney fee for a contested foreclosure (i.e., Borrower’s filing of a lawsuit to challenge a non-judicial foreclosure) resolved by the filing of a motion to dismiss and subsequent entry of an order granting motion to dismiss. This includes all work leading up to the filing of the motion to dismiss and all necessary court appearances. Contested foreclosure resolved by summary judgment motion (nonjudicial) Foreclosure attorney fee for a contested foreclosure (i.e., Borrower’s filing of a lawsuit to challenge a non-judicial foreclosure) resolved by the filing of a motion for summary judgment and subsequent entry of an order granting motion for summary judgment. This includes all work leading up to the filing of the summary judgment motion, all court appearances and all written discovery. Probate proceedings Foreclosure attorney fee for probate proceedings during a contested foreclosure. Motion for mediation in a contested foreclosure Foreclosure attorney fee for attendance and appearance at a mediation session for a contested foreclosure that is not part of a State or local law pre-foreclosure mediation program. Borrower initiated motions Foreclosure attorney fee for responding to a motion initiated by the Borrower or Borrower’s counsel, including the preparation and filing of a response and attendance at all hearings. Reply to affirmative defenses/motion to strike Foreclosure attorney fee for responding to a discovery request or propounding discovery in a contested foreclosure, including the preparation and filing of a response and attendance at all hearings. Discovery (request for production of documents, request for admissions, interrogatories) Foreclosure attorney fee for responding to a discovery request or propounding discovery in a contested foreclosure, including the preparation and filing of a response and attendance at all hearings. Contested foreclosure fee – other Foreclosure attorney fee for additional work needed to resolve a contested foreclosure that enters into litigation, whether routine or non-routine, in order to proceed with the foreclosure. 11. For the life of the default, the actual cost of system connectivity fees, technology fees and invoice processing fees up to the following maximum expense limits: ■ Connectivity fees are reimbursable up to a maximum of $25 per referral, on or after April 1, 2011, for the life of the default ■ Technology fees are reimbursable up to a maximum of $5 per referral, before April 1, 2011, for the life of the default ■ Invoicing fees are reimbursable up to a maximum of $5 to process foreclosure invoices and an additional maximum of $5 to process bankruptcy invoices for the life of the default on referrals on or after April 1, 2011 For details on system connectivity and invoice processing, refer to Section 9501.5(a). 12. Attorney fees to shorten a redemption period, when allowed by applicable State law, if the Servicer has submitted and Freddie Mac has granted written pre-approval of the Servicer’s request via PAID 13. Reasonable attorney fees incurred in connection with the foreclosure of a Cooperative Share Loan. Servicers must claim reimbursement using expense code 014005 (Foreclosure on a Cooperative Share). Refer to Chapter 8801 for additional details on Servicing requirements related to Cooperative Share Loans. 14. Attorney fees for appearance and attendance at a status, conciliation or case management conference, when required by State or local law or set by the court, if the Servicer has submitted and Freddie Mac has granted written pre-approval of the Servicer’s request via PAID. This includes fees for appearance and attendance at pre-mediation hearings or conferences when required by State or local law or set by the court. 15. Certain expenses (e.g., legal fees and/or legal costs) considered unrecoverable from the Borrower under applicable federal, State or local law upon reinstatement or payoff of the Mortgage or upon completion of a mortgage modification. Note: Refer to Section 9701.1(e)(iv) regarding unrecoverable expenses. In the event of a foreclosure of the property or a bankruptcy of the Borrower, attorneys’ invoices paid by the Servicer pursuant to Section 8103.2(b) must match or exceed the claim for reimbursement in PAID. Servicers must pay attorneys’ invoices timely and should not be delaying the payment of attorneys’ invoices until after the expenses have been reimbursed by Freddie Mac. Freddie Mac will not reimburse the Servicer for attorney’s fees and litigation costs on Mortgages sold to Freddie Mac with full recourse or subject to indemnification. For Mortgages sold to Freddie Mac with recourse or subject to indemnification, the Servicer must inform counsel retained for foreclosure, eviction or bankruptcy that the Servicer is responsible for paying all associated fees and costs.

(b) Reimbursement requirements when foreclosure must be restarted In certain States, if the Servicer must restart a foreclosure proceeding, in whole or in part, due to an allowable delay as defined in Section 9301.11(b), Freddie Mac will reimburse the Servicer as follows: 1. All of the reimbursable actual costs (per the requirements of the Guide) of each foreclosure attempt and the completed foreclosure 2. Up to 70% of the approved foreclosure attorney fees for the first foreclosure attempt 3. Up to 100% of the approved foreclosure attorney fees for the completed foreclosure Additionally, for any foreclosure attempt subsequent to the first foreclosure attempt, except for the completed foreclosure, the Servicer may be reimbursed up to 70% of the approved foreclosure attorney fees with prior written approval from Freddie Mac. To obtain written approval from Freddie Mac, the Servicer must submit an RPA via the RPA functionality in PAID. Freddie Mac will not reimburse the Servicer for any fees or costs associated with a restarted foreclosure if the Servicer has to restart a foreclosure proceeding due to a delay that is not considered an allowable delay as defined in Section 9301.11(b) or due to Servicer noncompliance with the Guide. The States affected by this requirement are identified in Exhibit 57A, Approved Attorney, Foreclosure, Mediation, Postponement Fees and Title Expenses. In all other States, Freddie Mac will reimburse the Servicer for only one occurrence of the foreclosure attorney fee and reimbursable actual costs (per the requirements of the Guide).

(c) Reimbursement of BPO/appraisal reports Since the Servicer does not incur an expense when it orders a BPO or appraisal report from Freddie Mac via BPOdirect® in connection with a workout or a foreclosure, a BPO or appraisal report via BPOdirect is not an expense for which the Servicer may seek reimbursement. Freddie Mac will only reimburse the Servicer for an appraisal report ordered from an appraiser of its choice if the Servicer has complied with Section 9202.4(a).

(d) REO related costs and expenses Freddie Mac will reimburse the Servicer for post-acquisition activities that a Servicer must perform for Freddie Mac, the MI, the FHA and/or the VA. (Refer to Chapter 9603 for information on these activities.)